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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.286Seller's and Purchaser's Responsibilities

    (A) A promoter of a flea market, trade day, or other event that involves the sales of taxable items is a seller responsible for the collection and remittance of the sales tax that dealers, salespersons, or individuals collect at such events, unless those persons hold active sales and use tax permits that the comptroller has issued.

    (B) A direct sales organization that is engaged in business in this state is a seller responsible for the collection and remittance of the sales and use tax collected by the organization's independent salespersons.

    (C) Pawnbrokers, storage facility operators, mechanics, artisans, or others who sell property to enforce a lien are sellers responsible for the collection and remittance of sales and use tax on the sale of such tangible personal property.

    (D) A person engaged in business in this state who sells, leases, or rents tangible personal property owned by another person by means of a consignment sale is a seller responsible for the collection and remittance of the sales tax on the consignment sale.

    (E) An auctioneer who owns tangible personal property or to whom tangible personal property has been consigned is a seller responsible for the collection and remittance of the sales and use tax on tangible personal property sold at auction. For more information, auctioneers should refer to §3.311 of this title (relating to Auctioneers, Brokers, and Factors).

  (14) Taxable item--Tangible personal property and taxable services. Except as otherwise provided in Tax Code, Chapter 151, the sale or use of a taxable item in electronic form instead of on physical media does not alter the item's tax status.

    (A) Tangible personal property means property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner, including a computer program as defined in §3.308 of this title (relating to Computers--Hardware, Computer Programs, Services, and Sales) and a telephone prepaid calling card, as defined in §3.344 of this title.

    (B) Taxable services are those identified in Tax Code, §151.0101 (Taxable Services).

(b) Who must have a sales and use tax permit.

  (1) Sellers. Except as provided in paragraph (2) of this subsection, each seller who is engaged in business in this state, including itinerant vendors, persons who own or operate a kiosk, and sellers operating temporarily in this state, must apply to the comptroller and obtain a sales and use tax permit for each place of business of the seller operated in this state and a single permit for its out-of-state places of business.

  (2) Safe harbor for remote sellers.

    (A) Remote seller defined. For purposes of this paragraph, a remote seller is a seller engaged in business in this state whose only activity in the state is described in subsection (a)(4)(I) or (J) of this section.

    (B) Safe harbor.

      (i) Permitting and collection obligations. The comptroller will not enforce the permit requirement of this subsection or the collection obligation of subsection (d) of this section on a remote seller whose total Texas revenue in the preceding twelve calendar months is less than $500,000. If a remote seller's total Texas revenue exceeds that amount, the remote seller shall obtain a permit and begin collecting as provided in subparagraph (E) of this paragraph and shall continue to collect unless it terminates its collection obligation under subparagraph (F) of this paragraph.

      (ii) Temporary storage of inventory. A remote seller that is temporarily storing tangible personal property in Texas to be used for fulfillment at a facility of a marketplace provider that has certified that it will assume the rights and duties of a seller with respect to the tangible personal property, as provided for in this subsection, will not have to obtain a permit or have a collection obligation. This subsection is not applicable to those remote sellers who are above the safe harbor amount under clause (i) of this subparagraph.

    (C) Total Texas revenue defined for purposes of this paragraph.

      (i) Total Texas revenue means the gross revenue from the sale of tangible personal property and services for storage, use, or other consumption in this state recognized under the accounting method used by the seller, and includes separately stated handling, transportation, installation, and other similar fees collected by the seller in connection with the sale.

      (ii) A remote seller shall include in total Texas revenue, the aggregate sum of all sales made on all mediums, including all marketplaces and the remote seller's own website. This clause takes effect on April 1, 2020.

      (iii) Total Texas revenue includes taxable, nontaxable, and tax-exempt sales. A sale of an item for delivery in this state is presumed to be a sale for storage, use, or other consumption in this state. With respect to a service, "use" means the derivation in this state of direct or indirect benefit from the service.

    (D) Consolidation of total Texas revenue. The comptroller may consolidate the total Texas revenue of sellers engaged in conduct that circumvents the safe harbor amount in subparagraph (B) of this paragraph.

    (E) When to obtain a permit and begin collecting. No later than the first day of the fourth month after the month in which a remote seller exceeds the safe harbor amount in subparagraph (B) of this paragraph, the remote seller shall obtain a permit and begin collecting use tax. For example, if during the period of July 1, 2018, through June 30, 2019, a remote seller's total Texas revenue exceeds the safe harbor amount in subparagraph (B) of this paragraph, the remote seller shall obtain a permit by October 1, 2019, and begin collecting use tax no later than October 1, 2019.

    (F) Terminating collection obligation. A remote seller that is required to be permitted may terminate its collection obligation under this paragraph after twelve consecutive months in which the remote seller's total Texas revenue for the preceding twelve calendar months is below the safe harbor amount in subparagraph (B) of this paragraph. In order to terminate its collection obligation, a remote seller must submit a form prescribed by the comptroller. Thereafter, the remote seller shall resume collection on the first day of the second month following any twelve calendar months in which the remote seller's total Texas revenue exceeds the safe harbor amount in subparagraph (B) of this paragraph. For example, if the total Texas revenue of a remote seller that previously terminated its collection obligation exceeds the safe harbor amount in subparagraph (B) of this paragraph during the period of January 1, 2020, through December 31, 2020, the remote seller shall resume collection on February 1, 2021.

    (G) Records retention required. For purposes of this paragraph, a remote seller that terminates its collection obligation shall comply with the record retention requirement of §3.281 of this title (relating to Records Required; Information Required) and §3.282 of this title (relating to Auditing Taxpayer Records). The remote seller must maintain sufficient documentation to verify the date on which the remote seller terminated its collection obligation under subparagraph (F) of this paragraph or ceases to engage in business in this state.

    (H) Transition rule. Remote sellers will be subject to the permit requirement of this subsection and the collection obligation of subsection (d) of this section beginning on October 1, 2019. The initial twelve calendar months for determining a remote seller's total Texas revenue will be July 1, 2018, through June 30, 2019. If a remote seller's total Texas revenue during that period exceeds the safe harbor amount in subparagraph (B) of this paragraph, the seller shall obtain a permit by October 1, 2019, and begin collecting use tax no later than October 1, 2019.

  (3) Marketplace providers and marketplace sellers.

    (A) Duties of marketplace providers. A marketplace provider shall:

      (i) certify in writing to each marketplace seller that the marketplace provider assumes the rights and duties of a seller with respect to sales made by the marketplace seller through the marketplace (no specific language or format is required for the certification);

      (ii) collect sales and use tax on Texas sales of taxable items made through the marketplace;

      (iii) report and remit the sales and use taxes on all Texas sales made through a marketplace;

      (iv) provide to each marketplace seller records of the marketplace sales made on behalf of the marketplace seller; and

      (v) comply with the record retention requirement of §3.281 of this title and §3.282 of this title.

    (B) Duties of marketplace sellers. A marketplace seller shall:

      (i) retain records for all marketplace sales made on a marketplace as required in §3.281 of this title and §3.282 of this title;

      (ii) furnish to the marketplace provider information that is required to correctly collect and remit sales and use tax (the information may include a certification of taxability that an item being sold is a taxable item, is not a taxable item, or is exempt from taxation); and

      (iii) not be required to obtain a permit if only selling through a marketplace provider that has certified that it will assume the rights and duties of a seller, as provided in this subsection.

    (C) Good faith requirements for marketplace sellers and marketplace providers.

      (i) A marketplace seller who in good faith accepts a marketplace provider's certification under subparagraph (A)(i) of this paragraph shall exclude sales made through the marketplace from the marketplace seller's sales tax report if the marketplace seller is otherwise required to collect and remit tax.

      (ii) Except as provided by subparagraph (E) of this paragraph, a marketplace provider is not liable for failure to collect and remit the correct amount of sales and use taxes if the marketplace provider shows the failure resulted from the marketplace provider's good faith reliance on incorrect or insufficient information provided by the marketplace seller.

    (D) A marketplace seller is liable for any deficiency resulting from incorrect or incomplete information provided by the marketplace seller to the marketplace provider.

    (E) Joint and several liability. A marketplace provider and marketplace seller that are affiliates or associates, as defined by Business Organizations Code, §1.002, are jointly and severally liable for a deficiency resulting from a sale made by the marketplace seller through the marketplace.

    (F) Marketplace provider waiver requests. A marketplace provider may request a waiver of the requirements of subparagraph (A) of this paragraph by sending a written request to the Texas Comptroller of Public Accounts, Tax Policy Division that explains the basis for the waiver. The comptroller will review the waiver request and issue a letter granting, conditionally granting, or denying the waiver request. If the information below, or any additional information requested by the comptroller, is not provided, the comptroller will not issue a waiver. The requestor does not have the right to a hearing. The request for the waiver must include:

      (i) the name of the marketplace provider;

      (ii) an explanation of the marketplace provider's business model, including information on the services offered by the marketplace provider and the charges for those services;

      (iii) the basis for the waiver request;

      (iv) a statement providing whether the waiver is permanent or temporary; and

      (v) if temporary, the date the marketplace provider expects the waiver to expire.

    (G) Exceptions. The comptroller may except marketplace providers in certain industries from some or all of the statutory and regulatory requirements for marketplace providers based on the industries' business models and practices. The comptroller will provide written notification to the excepted marketplace providers.

  (4) A seller that no longer intends to engage in business and make sales of taxable items in the state shall submit a form prescribed by the comptroller to terminate its permit and must obtain a new permit before it commences sales of taxable items in the state thereafter. The seller must maintain sufficient documentation to verify the date on which the seller ceases to engage in business in this state.

  (5) Direct sales organizations. Independent salespersons of direct sales organizations are not required to hold sales and use tax permits to sell taxable items for direct sales organizations. Direct sales organizations engaged in business in this state are sellers responsible for holding sales and use tax permits and for the collection and remittance of sales and use tax on all sales of taxable items by their independent salespersons. See subsection (d)(3) of this section for more information about the collection and remittance of sales and use tax by direct sales organizations.

  (6) Non-permitted purchasers. Persons who are not required to have a sales and use tax permit or who do not have a direct payment permit are still responsible for paying to the comptroller sales or use tax due on purchases of taxable items from sellers who do not collect and remit tax. See subsection (g)(9) of this section for return and payment information and §3.346 of this title (relating to Use Tax).

Cont'd...

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