The comptroller adds new subsection (e) to include the provisions in former subsection (b), relating to the effects of other law, with minor non-substantive changes to the provisions as they appeared in former subsection (b).

The comptroller adds new subsection (f), to include the provisions of former subsection (c), relating to tax rates without changing the provisions as they appeared in former subsection (c).

The comptroller adds new subsection (g) to include the provisions of former subsection (d), relating to jurisdictional boundaries, combined areas, and city tax imposed through strategic partnership agreements, with non-substantive changes made to the language on combined areas for ease of readability.

The comptroller adds new subsection (h) to include the provisions in former subsection (f) concerning places of business and job sites crossed by local taxing jurisdiction boundaries with a change to the title of the subsection to read places of business of the seller. No other changes were made to those provisions.

The comptroller adds new subsection (i). Throughout new subsection (i), the comptroller implements the Wayfair decision for local use tax to address sales consummated in Texas and sales consummated outside of Texas, including sales by remote sellers.

In new paragraph (1), the comptroller adds the language found in former subsection (g)(1) with changes. The comptroller explicitly states in paragraph (1) that the location of the seller in Texas does not affect the determination of whether the seller is required to collect additional local use tax due.

In new paragraph (2), the comptroller includes the language in former subsection (g)(2) with changes. The comptroller makes a cross-reference to new subsection (i)(3) of the amendment, which implements House Bill 2153. The comptroller also clarifies that new subsection (i)(2) applies to sales not consummated in Texas. The amendment provides that local use tax is based upon the location in this state to which the item is shipped or delivered or at which the purchaser takes possession.

In new paragraph (3), the amendment addresses local use tax for remote sellers and implements the single local use tax rate for remote sellers enacted in House Bill 2153.

New subparagraph (A)(i) provides that a remote seller is required to collect and remit using the combined rate of all applicable local use taxes based on the location to which the item is shipped or delivered or at which the purchaser takes possession. New subparagraph (A)(ii) provides that at the remote seller's election, the remote seller may elect to use the single local use tax rate published in the Texas Register.

New subparagraph (B) addresses the single local use tax rate when a remote seller stores tangible personal property in Texas to be sold on a marketplace. The comptroller recognizes that a remote seller selling tangible personal property on a marketplace may not have control of where their tangible personal property is stored. Therefore, to ease the burden on a remote seller, this provision allows the remote seller to elect the single local use tax rate.

New subparagraph (C) addresses notice requirements a remote seller sends to the comptroller of its election and revocation of election to use the single local use tax rate. New clause (i) provides that a remote seller must notify the comptroller of its election to use the single local use tax rate on a form prescribed by the comptroller or may notify the comptroller of the election on its use tax permit application form before being able to use the single local use tax rate. New clause (i) also requires that a remote seller use the single local use tax rate for all its sales of taxable items until the remote seller revokes the election in writing to the comptroller. New clause (ii) addresses the requirements for a remote seller to revoke its election to collect the single local use tax rate by filing a form prescribed by the comptroller by October 1 of the calendar year.

New subparagraph (D)(i) provides the initial single local use tax rate of 1.75%, which is in effect for the period beginning October 1, 2019, and ending December 31, 2019. Subparagraph (D)(ii) provides the initial single local use tax rate of 1.75%, which is in effect for the period beginning January 1, 2020, and ending December 31, 2020.

New subparagraph (E) provides that before the beginning of a calendar year, the comptroller will publish notice of the single local use tax rate that will be in effect for that calendar year in the Texas Register.

New subparagraph (F) provides the calculation for the single local use tax rate.

New subparagraph (G) provides that a purchaser may request a refund based on local use taxes paid in a calendar year. The refund is for the difference between the single local use tax rate paid by the purchaser and the amount the purchaser would have paid based on the combined tax rate for all applicable local use taxes. Non-permitted purchasers may request a refund directly from the comptroller on an annual basis without having to meet the requirements in §3.325(a)(1) of this title (relating to Refunds and Payments Under Protest) and the statute of limitation under Tax Code, §111.104 (Refunds).

New subparagraph (H) addresses marketplace providers and states that a marketplace provider may only use the combined tax rate of all applicable local use taxes when computing the amount of local use tax to collect and remit.

In new paragraph (4), the comptroller restates the language in deleted subsection (g)(4) concerning purchasers responsible for accruing and remitting local taxes if the seller fails to collect without any changes.

In new paragraph (5), the comptroller restates the language in deleted subsection (g)(5) concerning local tax due on the sales price of a taxable item without any changes.

The comptroller adds new paragraph (6) to relieve a purchaser of liability for additional use tax if the purchaser pays local use tax using the single local use tax rate to an eligible remote seller electing to use the single local use tax rate. Paragraph (6) also requires the purchaser to verify on the comptroller's website that a remote seller has elected to use the single local use tax rate. Moreover, paragraph (6) provides that if a remote seller is not listed on the comptroller's website, the purchaser will be liable for additional use tax due.

Mr. Edmonson commented that TechNet believes that paragraph (6) will create an undue burden on the buyer to verify if the remote seller is registered with the comptroller. He commented that the state should pursue the seller, not the buyer. The comptroller declines to make a revision based on this comment.

The comptroller deletes existing subsection (b), relating to the effect of other law, as this information is contained in new subsection (e) with minor, non-substantive changes.

The comptroller deletes existing subsection (c) relating to tax rates, as that information is contained in new subsection (f) without change.

The comptroller deletes existing subsection (d) relating to jurisdictional boundaries, combined areas, and city tax imposed through strategic partnership agreements, as this information is contained in new subsection (g) with non-substantive changes made to the provisions on combined areas for ease of readability.

The comptroller deletes existing subsection (e) relating to place of business - special definitions, as this information is contained in new subsection (b) with changes.

The comptroller deletes existing subsection (f) concerning places of business and job sites crossed by local taxing jurisdiction boundaries, as this information is contained in new subsection (h) with a change only to the title of the subsection to read places of business of the seller.

The comptroller deletes subsection (g) concerning sellers' and purchasers' responsibilities for collecting or accruing local taxes, as those provisions, except for subsection (g)(3), which was deleted in its entirety, are contained in new subsection (i) with changes.

The comptroller deletes existing subsection (h) concerning local sales tax, as this information is contained in new subsection (c) with changes.

The comptroller deletes existing subsection (i) concerning use tax, as this information is contained in new subsection (d) with changes.

The comptroller adds new subsection (k)(5) to implement House Bill 1525, to address sales of taxable items through marketplace providers. Subsequent paragraphs are renumbered.

Mr. Kroll commented that House Bill 1525 could be interpreted to only source third-party marketplace seller transactions to destination. He commented that the provision should be amended to ensure that all taxable sales made via a marketplace, either by the marketplace provider itself or on behalf of a marketplace seller, should be sourced to destination. He suggested language to that effect. The comptroller declines to make this revision because House Bill 1525 is specific to the sales made by marketplace providers on behalf of marketplace sellers. It does not provide for sourcing on the marketplace provider's own sales. Additionally, amending §3.286 of this title in this section is not appropriate.

The provisions related to remote sellers, the single local use tax rate, and marketplace providers took effect October 1, 2019.

Joe Strong, on behalf of Microsoft, made comments pertaining to marketplace providers and marketplace sellers, registration, good faith, and information requirements, which are addressed in §3.286 of this title and not this amendment. Mr. Howard and Ms. Howard commented that they strongly disagree with the amendment.

Mr. Pannell requested guidance on the information that will be audited by the comptroller and the penalties for incorrect application of local tax. Mr. Kroll commented that the comptroller does not have any training or audit materials for this rule, so it appears businesses will not face compliance scrutiny under audit. The comptroller declines to make revisions based on this comment because this section addresses local sales and use tax administration. The comptroller will provide audit guidelines regarding this section in the appropriate audit materials.

Ms. May urged that the amendment continue to designate purchasing offices as places of business if it is deemed that they do not exist solely to avoid or rebate sales tax. The comptroller did not make any amendments to the definition of purchasing offices.

The comptroller adopts this amendment under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture), which provides the comptroller with the authority to amend rules to reflect changes in the constitution or laws of the United States and judicial interpretations thereof.

The amendments implement Tax Code, §§151.0595 (Single Local Tax Rate for Remote Sellers), 321.203, and 323.203, and South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (June 21, 2018).