| (h) Exemptions for repair and maintenance. Repair or
maintenance of tangible personal property that is exempted under this
section is also exempt, unless the tangible personal property is installed
into realty and has lost its identity as tangible personal property.
For information on the repair or maintenance of items that become
real property after installation, see §3.357 of this title (relating
to Nonresidential Real Property Repair, Remodeling, and Restoration;
Real Property Maintenance). For information on new construction that
incorporates materials exempted under this section see §3.291
of this title (relating to Contractors).
(i) Exemptions for natural gas and electricity.
(1) Natural gas and electricity used in the production
of a master recording are exempt.
(2) Natural gas and electricity are taxable when used
for a non-exempt purpose. For example, an entertainment venue provides
beverages to customers during live performances. The venue also makes
master recordings of the live performances. The electricity used for
the beverage refrigeration equipment is not exempt; however the electricity
used to power the recording equipment is exempt under this subsection.
Non-exempt purposes include, but are not limited to, the following:
(A) administrative or office operations;
(B) marketing;
(C) transportation; or
(D) warehousing.
(3) A predominant use study is required to determine
the exempt and non-exempt use of natural gas or electricity measured
by a single meter. See §3.295 of this title (relating to Natural
Gas and Electricity).
(j) Exemptions for qualified media production locations.
(1) The exemption in this subsection is available only
to a qualified person acquiring a taxable item for use at a qualified
media production location. Information on becoming certified as a
qualified person or a qualified media production location is available
through the Texas Film Commission.
(2) The sale, lease, or rental of a taxable item, including
nonresidential repair or remodeling services, is exempt if the item
is used:
(A) for the construction, maintenance, expansion, improvement,
or renovation of a media production facility at a qualified media
production location;
(B) to equip a media production facility at a qualified
media production location; or
(C) for the renovation of a building or facility at
a qualified media production location that is to be used exclusively
as a media production facility.
(3) Repair or maintenance of tangible personal property
used to equip a media production facility at a qualified media production
location is exempt during the exemption period described in paragraph
(4) of this subsection.
(4) The exemption in this subsection is temporary.
(A) The exemption begins when both the qualified person
and related qualified media production location are certified by the
Texas Film Commission.
(B) The exemption ends on the earlier of:
(i) the expiration date identified in the approval
documents issued for the certification of the qualified media production
location;
(ii) the expiration date identified in the approval
documents issued for the certification of the qualified person; or
(iii) the date the certification of either the qualified
person or the qualified media production location is revoked.
(C) In no event shall the exemption period extend for
more than two years from the earlier of the date of certification
of the qualified person or the date of certification of the related
qualified media production location.
(5) Reports required. Each qualified person is required
to submit a report for each qualified media production location.
(A) The report must be in the form and manner prescribed
by the comptroller and must contain the following information:
(i) the name, address, and comptroller-issued taxpayer
identification number of the qualified person;
(ii) the name, address, and, if applicable, comptroller-issued
taxpayer identification number of the qualified media production location;
(iii) a description of the project or activity conducted
by the qualified person at the qualified media production location;
(iv) the date of certification and the expiration date
of the certification of the qualified person and related qualified
media production zone as identified in the approval documents issued
by the Texas Film Commission;
(v) a statement that no items were purchased tax-free
under the exemption in this subsection during the period covered by
the report, if applicable; or for each item purchased tax-free under
this exemption the following information:
(I) the name, address, and comptroller-issued taxpayer
identification number of the seller;
(II) the date of purchase;
(III) the name or description of the item, or like
items;
(IV) the purpose or brief explanation of how the item,
or like items, were, or are to be, used;
(V) the sales price of the item;
(VI) the lease or rental terms, if applicable; and
(VII) the current location of the item.
(B) Report periods. The initial report covers the time
period from the date of certification of the qualified person and
the related qualified media production location through August 31.
For example, if the qualified person and the related qualified media
production location received certification on April 1, the initial
report period is April 1 through August 31. Subsequent reports cover
the time period from September 1 through August 31 of the following
year.
(C) The report is due September 30 each year. If the
due date falls on a Saturday, Sunday, or legal holiday, the report
will be due the next business day.
(k) Exemption certificates. The exemptions under this
section may be claimed by providing the seller with a properly completed
exemption certificate at the time of purchase in lieu of paying sales
and use tax. See §3.287 of this title (relating to Exemption
Certificates).
(l) Divergent use.
(1) When a taxable item purchased tax-free under a
properly completed exemption certificate is used in a taxable manner,
sales and use tax is due. The tax is calculated based on the fair
market rental value of the tangible personal property for the period
of time used in the taxable manner. See §3.287 of this title
and Tax Code, §151.155 (Exemption Certificate).
(2) Records must be maintained to document the taxable
use of an item purchased tax-free, and the payment of sales and use
tax due on such use.
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