34 TAC §3.356
The Comptroller of Public Accounts proposes an amendment
to §3.356, concerning real property service. The amendment incorporates
changes to Tax Code, §151.0048 and §151.347, by prior legislation.
The amendment adds definitions for the terms "contractor," "real property
services," "residential property," and "self-employed." The change to Tax
Code, §151.0048, excludes from the definition of real property services
those services purchased by a contractor as part of the construction of new
residential structures. The amendment to Tax Code, §151.347, changes
the dollar amount for exempt landscaping and lawn maintenance services sold
by persons under 18 and explains the limitations that apply to the exemption
for self-employed individuals who perform landscaping and lawn maintenance
services. As a result of prior legislation, the definition of real property
services is amended temporarily from October 1, 1999 to October 1, 2001. During
this period, surveying services that were purchased by a homeowner in connection
with the construction of a new structure for use as a residence or other improvement
of the structure were not taxable services. Amendments to Tax Code, §151.0048,
codify and clarify provisions in the section regarding property management
companies.
James LeBas, Chief Revenue Estimator, has determined that for the first
five-year period the rule will be in effect, there will be no significant
revenue impact on the state or units of local government.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will be in providing additional information concerning tax responsibilities.
This rule is adopted under Tax Code, Title 2, and does not require a statement
of fiscal implications for small businesses. There is no significant anticipated
economic cost to individuals who are required to comply with the proposed
rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager,
Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under 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
Tax Code, Title 2.
The amendment implements Tax Code, §151.0048 and §151.347.
§3.356.Real Property 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)
Contractor--Any person who builds new
improvements to residential or nonresidential real property, completes any
part of an uncompleted new structure that is an improvement to residential
or nonresidential real property, makes improvements to real property as part
of periodic and scheduled maintenance of nonresidential real property, or
repairs, restores, maintains, or remodels residential real property, and who,
in making the improvement, incorporates tangible personal property into the
real property that is improved. The term includes subcontractors but does
not include material men, suppliers, or persons who provide taxable real property
services. Contractors should refer to §3.291 of this title (relating
to Contractors). Persons who repair, restore, or remodel nonresidential real
property are providing taxable services and should refer to §3.357 of
this title (relating to Nonresidential Real Property Repair, Remodeling, and
Restoration; Real Property Maintenance). Persons who repair, restore, or remodel
chemical plants or petrochemical refineries should refer to §3.362 of
this title (relating to Labor Relating to Increasing Capacity in a Production
Unit in a Petrochemical Refinery or Chemical Plant).
(2)
Disaster area--
(A)
an area that is declared a disaster area by the Governor
under Government Code, Chapter 418; or
(B)
an area that is declared a disaster area by the President
of the United States under 42 U.S.C., §5141.
(3)
[
(1)
] Employee--A person
who
provides
[
providing
] services for another for consideration
if
[
where
] the employer has the right to control and direct
the employee in the material details of how the work is to be performed, both
under the contract of employment and in fact. The term also includes personnel
who are
provided by a temporary help service, as defined in paragraph
(14)
[
(10)
] of this subsection.
(4)
[
(2)
] Employer--
To determine
[
In determining
] which of several persons is the employer
of an individual,
the comptroller will consider these
factors [
which will be considered include
]:
(A)
who exercises direct control over the details of how
the employee performs
the work [
is performed by the employee
];
(B)
who pays the employee's salary;
(C)
who withholds applicable federal taxes from the employee's
salary;
(D)
who provides employment-related benefits such as health
insurance,
sick leave, vacation, or
eligibility to participate
in a retirement plan[
, sick leave, vacation, etc., to the employee
];
and
(E)
who has the right to terminate the employment of the individual
employee.
(5)
[
(3)
] Garbage or other solid waste--Waste;
refuse; sludge from a waste treatment plant, a water supply treatment plant,
or an air pollution control facility; and other discarded material, including
solid, liquid, semisolid, or contained gaseous material,
that result
[
resulting
] from residential, industrial, municipal, commercial,
mining, and agricultural operations, and [
resulting
] from community
and institutional activities. The term does not include any of the following:
(A)
solid or dissolved material in domestic sewage; [
or
] solid or dissolved material in irrigation return flows; or industrial
discharges
that are
subject to regulation by
a
permit
issued pursuant to the Texas Water Code, Chapter 26;
(B)
waste materials
that
[
which
] result
from activities associated with the exploration
for or
[
,
]
development[
,
] or production of oil, gas, geothermal resources,
or any other substance or material
that the
[
regulated by
the
] Railroad Commission of Texas
regulates
pursuant to Natural
Resources Code, §91.101;
(C)
any waste
that
[
which
] requires specific
licensing under Health and Safety Code, Chapter 401, and the rules
that
[
adopted by
] the Texas Board of Health
adopts
under
that law, which for the purposes of this
section
[
rule
]
shall be referred to as radioactive waste;
(D)
any substance that
[
hazardous waste, as
identified or listed as a hazardous waste by
] the administrator of the
United States Environmental Protection Agency or [
by
] other appropriate
federal or state agency
identifies or lists as hazardous waste
;
or
(E)
industrial solid waste, as that term is defined in Health
and Safety Code, Chapter 361, with the exception of industrial solid waste
that
[
which
] meets the definition of garbage or municipal
solid waste.
(6)
[
(4)
] Landscaping--The activity of
arranging and modifying areas of land, natural scenery and other areas, such
as indoor or outdoor patios, for aesthetic effect, considering the use to
which the land is to be put. The term includes adding, removing, or arranging
natural forms, features, and plantings, including vegetation, and other features
to fulfill aesthetic requirements. It includes the application of soil, soil
additives, and amendments to prepare or maintain the planting area. Some examples
are garden planting or maintenance, arborist services, ornamental bush or
shrub planting, tree planting or removal, tree surgery, pruning or spraying,
and lawn sodding. The term does not include the addition of sprinkler systems,
retaining walls, ponds, pools, or fences, or other construction activities
or services provided by landscape designers or landscape architects such as
consultation, research, preparation of general or specific design or detail
plans, studies, specifications, or supervision, or any other professional
services or functions within the definition of the practice of engineering
or architecture. Landscaping services performed by landscape designers or
landscape architects are taxable.
(7)
[
(5)
] Lawn and yard maintenance--
To mow, trim, fertilize, water, or perform
[
Mowing, trimming, fertilizing,
watering and
] any other treatment or service [
which may be performed
] on private or commercial yards or lawns. It also includes maintenance
of trees and plants whether inside or outside a building.
Clearing
[
The term does not include clearing
] land for buildings,
and mowing
power line
, pipeline, or highway
rights-of-way,
are
not lawn and yard maintenance services.
[
pipeline rights-of-way,
or maintenance on land belonging to a governmental entity when the service
is required by the governmental entity.
]
(8)
New Construction--All new improvements
to real property, including initial finish-out work to the interior or exterior
of the improvement. An example is a multiple story building that has had only
its first floor finished and occupied. The initial finish-out of each additional
floor before initial occupancy or use is new construction. New construction
also includes the addition of new usable square footage to an existing building.
Examples include the addition of a new wing onto an existing building or the
addition of a new mezzanine level within an existing building. Reallocation
of existing square footage inside a building is remodeling and does not constitute
the addition of new square footage. For example, the removal or relocation
of interior walls to expand the size of a room or the finish out of an office
space that was previously used is remodeling. Raising the ceiling of a room
or the roof of a building is not new construction if new usable square footage
is not created.
(9)
[
(6)
] Property management company--A
person
, including an affiliate of a property management company,
who,
for consideration, operates and manages all the activities at a property held
by the owner for purposes of rental,
including
[
such as:
]
an office building, mall
,
[
or other
] retail or office
complex, [
an
] apartment complex, duplex, or home. In the context
of this
section
[
rule
], the responsibilities of a property
management company must include, but are not limited to, securing tenants,
hiring and supervising
persons who are responsible for
[
employees
for operation or
] upkeep of the property, receiving and applying revenues,
and incurring and paying expenses derived from the operation of the property
as directed by the owner.
A corporation, limited liability company, partnership,
trust, or estate is an affiliate of the property management company if either
it or the management company owns at least an 80% interest in the other, or
if both it and the management company are owned by a third person who has
at least an 80% ownership interest in both.
The term does not include
a person
who performs
[
performing
] taxable services
at a manufacturing facility or at a property held by the owner for purposes
other than rental.
(10)
Real property services--Services as set
out in subparagraph (A) of this paragraph whether performed on residential
or nonresidential property.
(A)
Real property services are:
(i)
landscaping;
(ii)
lawn and yard maintenance;
(iii)
removal or collection of garbage, rubbish, or other solid
waste;
(iv)
building or grounds cleaning, janitorial, or custodial
services;
(v)
structural pest control service; or
(vi)
surveying of real property.
(B)
Real property services does not include:
(i)
a service that is listed under subparagraph (A) of this
paragraph if the service is purchased by a contractor, developer, builder
or other person acting as a builder, and if the service is purchased in connection
with the construction of a new residential structure or other improvement
that is immediately adjacent to the new residential structure and that is
used in the occupancy of the structure. This exclusion does not apply to services
that are performed on property that is used as a sales office;
(ii)
surveying of real property if the service was purchased
by a real property owner during the period of October 1, 1999 through September
30, 2001 and if the service was purchased in connection with the construction
of a new residential structure or other improvement that is immediately adjacent
to the new residential structure and that is used in the occupancy of the
structure;
(iii)
the collection and removal of items excluded from the
definition of garbage as set out in paragraph (5) of this subsection.
(11)
[
(7)
] Residential or nonresidential
building or grounds cleaning, janitorial, or custodial services--The activities
of keeping the inside and outside premises of a building clean, orderly, and
functional, including performing minor adjustments, maintenance, or repairs.
Examples include, but are not limited to: window washing; floor, wall, and
ceiling cleaning; collection of waste on the premises, whether from inside
a building or on the grounds; chimney or duct cleaning; lighting maintenance,
such as bulb and fuse replacement; the cleaning, disinfecting, and restocking
of restrooms or lounge areas; cleaning or washing sidewalks, parking garages,
or parking lots; and pool cleaning and maintenance. The term does not include
activities such as painting
,
[
;
] wallpapering
,
[
;
] or performing significant repairs
. Domestic
[
; nor
domestic
] services such as those of a baby-sitter, maid
,
or
cook
are not included in this term when provided by an individual who
is an employee of
[
employed by
] a private household
and the services are
[
to provide domestic services
] for the
benefit of the household.
(12)
[
(8)
] Structural pest control services--Activities
that are regulated by the Texas Structural Pest Control Board and that are
performed
to:
[
for the purpose of
]
(A)
identify, prevent, control, or eliminate,
[
identifying, preventing, controlling, or eliminating,
]
by use of chemical or mechanical means, infestation of any of the following:
(i)
[
(A)
] insects, spiders, mites, ticks,
ants, bees, and other related pests, wood infesting organisms, rodents, weeds,
nuisance birds, or any other obnoxious or undesirable animals
that
[
which
] may infest households, railroad cars, ships, docks, trucks, airplanes
,
or other structures or their contents;
or
(ii)
[
(B)
] pests or diseases of trees,
shrubs
,
or other plantings in a park or adjacent to a residence,
business establishment, industrial plant, institutional building, or street;
and
(B)
[
(C)
]
inspect or evaluate
[
the term "structural pest control services" includes related activities, such
as inspection or evaluation concerning
] the nature or extent of an infestation
, and to prepare related
[
;
] reports[
; or performance
of services to control pest or insect infestation
].
(13)
[
(9)
] Surveying of real property--Activities
[
performed
] to determine or confirm the boundaries of real property,
or [
to determine or confirm
] the location of structures or other
improvements in relation to the boundaries of the property by the use of relevant
elements of law, research, measurement, analysis, computation, mapping
,
and land description. Examples include[
, but are not limited
to,
] boundary recovery, residential surveying, lot surveying, title
surveying, as-built title surveying, and right-of-way surveying. The term
does not include
searches of a
[
activities performed after
taxable surveying has been completed to search the
] surveyed area for
items of archaeological or historic significance.
(14)
[
(10)
] Temporary help service--An
individual, company, or corporation
that supplies personnel on a temporary
basis to supplement a customer's existing work force and that falls within
Labor Code, §93.001, the service is
covered by Industry Group 7363,
Group 736, Major Group 73 of the Standard Industrial Classification Manual,
1989[
, and includes an individual, company, or corporation that supplies
personnel on a temporary basis to supplement a customer's existing work force
]. In the context of this section, such temporary personnel must perform
a service that is normally performed by the customer's own employees; the
customer must provide all supplies and equipment necessary; and the temporary
personnel must be under the direct or general supervision of the customer
to whom the help is furnished.
(b)
Responsibilities of persons
who provide
[
providing
] real property services
.
[
on both residential
and nonresidential real property. With the exception of terms defined by subsection
(a)(6) and (10) of this section,
]
(1)
Persons who perform
[
persons
providing services defined in subsection (a) of this section are performing
real property services. Persons performing
] real property services must
obtain a tax permit and collect and remit sales or use taxes on all charges
for real property services.
(2)
Persons who perform nontaxable services
as described in subsection (a)(10)(B) of this section are not considered retailers
under Tax Code, Chapter 151, and are not required to hold tax permits. Such
persons are required to pay sales or use tax on all purchases of taxable items
that are used to perform the nontaxable service.
(3)
Persons who perform both real property
services and nontaxable services are required to obtain a tax permit and must
collect and remit sales or use taxes on all charges for real property services.
(4)
To document that a service is a nontaxable
service under subsection (a)(10)(B) of this section, a service provider's
customer must prove by way of written invoices, contract, or other documentary
evidence that the services are nontaxable real property services in that subsection.
If the service provider does not have a written document, then the service
provider must presume that the service is a taxable real property service
and must therefore collect tax. If the customer has documentation to prove
that the service qualifies as nontaxable service, then the customer may issue
to the service provider an exemption certificate in lieu of paying tax or
provide the documentation required to overcome the presumption. The certificate
must sufficiently describe the service performed to document that the service
falls within the exclusion identified in subsection (a)(10)(B) of this section
and must state that the customer is liable for any additional tax that is
due in the event that the comptroller determines that a taxable service was
performed.
(c)
Purchases for resale
[
Resale certificates
].
(1)
A properly completed resale certificate may be used to
purchase tangible personal property tax free if the care, custody, and control
of the property is transferred to the customer as part of the real property
service. For example, a
service provider who
[
taxpayer
]
purchases paper
towels
[
products
] to be left at the
customer's premises when providing janitorial services, or
who purchases
garbage dumpsters to
be left
[
leave
] on the customer's
premises as a part of the
taxable
garbage collection service[
. Taxpayer
] may purchase the paper
towels or
[
products
and
] dumpsters tax free by issuing a resale certificate. Tax is due
on the total amount
the service provider charges to
[
charged
] the customer, including
charges
[
amounts
] for
the paper
towels
[
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
to another
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
that
[
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
only
to the extent
that
the buyer can establish the value
of that portion of the service
that is
[
actually
] incorporated
into the tangible personal property.
The buyer may not issue a resale
certificate if
[
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
is
[
was actually
] incorporated
into the tangible personal property.
(d)
Exemption
or direct payment exemption
certificates.
(1)
A person who provides
[
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
or a direct payment permit holder
. 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).
(2)
A person who provides real property services
in a disaster area to repair damages may accept a properly completed exemption
certificate in lieu of tax on labor to repair property damaged by the disaster,
if the charge for labor is separately itemized. Tax is due on the materials.
(e)
Certain exempted landscaping and lawn and yard services.
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
a self-employed
individual whose total receipts from landscaping, lawn, or yard maintenance
are $5,000 or less for the four most recent calendar quarters. The exemption
does not apply to landscaping, lawn, and yard services performed by an employee
or independent contractor hired by the self-employed individual. Services
are presumed taxable until the service provider gives the purchaser a written
statement that receipts for qualifying services did not exceed $5,000 in the
four most recent calendar quarters. If the receipts exceed $5,000 in the four
most recent calendar quarters, then the self-employed individual must collect
sales tax on landscaping, lawn, or yard maintenance service beginning the
first day of the next calendar quarter after the quarter in which the $5,000
threshold was exceeded.
[
:
]
[(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
who provide
[
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
for later
removal
[
and which will, at another time, be moved
] to a
landfill, the fee
for
[
charged to persons
] depositing
garbage into such a facility is [
considered to be
] a charge for
taxable
garbage collection [
and is taxable
].
(h)
Waste collection
[
Garbage collection
]
services [
that may be
] excluded from
real property services.
[
tax. Persons providing collection services for customers having
]
(1)
Charges for waste collection services are
presumed taxable unless the customer gives the service provider documentation
that the waste is
[
waste
] excluded from the definition of
"garbage or other solid
waste." The collection of waste excluded from
the definition of "garbage or other solid
waste"
as provided in
subsection (a)(5) of this section is not taxable. When such excluded waste
is removed, the service provider should accept a written statement from the
customer affirming that the waste is 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
].
(2)
When collecting both garbage as defined
by subsection (a)(5) of this section and excluded waste, the service provider
must collect tax on the total charge for the service unless:
(A)
the charge for the removal of excluded waste is separately
stated from charges for removing garbage or solid waste; or
(B)
the service provider and the customer agree in writing
that the customer will be responsible for accruing tax on that portion of
the charge that represents taxable services. The customer may use any reasonable
allocation for reporting tax on taxable services.
(i)
Unrelated services.
(1)
A service
is
[
will be considered as
]
unrelated if:
(A)
it is
neither
[
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
that
[
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
services
that
[
service which
] may be excluded from the tax base include
maintenance charges
that meet
[
meeting
] the definition
in §3.357 of this title (relating to [
Labor Relating to
] Nonresidential
Real Property Repair, Remodeling
, and
Restoration
; Real Property
[
,
] Maintenance[
, New Construction, and Residential
Property
]), engineering studies, and architectural or landscaping
design
[
designs
].
(2)
If a combination of
[
When
] nontaxable
unrelated services and
real property services are performed under the
same contract
[
taxable services are sold or purchased for a single
charge
] and the portion
of the charges for real property
[
relating to taxable
] services
exceeds
[
represents more
than
] 5.0% of the total charge,
then the parties must separately
identify taxable and nontaxable services along with the charges that apply
to each or else
the total charge is presumed to be
for real property
services and is
taxable.
Both parties must retain documentation
that clearly defines the work that is performed to show that, had the real
property services and nontaxable services been performed independently, the
charge for each would approximate the amount allocated. If
[
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
taxable
[
exempt
] and
nontaxable
[
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
service provider's apportioned
charge for nontaxable
[
charge for exempt
] services is
unreasonable based on
[
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
may
[
will
] adjust the charges and
either party may be
held responsible for the additional taxes due
[
assess the service
provider the additional tax, penalty, and interest on the taxable services
].
(3)
The sales price of a real property taxable service
includes all charges for expenses related to the provision of that service
whether separately stated.
[
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
equipment,
meals, telephone
calls, hotel rooms, or airplane tickets.
(j)
Governmental entities.
Sales or use tax is due on
charges for
[
When
] garbage collection services
that
are provided by a governmental entity
. However, no sales or use
tax is due if the governmental entity provides garbage collection services
[
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
. If
[
, sales or use taxes
are not due. This section does not apply if
] the fee
is
[
changes each billing period
] based on
volume of waste or services
provided to
[
quantity of consumption of tangible personal property
or service provided
] individual service recipients
, then the garbage
collection service is not considered to be a part of a set fee structure,
and the fee is subject to sales or use tax
.
(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.
]
(1)
If a service provider has only one place
of business, local sales tax must be collected based on the tax rate at the
service provider's place of business, even if the service is performed at
a different location, but the service provider should not collect transit
authority sales tax if the service is performed at a location outside the
boundaries of the transit area. If a service provider has multiple places
of business, then the service provider must collect local sales tax based
on the tax rate at the place of business from which the service is provided,
regardless of the location where the customer's order was taken.
(2)
If a service provider has a place of business
that is outside the boundaries of a local taxing jurisdiction, then the service
provider will be required to collect local use tax if the service is performed
within the local taxing jurisdiction.
(3)
A garbage or waste collection service provider
must collect local taxes based on the tax rate of
[
Local taxes
for garbage or other solid waste removal services are allocated to
]
the local taxing jurisdiction
where the
[
in which the garbage
or other solid waste is located when its
] collection or removal
of garbage or other solid waste occurs
[
begins
].
(l)
Responsibilities.
For general information on
the collection and reporting responsibilities of providers and purchasers
of taxable services, see §§
3.252, 3.253,
3.286, 3.374,
3.375, 3.424, and 3.425 of this title (relating to
Collection and Allocation
of County Tax; County Use Tax;
Seller's and Purchaser's Responsibilities;
Collection and Allocation of the City Sales Tax; City Use Tax; Collection
and Allocation of Transit Sales Tax; and Transit Use Tax)
[
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
engaged in
[
doing
] business in Texas or
in
[
a
] specific local taxing
jurisdictions
[
jurisdiction
] and is not required to, or does not voluntarily, collect and report
[
the applicable
] Texas
state and/or local
tax, it is
the Texas customer's responsibility to report and pay the
state and/or
local
use tax directly to this office.
(n)
Property management companies.
(1)
Employees permanently assigned to one rental property are
considered employees of that property
if
[
when
] the
property manager is reimbursed by the property owner
for the salaries
of the employees
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
the
[
a managed rental
] property by
those assigned
[
management company
] employees
is
[
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 services on managed rental property
].
(2)
Property management companies whose employees provide taxable
services as part of their overall management and operation of a rental property
need not collect tax on those services if
the
[
their
]
value
of the taxable services
is insignificant.
(A)
Insignificant means that the value of the taxable
service
[
Such taxable services will be considered insignificant
in any billing period in which their value
] is 5.0% or less of the amount
charged by the management company for services
in any billing period
. The amount charged by the management company for taxable services
is to be determined by deducting from the management company's total charge
any mortgage payments made by the management company for the property owner
and any amounts paid to persons other than employees of the management company
for goods and services.
(B)
If the value of the taxable services exceeds the 5.0% limit,
the entire amount charged by the management company
is
[
will
be considered
] taxable
. All separately stated
[
unless
] charges for taxable services are
taxable.
[
separately
itemized and taxed as provided under subsection (i)(2) of this section.
]
(3)
Purchases by the property management company for use by
the property owner of taxable goods, labor, or services from third-party suppliers
may be handled in either of the following ways:
(A)
the management company may issue a
properly completed
resale certificate to the supplier and collect tax from the property
owner on the itemized charge for the goods, labor, or
services
[
service
]; or
(B)
the management company may pay tax to the supplier and
collect from the property owner an amount equal to the total of the amount
paid by the management company for the goods, labor, or services and the tax
paid.
Any amount represented as tax must be labeled as "tax reimbursement."
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on March 11, 2003.
TRD-200301675
Martin Cherry
Chief Deputy General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: April 27, 2003
For further information, please call: (512) 475-0387