Part 1.
COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 3.
TAX ADMINISTRATION
Subchapter O. STATE SALES AND USE TAX
34 TAC §3.293
The Comptroller of Public Accounts adopts an amendment to §3.293,
concerning food; food products; meals; food service, with changes to the proposed
text as published in the December 31, 1999, issue of the Texas Register (24
TexReg 12017).
Subsection (g)(3) of this rule is being amended to reflect the increase
in the amount exempted from sales tax on individual sales of food, gum, or
candy when sold from a bulk vending machine from $ .25 to $ .50 as directed
by House Bill 2146, 76th Legislature, 1999. Subsection (e)(1) is clarified
to provide that an employee must be involved in preparing or serving food
in order for the employee's meal served immediately prior to, during, or after
a shift to be nontaxable. Subsection (f)(5) is clarified to provide that the
sales price of meals and food in most cases includes separately stated charges
for the room or facility.
A grammatical correction replacing the word "which" with the word "that"
was made to subsection (f)(4) of the proposed rule.
Comments were received from the Texas Hotel and Motel Association, suggesting
the addition of language in subsection (f)(5) to clarify that the sales price
for meals and food charged by a hotel to a customer does not include a separately
stated charge for a room or facility for which hotel occupancy tax is already
imposed under Tax Code, §156.051. The comptroller accepts the suggestion
and has changed the language in subsection (f)(5) to clarify this point. However,
as stated in the rule, hotel occupancy tax paid by a caterer or food service
provider to a hotel for a banquet room or facility is considered part of the
overhead cost of the catered meal and is taxable as part of the sales price.
This amendment is adopted under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Tax Code, §§151.007, 151.305, and
151.314.
§3.293.Food; Food Products; Meals; Food Service.
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
American plan - The system used by hotels, rooming houses,
and the like where one price covers room, food, and service.
(2)
Bulk vending machine - A coin-operated device that contains
unsorted items and randomly dispenses goods in approximately equal amounts
without selection of a particular item or type of item by the customer.
(3)
Candy - Confections such as candy bars, chewing gum, or
candy kisses, but does not include products used exclusively for cooking,
such as chocolate bits.
(4)
Caterer - A person engaged in the business of preparing
and serving meals, drinks, or other food products at locations designated
by a customer.
(5)
Food - All edible products intended for humans which products
are consumed for taste, aroma, or nutritional value.
(6)
Food products.
(A)
Food products include items intended for human consumption.
Examples include, but are not limited to: cereal and cereal products, milk
and milk products, including ice cream, oleomargarine, meat and meat products,
poultry products, fish and fish products, eggs and egg products, vegetables
and vegetable products, fruit and fruit products, spices, condiments and salt,
sugar products, coffee and coffee substitutes, tea, cocoa and cocoa products,
canned foods, or any combination of these.
(B)
Food products do not include:
(i)
alcoholic beverages, carbonated and noncarbonated soft
drinks, diluted juices, ice, candy, or medicines, tonics, vitamins, and medicinal
preparations in any form. A substance will be treated as medicinal or as a
tonic if the substance has no nutritional value, or the quantities of food
elements in the substance are small and its contribution to any diet is small,
or the substance has substantial nutritional value but the substance is marketed,
labeled, and promoted to the public as being therapeutic; or
(ii)
food ready for immediate consumption.
(7)
Food service operator - Persons who operate restaurants
and like places of business, caterers, wedding and bridal consultants, and
others selling food ready for immediate consumption.
(8)
Mobile vendor - A person who sells food from a motor vehicle,
push cart, or any other form of vehicle.
(9)
Food ready for immediate consumption.
(A)
Food ready for immediate consumption means the type of
food, beverages, or meals normally prepared, served, or sold by restaurants,
lunch counters, cafeterias, etc., which, when sold, require no further preparation
prior to consumption.
(B)
When food is sold by a retailer who provides eating facilities
(tables, trays, chairs, benches, or booths), food ready for immediate consumption
also includes:
(i)
all food sold in a heated state;
(ii)
all food sold in individual-sized packages or portions
when food heating facilities are available for customer use;
(iii)
all food sold with eating utensils provided, including
plates, knives, forks, spoons, glasses, cups, or straws;
(iv)
all sandwiches ready for immediate consumption (examples
of sandwiches ready for immediate consumption include most triangle-type sandwiches,
whether or not refrigerated, such as ham, cheese, tuna, or chicken salad.
An example of a sandwich not ready for immediate consumption would be a frozen
sandwich or a sandwich with a frozen or a partially frozen filling);
(v)
all individual ice cream sundries; for example: ice cream
cones, ice cream sandwiches, dishes, bars, sticks, specialties, or the like;
however, ice cream sundries when sold in prepackaged units containing six
or more such items are not included;
(vi)
all individual-sized portions of bakery products sold
in quantities of five or less; and
(vii)
all food sold in individual-sized packages or portions
requiring no further processing before consumption, when more than 75% of
the retailer's gross sales on an outlet-by-outlet basis consist of sales of
nonfood items and/or food sold in a heated state, with utensils provided,
or in the form of sandwiches or individual ice cream sundries.
(C)
When food is sold by a retailer who does not provide eating
facilities (tables, trays, chairs, benches, or booths), food ready for immediate
consumption also includes:
(i)
all food sold in a heated state, when the food is heated
by the retailer rather than the customer;
(ii)
all food sold with eating utensils provided, including
plates, knives, forks, spoons, glasses, cups, or straws;
(iii)
all sandwiches ready for immediate consumption (examples
of sandwiches ready for immediate consumption include most triangle-type sandwiches,
whether or not refrigerated, such as ham, cheese, tuna, or chicken salad.
An example of a sandwich not ready for immediate consumption would be a frozen
sandwich or a sandwich with a frozen or partially frozen filling); and
(iv)
all individual ice cream sundries. For example: ice cream
cones, ice cream sandwiches, dishes, bars, sticks, specialties, or the like;
however, ice cream sundries sold in prepackaged units containing six or more
such items are not included.
(10)
Retirement facility - A facility which provides permanent
housing and residence to individuals, a majority of whom are 60 years of age
or older.
(11)
Wedding or bridal consultant - A person who provides services
other than or in addition to the preparation and serving of food at weddings.
Such services may include sending invitations, providing floral arrangements,
decorating, supervision, and cleanup.
(b)
Taxable food sales. Tax is due on the sale of food, meals
and drinks:
(1)
prepared, served, or sold ready for immediate consumption
by any retailer whether the food is sold to be eaten on premises or to go;
(2)
sold through a vending machine;
(3)
prepared, sold, or served under the American plan. If the
American plan is used by hotels, boarding houses, or other places of business,
the charge for meals must be separated from the charges for room or lodging.
If the charges for meals and lodging are not separately stated on the bill
to the customer, hotel occupancy tax must be collected on the entire charge.
If the lump-sum charge is not subject to hotel occupancy tax, sales tax must
be collected on the portion of the charge attributable to the meals;
(4)
sold by universities, colleges, junior colleges, or other
schools of higher learning;
(5)
prepared, sold, or served by caterers and wedding or bridal
consultants. See subsection (f) of this section;
(6)
sold ready for immediate consumption by a mobile vendor;
(7)
sold by concession stands at ball parks, recreation halls,
gymnasiums, and other like places of business, or served to a person seated
in a stadium witnessing a sporting event;
(8)
purchased ready for immediate consumption by a common carrier
for the purpose of serving passengers traveling en route aboard the carrier;
or
(9)
sold to a person confined in a correctional facility operated
under the authority or jurisdiction of or under contract with this state or
a political subdivision of the state. This does not include meals provided
by the correctional facility at no cost to the inmates as part of their incarceration.
(c)
Exempt sales.
(1)
Food not ready for immediate consumption.
(2)
Food sales by schools, school-associated groups, and state
institutions. For the purposes of this paragraph, food includes soft drinks
and candy but does not include alcoholic beverages. Tax is not due on the
sale of food when:
(A)
sold by religious organizations or sold at religious functions
conducted under the authority of a particular religious organization;
(B)
sold or served by public or private schools, school districts,
student organizations, or parent- teacher associations in an elementary or
secondary school during the regular school day pursuant to an agreement with
the proper school authorities;
(C)
sold or served by a parent-teacher association during a
fund-raising sale, the proceeds of which do not go to the benefit of an individual;
(D)
sold by a person under 19 years of age who is a member
of a nonprofit organization devoted to the exclusive purpose of education,
physical, or religious training, and groups associated with public or private
elementary or secondary schools as a part of a fund-raising drive sponsored
by the organization for its exclusive use;
(E)
served to students, residents, or patients of hospitals,
day care centers, summer camps, and other institutions licensed by the state
for the care of human beings. However, meals served to visitors or employees
of these establishments are taxable;
(F)
served to permanent residents of a retirement facility
at the retirement facility. Meals served to visitors or employees of the facility
are taxable; or
(G)
provided at no cost to inmates by correctional facilities
as part of the inmates' incarceration.
(3)
Items purchased with food coupons under the food stamp
program operated under 7 United States Code, Chapter 51.
(d)
Mobile vendors.
(1)
A person who supplies food to a mobile vendor may be required
to remit the tax due on the retail sale of these products. The Tax Code, §151.024,
authorizes the comptroller to regard a supplier as a retailer and a mobile
vendor as an agent for these sales.
(2)
After the supplier has been notified by the comptroller
that the mobile vendor will be regarded as an agent of the supplier, the amount
of tax to be remitted to the comptroller will be computed by adding to the
supplier's sales price the amount of markup the mobile vendor will apply when
the food is sold at retail and multiplying this sum by the applicable tax
rate.
(3)
For reporting and auditing purposes, a 20% markup will
be applied to a supplier's sales price to a mobile vendor unless the comptroller
notifies an individual taxpayer in writing that a higher percentage of markup
should be used to report these sales.
(e)
Subsidies; employee meals; free meals.
(1)
Meals furnished by food service operators to employees
immediately prior to, during, or immediately after a shift, which are provided
for the convenience of the food service operator, are not taxable if the employee
is involved in preparing or serving of food.
(2)
An employer is not liable for tax on the amount of any
subsidy paid to a food service operator unless the subsidy is specifically
contingent on, or included in, the sales price for meals served to employees
or guests, or is the total consideration paid for the meals.
(3)
Meals and beverages furnished to customers free of charge
as promotional items are taxable to a restaurant owner only to the extent
tax would have been due on the original purchase price of the food or drinks
from suppliers.
(4)
When the restaurant owner, for promotional purposes, sells
two meals for the price of one meal, sales tax should be collected only on
the amount charged. Sales tax should not be collected on the "free" meal.
(f)
Responsibilities of persons who operate restaurants and
like places of business, caterers, wedding or bridal consultants, and others
selling food ready for immediate consumption (food service operators).
(1)
Food service operators must collect tax on all sales of
food ready for immediate consumption.
(2)
A food service operator selling both food products and
food ready for immediate consumption will be allowed to report tax on only
food sold ready for immediate consumption if the records clearly identify,
through methods such as sales invoices, or cash register coding, nontaxable
and taxable food sales.
(3)
Operators of eating establishments, caterers, wedding or
bridal consultants, and other food service operators must pay the tax on the
purchase of all equipment and replacement parts for equipment used to provide
the food service. Examples of supply items and equipment taxable to the operator
include, but are not limited to, tables, chairs, place mats, tablecloths,
cloth napkins, silverware, dishes, cooking utensils, dispensers, garbage can
liners, mop holders, lime squeezers, grill bricks, aprons, glass creamers,
appliances, menus, and inserts.
(4)
Operators of eating establishments, caterers, wedding or
bridal consultants, and other food service operators may purchase on resale
or exemption certificates those items that are furnished to their customers
with the food or beverages. These items must be of a nonreusable nature or
qualify for exemption as wrapping or packaging materials. Examples include
nonreusable paper, wooden, plastic, and aluminum articles. Other items included
are cake boxes, lunch boxes, cups (paper, plastic, or styrofoam), paper and
plastic containers, bottle wraps, butter chip trays, paper dishes, knives,
forks, spoons, paper napkins, soda straws, toothpicks, french fry bags, stir
sticks, ice cream sticks, souffle cups, hot dog trays, and other types of
nonreusable trays.
(5)
Tax is due on any charge made for preparing and serving
the meals and food. The sales price of meals and food includes any separately
stated charge for the room or facility, or the use by a customer of any items,
such as tables, chairs, tableware, and tablecloths. The separately stated
charge for the use of these items is not considered a rental of the items
to a customer but an expense connected with the sale of the meals or food
products. The sales price of meals and food sold by a hotel or motel does
not include a separately stated charge for a room or facility on which hotel
occupancy tax is imposed under Tax Code, §156.051. A separately stated
charge to a customer for hotel occupancy tax paid on a room or facility by
a caterer or other food service provider is subject to sales tax.
(6)
Sales tax is due on the transfer to the customer of any
taxable item, such as flowers, invitations, decorations, etc., which become
the property of the customer.
(7)
Sales or use tax is not due on ice purchased for use as
a part of a drink or food product to be sold in the regular course of business.
Ice used to maintain food for immediate consumption in a cool state prior
to sale is taxable.
(8)
For information on tips and gratuities see §3.337
of this title (relating to Gratuities).
(9)
For information on the responsibilities of persons who
sell and serve mixed beverages see §3.289 of this title (relating to
Alcoholic Beverages Exemptions).
(g)
Food sales through vending machine.
(1)
With the exceptions of soft drinks and candy, vending machine
operators must report sales tax on 50% of the total gross receipts from sales
of all food. No deduction will be allowed for spoilage, waste, or other loss
of foods.
(2)
Vending machine operators must pay sales tax on the total
gross receipts from sales of soft drinks and candy except as provided in paragraph
(3) of this subsection. Vending machine operators who include the tax in the
sales price of food, soft drinks, and candy should refer to §3.328 of
this title (relating to Optional Reporting Methods for Grocers and Other Vendors).
(3)
No tax is due on the sale of food, gum, or candy for $
.50 or less from a bulk vending machine.
(h)
Rounding off tax due. The practice of rounding off the
amount of tax due on the sale of a taxable item is prohibited. Tax must be
added to the sales price by using the formula prescribed in the Tax Code.
(i)
When a package contains both food products and taxable
items the application of the tax depends upon the essential character of the
complete package. If the taxable items are the primary component of the package
and a single charge is made, the entire sales price of the package is taxable.
If the taxable items are not the primary component of the package, the entire
sale is exempt unless a separate charge is made for the taxable items, in
which case the separate charge is subject to tax. In cases where no charge
is made for the taxable items, these items are promotional items not purchased
for resale by the person preparing the package. The person who provided the
promotional items is liable for the tax based upon the cost of the item.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 9, 2000.
TRD-200004070
Martin Cherry
Deputy General Counsel for Tax Policy and Agency Affairs
Comptroller of Public Accounts
Effective date: June 29, 2000
Proposal publication date: December 31, 1999
For further information, please call: (512) 463-3699
34 TAC §3.544
The Comptroller of Public Accounts adopts an amendment to §3.544,
concerning reports and payments, without changes to the proposed text as published
in the January 28, 2000, issue of the
Texas Register
(25 TexReg 554).
A new subsection, (a)(4), has been added to the rule. This provision concerns
corporations that will not owe franchise tax because their gross receipts
from the entire business are less than $150,000. This amendment is in accordance
with Senate Bill 441, 76th Legislature, 1999. Subsection (b)(1) has been amended
to provide for a variable annual interest rate on delinquent taxes for reports
originally due on or after January 1, 2000. This amendment is in accordance
with Senate Bill 1321, 76th Legislature, 1999.
No comments were received regarding adoption of the amendment.
This amendment is adopted under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Tax Code, §171.002 and §111.060.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 8, 2000.
TRD-200004040
Martin Cherry
Special Counsel
Comptroller of Public Accounts
Effective date: June 28, 2000
Proposal publication date: January 28, 2000
For further information, please call: (512) 463-4062
34 TAC §3.560
The Comptroller of Public Accounts adopts an amendment to §3.560,
concerning banking corporations, without changes to the proposed text as published
in the January 28, 2000, issue of the
Texas Register
(25 TexReg 555).
The amendment is in accordance with House Bill 2067, 76th Legislature,
1999, including a revised definition of "banking corporation" in subsection
(b)(1), a new apportionment requirement for dividends and interest in subsection
(f), and new enforcement guidelines in subsection (h). The bill repealed §171.1031
which apportioned dividends and interest to the bank's commercial domicile.
A definition of "legal domicile" has been added to subsection (b) because
of the new apportionment requirement for dividends and interest. The legislation
states that these new provisions apply to reports originally due on or after
January 1, 2000.
No comments were received regarding adoption of the amendment.
This amendment is adopted under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Tax Code, §§171.001, 171.259, and
171.316.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 8, 2000.
TRD-200004039
Martin Cherry
Special Counsel
Comptroller of Public Accounts
Effective date: June 28, 2000
Proposal publication date: January 28, 2000
For further information, please call: (512) 463-4062
34 TAC §3.563
The Comptroller of Public Accounts adopts an amendment to §3.563,
concerning savings and loan associations, without changes to the proposed
text as published in the January 28, 2000, issue of the
Texas Register
(25 TexReg 556).
The amendment is in accordance with House Bill 2067, 76th Legislature,
1999, including a revised definition of "savings and loan association" in
subsection (b)(4), a new apportionment requirement for dividends and interest
in subsection (e), and new enforcement guidelines in subsection (g). The bill
repealed §171.1031, which apportioned dividends and interest to the saving
and loan association's commercial domicile. A definition of "legal domicile"
has been added to subsection (b) because of the new apportionment requirement
for dividends and interest. The legislation states that these new provisions
apply to reports originally due on or after January 1, 2000.
No comments were received regarding adoption of the amendment.
This amendment is adopted under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Tax Code, §§171.001, 171.260, and
171.317.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 8, 2000.
TRD-200004038
Martin Cherry
Special Counsel
Comptroller of Public Accounts
Effective date: June 28, 2000
Proposal publication date: January 28, 2000
For further information, please call: (512) 463-4062
34 TAC §3.811
The Comptroller of Public Accounts adopts an amendment to §3.811,
concerning the taxpayer election for reciprocal or interinsurance exchanges
to be taxed under Insurance Code, Article 4.10, instead of the rate established
for reciprocal or interinsurance exchanges under Insurance Code, Article 4.11B,
without changes to the proposed text as published in the February 11, 2000,
issue of the
Texas Register
(25 TexReg 1044).
The amendment eliminates references to qualification for tax rates based
on investments and identifies the flat tax rate of 1.6% to be effective January
1, 2000, in accordance with House Bill 1837, 76th Legislature, 1999.
No comments were received regarding adoption of the amendment.
This amendment is adopted under the Tax Code, §111.002,
which provides the comptroller with the authority to prescribe, adopt, and
enforce rules relating to the administration and enforcement of the provisions
of the Tax Code, Title 2.
The amendment implements the Insurance Code, Article 4.10, Article 4.11B,
and Article 4.11C.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on June 6, 2000.
TRD-200003969
Martin Cherry
Special Counsel
Comptroller of Public Accounts
Effective date: June 26, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 463-4062
Subchapter C. CLAIMS PROCESSING--TRAVEL VOUCHERS
Subchapter V. FRANCHISE TAX
Subchapter GG. INSURANCE TAX
Chapter 5.
FUNDS MANAGEMENT (FISCAL AFFAIRS)