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RULE §3.356Real Property Service

the customer, including amounts for the paper products, dumpster, and for the services.

  (2) A properly completed resale certificate may be issued for a service if the buyer intends to transfer the service as an integral part of a taxable service. A service will be considered an integral part of a taxable service if the service purchased is essential to the performance of the taxable service and without which the taxable service could not be rendered. See §3.285 of this title (relating to Resale Certificate; Sales for Resale).

  (3) A properly completed resale certificate may be issued to purchase a taxable service tax free if the buyer intends to incorporate the service into tangible personal property which will be resold. If the entire service is not incorporated into the tangible personal property, it will be presumed the service is subject to tax and the service will only be exempt to the extent the buyer can establish the value of that portion of the service actually incorporated into the tangible personal property. If the buyer does not intend to incorporate the entire service into the tangible personal property, the buyer may not issue a resale certificate but he may claim credit at the time of sale of the tangible personal property for the portion of the service that was actually incorporated into the tangible personal property.

(d) Exemption certificates. Persons providing real property services may accept a properly completed exemption certificate in lieu of tax when the service is purchased by an exempt entity. See §3.322 of this title (relating to Exempt Organizations), §3.287 of this title (relating to Exemption Certificates) and §3.288 of this title (relating to Direct Payment Procedures and Qualifications).

(e) Landscaping, lawn, and yard maintenance provided by persons under 18 years old or by persons 65 years old or older. Charges for the performance of landscaping, lawn, and yard maintenance services (subsection (a)(4) and (5) of this section) are exempt if performed by:

  (1) a self-employed person under 18 years of age whose total receipts from providing landscaping, lawn, or yard maintenance are $1,000 or less during either the preceding calendar quarter or the same calendar quarter of the preceding year; or

  (2) an individual 65 years of age or older whose total receipts from providing landscaping or yard maintenance are $5,000 or less for the four most recent quarters.

(f) Landfill charges connected with garbage collection services. Persons providing garbage collection services may not separate in the bill to their customers the charge for garbage collection from the charge for use of the landfill for the purpose of reducing the amount upon which tax must be collected. The charge paid by the service provider for access to the landfill, while not taxable to the service provider, is a necessary expense in providing the garbage collection service and is not excludable from the fee to the service provider's customer for garbage collection.

(g) Garbage removal facilities. When a city, county, or any other entity provides a facility where garbage may be left and which will, at another time, be moved to a landfill, the fee charged to persons depositing garbage into such a facility is considered to be a charge for garbage collection and is taxable.

(h) Garbage collection services that may be excluded from tax. Persons providing collection services for customers having waste excluded from the definition of "garbage or other solid waste" may accept an exemption certificate from the customer in lieu of tax. The exemption certificate must state the type of waste being excluded, and that either the waste to be collected is totally excludable or that the customer has both taxable and nontaxable waste and the customer will be responsible for accruing tax on that portion of the charge which represents taxable services. The customer may use any reasonable allocation for reporting tax on taxable services which is supportable by books and records.

(i) Unrelated services.

  (1) A service will be considered as unrelated if:

    (A) it is not a real property service, nor a service or labor taxable under another provision of the Tax Code, Chapter 151;

    (B) it is not provided as a part of the taxable service and is of a type which is commonly provided on a stand-alone basis; and

    (C) the performance of the unrelated service is distinct and identifiable. Examples of an unrelated service which may be excluded from the tax base include maintenance charges meeting the definition in §3.357 of this title (relating to Labor Relating to Nonresidential Real Property Repair, Remodeling Restoration, Maintenance, New Construction, and Residential Property), engineering studies, and architectural or landscaping designs.

  (2) When nontaxable unrelated services and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the service provider at the time the transaction occurs by separately stating to the customer a reasonable charge for the taxable services. However, if the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. A customer may presume that a separately stated charge from a service provider for taxable services is reasonable, in the context of this section. The service provider's books must support the apportionment between exempt and nonexempt activities based on the cost of providing the service or on a comparison to the normal charge for each service if provided alone. If the charge for exempt services is unreasonable when the overall transaction is reviewed, considering the cost of providing the service or a comparable charge made in the industry for each service, the comptroller will adjust the charges and assess the service provider the additional tax, penalty, and interest on the taxable services.

  (3) Charges for services or expenses directly related to or incurred while providing the taxable service are taxable and may not be separated for the purpose of excluding these charges from the tax base. Examples include charges for meals, telephone calls, hotel rooms, or airplane tickets.

(j) Governmental entities. When garbage collection services are provided by a governmental entity without a specific charge being assessed, such as when this service is provided as a basic part of services funded by a tax or a set fee structure of the governmental entity, sales or use taxes are not due. This section does not apply if the fee changes each billing period based on quantity of consumption of tangible personal property or service provided individual service recipients.

(k) Local taxes. With the exception of garbage or other solid waste removal services, local sales and use taxes apply to services in the same way as they apply to tangible personal property. Generally, service providers must collect local sales taxes if their place of business is within a local taxing jurisdiction, even if the service is actually provided at a location outside that jurisdiction. However, transit sales taxes do not apply to services provided outside the boundaries of the transit area. If the service provider's place of business is outside a local taxing jurisdiction but the service is provided to a customer within a local taxing jurisdiction, local use taxes apply and the service provider is required to collect them. Local taxes for garbage or other solid waste removal services are allocated to the local taxing jurisdiction in which the garbage or other solid waste is located when its collection or removal begins.

(l) For general information on the collection and reporting responsibilities of providers and purchasers of taxable services, see §§3.286, 3.374, 3.375, 3.424, and 3.425 of this title (relating to Seller's and Purchaser's Responsibilities; Imposition of the Sales Tax; Collection by Retailer; Bracket System Formula; Determining City Tax, Administration of Use Tax; Collection by Retailer, Imposition of Sales Tax, and Administration of Use Tax; Imposition and Collection).

(m) Use tax. If a seller of a taxable service is not doing business in Texas or a specific local taxing jurisdiction and is not required to, or does not voluntarily, collect and report the applicable Texas tax, it is the Texas customer's responsibility to report and pay the use tax directly to this office.

(n) Property management companies.

  (1) Employees permanently assigned to one rental property are considered employees of that property when the property manager is reimbursed by the property owner on a dollar-for-dollar basis. On managed rental properties, the employees remain assigned to the property while employed by successive owners or management companies. The reimbursement charge for taxable services performed on a managed rental property by management company employees assigned to it will not be taxable. However, if these same employees provide real property services for other properties, the property manager must collect tax on the total charge for those services. The management company owes tax on the purchase price of all taxable items purchased and provided to the employees providing Cont'd...

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