TITLE 34.PUBLIC FINANCE

Part 1. COMPTROLLER OF PUBLIC ACCOUNTS

Subchapter J. PETROLEUM PRODUCTS DELIVERY FEE

The Comptroller of Public Accounts adopts an amendment to §3.151, concerning imposition, collection, and bonds or other security of the fee, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 472).

The change is necessary to reflect current comptroller policy providing that the fee not be assessed on petroleum products withdrawn from a bulk facility and exported from this state or delivered into the fuel supply tanks of vessels or boats, provided that the fuel is not stored prior to export. An additional change is necessary to reflect current comptroller policy providing entities exempt from the fee the option of seeking a refund from the permitted bulk facility from which the petroleum products were withdrawn or seeking a refund directly from the comptroller. A new subsection (k) is added, with the remaining subsections relettered.

No comments were received regarding adoption of the amendment.

This amendment is adopted under Tax Code, §111.002 and §111.0022, which provide 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, and taxes, fees, or other charges which the comptroller administers under other law.

The amendment implements Water Code, §26.3574.

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 March 24, 2005.

TRD-200501273

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter L. MOTOR FUEL TAX--PRIOR TO JANUARY 1, 2004

34 TAC §3.182

The Comptroller of Public Accounts adopts an amendment to §3.182, concerning motor fuel transporting documents, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 475).

The change is necessary to reflect the correct reference to the Water Code in subsection (c)(14).

No comments were received regarding adoption of the amendment.

This amendment is adopted 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, §153.004 and §153.227

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 March 24, 2005.

TRD-200501303

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter O. STATE SALES AND USE TAX

34 TAC §3.286

The Comptroller of Public Accounts adopts an amendment to §3.286, concerning seller's and purchaser's responsibilities, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 476). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The amendment incorporates recent statutory changes. House Bill 2424, 78th Legislature, Regular Session, 2003, amended Tax Code, §111.046, effective October 1, 2003, to allow the comptroller to establish by rule a minimum age for a person to be eligible for a permit or license to be issued by the comptroller. Subsection (c)(2) of the proposed section is being amended to establish a minimum age of 18 for an individual to obtain a sales and use tax permit unless the comptroller allows an exception. House Bill 109, 78th Legislature, 2003, amended Tax Code, §151.406, effective January 1, 2004, to require retailers to report the amount of sales tax refunded based on customs broker certifications. The proposed section adds subsection (f)(7) requiring retailers to file supplemental reports with their sales and use tax returns showing the total amount of sales tax refunded for exports based on customs broker certifications.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code, Chapter 151.

§3.286.Seller's and Purchaser's Responsibilities.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Engaged in business--A retailer is engaged in business in Texas if the retailer:

(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, an office, place of distribution, sales or sample room, warehouse or storage place, or other place of business;

(B) has any representative, agent, salesperson, canvasser, or solicitor who operates in this state under the authority of the seller to sell, deliver, or take orders for any taxable items;

(D) uses independent salespersons in direct sales of taxable items;

(E) derives receipts from a rental or lease of tangible personal property that is located in this state;

(F) allows a franchisee or licensee to operate under its trade name if the franchisee or licensee is required to collect Texas sales or use tax; or

(G) conducts business in this state through employees, agents, or independent contractors.

(2) Place of business of the seller--For tax permit requirement purposes, the term means an established outlet, office, or location that the seller, his agent, or employee operates for the purpose of receipt of orders for taxable items. A warehouse, storage yard, or manufacturing plant is not a "place of business of the seller" for tax permit requirement purposes unless the seller receives three or more orders in a calendar year at the warehouse, storage yard, or manufacturing plant.

(3) Seller--Every retailer, wholesaler, distributor, manufacturer, or any other person who sells, leases, rents, or transfers ownership of taxable items for a consideration. A promoter of a flea market, trade day, or other event that involves the sales of taxable items is a seller and is responsible for the collection and remittance of the sales tax that dealers, salespersons, or individuals collect at such events, unless the participants hold active sales tax permits that the comptroller has issued. A direct sales organization that is engaged in business as defined in paragraph (1)(D) of this subsection is a seller and is responsible for the collection and remittance of the sales tax on all sales of taxable items by the independent salespersons who sell the organization's product. Pawnbrokers, storagemen, mechanics, artisans, or others who sell property to enforce a lien are also sellers. An auctioneer who does not receive payment for the item sold, does not issue a bill of sale or invoice to the purchaser of the item, and who does not issue a check or other remittance to the owner of the item sold by the auctioneer is not considered a seller responsible for the collection of the tax. In this instance, it is the owner's responsibility to collect and remit the tax. Auctioneers should refer to §3.311 of this title (relating to Auctioneers, Brokers, and Factors).

(b) Permits required.

(1) Each seller must apply to the comptroller and obtain a tax permit for each place of business.

(2) Each out-of-state seller who is engaged in business in this state must apply to the comptroller and obtain a tax permit. An out-of-state seller who has been engaged in business in Texas continues to be responsible for collection of Texas use tax on sales made into Texas for 12 months after the seller ceases to be engaged in business in Texas.

(3) Independent salespersons of direct sales organizations are not required to hold sales tax permits to sell taxable items for direct sales organizations. Direct sales organizations hold responsibility to maintain Texas permits and collect Texas tax on all sales of taxable items by their independent salespersons. See subsection (d)(6) of this section for collection and remittance of tax by direct sales organizations.

(4) A person who engages in business in this state as a seller of tangible personal property or taxable services without a tax permit required by Tax Code, Chapter 151, commits a criminal offense. Each day that a person operates a business without a permit is a separate offense. See §3.305 of this title (relating to Criminal Offenses and Penalties).

(1) A person must complete an application that the comptroller furnishes and must return that application to the comptroller, together with bond or other security that may be required by §3.327 of this title (relating to Taxpayer's Bond or Other Security). A separate permit under the same account is issued to the applicant for each place of business. The permit is issued without charge.

(2) Each legal entity (corporation, partnership, sole proprietor, etc.) must apply for its own permit. An individual or sole proprietor must be at least 18 years of age unless the comptroller allows an exception from the age requirement. The permit cannot be transferred from one owner to another. The permit is valid only for the person to whom it was issued and for the transaction of business only at the address that is shown on the permit. If a person operates two or more types of business at the same location, then only one permit is required.

(3) The permit must be conspicuously displayed at the place of business for which it is issued. A permit holder that has traveling salesmen who operate from one central office needs only one permit, which must be displayed at the central office.

(4) All permits of the seller will have the same taxpayer number; however, each business location will have a different outlet number. The outlet numbers assigned may not necessarily correspond to the number of business locations owned by a taxpayer.

(d) Collection and remittance of the tax.

(1) Each seller must collect the tax on each separate retail sale in accordance with the statutory bracket system in Tax Code, §151.053. Copies of the bracket system should be displayed in each place of business so both the seller and the customers may easily use them. The tax is a debt of the purchaser to the seller until collected. A seller who is a printer should see paragraph (7) of this subsection for an exception to the collection requirement.

(2) The sales tax applies to each total sale, not to each item of each sale. For example, if two items are purchased at the same time and each item is sold for $.07, then the seller must collect the tax on the total sum of $.14. Tax must be reported and remitted to the comptroller as provided by Tax Code, §151.410. When tax is collected properly under the bracket system, the seller is not required to remit any amount that is collected in excess of the tax due. Conversely, when the tax collected under the bracket system is less than the tax due on the seller's total receipts, the seller is required to remit tax on the total receipts even though the seller did not collect tax from customers.

(3) The amount of the sales tax must be separately stated on the bill, contract, or invoice to the customer or there must be a written statement to the customer that the stated price includes sales or use taxes. Contracts, bills, or invoices that merely state that "all taxes" are included are not specific enough to relieve either party to the transaction of its sales and use tax responsibilities. The total amount that is shown on such documents is presumed to be the taxable item's sales price, without tax included. The seller or customer may overcome the presumption by using the seller's records to show that tax was included in the sales price. Out-of-state sellers must identify the tax as Texas sales or use tax.

(4) A seller who advertises or holds out to the public that the seller will assume, absorb, or refund any portion of the tax, or that the seller will not add the tax to the sales price of taxable items commits a criminal offense. See §3.305 of this title.

(5) The practice of rounding off the amount of tax that is due on the sale of a taxable item is prohibited. Tax must be added to the sales price according to the statutory bracket system.

(6) Direct sales organizations must collect and remit tax from independent salespersons as follows.

(A) If an independent salesperson purchases a taxable item from a direct sales organization after the customer's order has been taken, then the direct sales organization must collect and remit sales tax on the actual sales price of the taxable item.

(B) If an independent salesperson purchases a taxable item before the customer's order is taken, then the direct sales organization must collect and remit the tax from the salesperson based on the suggested retail sales price of the taxable item.

(C) Taxable items that are sold to an independent salesperson for the salesperson's use are taxed based on the actual price for which the item was sold to the salesperson at the tax rate that was in effect for the salesperson's location.

(7) A printer is a seller of printed materials and is required to collect tax on sales. However, a printer who is engaged in business in Texas is not required to collect tax if:

(A) the printed materials are produced by a web offset or rotogravure printing process;

(B) the printer delivers those materials to a fulfillment house or to the United States Postal Service for distribution to third parties who are located both in Texas and outside of Texas; and

(C) the purchaser issues an exemption certificate that contains the statement that the printed materials are for multistate use and the purchaser agrees to pay to Texas all taxes that are or may become due to the state on the taxable items that are purchased under the exemption certificate. See subsection (f)(4) of this section for additional reporting requirements.

(e) Payment of the tax.

(1) Each seller, or purchaser who owes tax that was not collected by a seller, must remit tax on all receipts from the sales or purchases of taxable items less any applicable deductions. On or before the 20th day of the month following each reporting period, each person who is subject to the tax shall file a consolidated return together with the tax payment for all businesses that operate under the same taxpayer number. Reports and payments that are due on Saturdays, Sundays, or legal holidays may be submitted on the next business day.

(2) The returns must be signed by the person who is required to file the report or by the person's duly authorized agent, but need not be verified by oath.

(3) The returns must be filed on forms that the comptroller prescribes. The fact that the seller or purchaser does not receive the correct forms from the comptroller does not relieve the seller or purchaser of the responsibility to file a return and to pay the required tax.

(4) A seller or a purchaser who owes tax that was not collected by a seller, who remitted $100,000 or more in sales and use tax to the comptroller during the preceding state fiscal year (September 1 through August 31) must file returns and transfer payments electronically as provided by Tax Code, §111.0625 and §111.0626. For further information about electronic filing of returns and payment of tax, see §3.9 of this title (relating to Electronic Filing of Returns and Reports; Electronic Transfer of Certain Payments by Certain Taxpayers).

(5) A non-permitted purchaser who owes sales or use tax that was not collected by a seller must remit the tax to the comptroller on or before the 20th of the month following the month in which the taxable event occurs.

(f) Reporting period.

(1) Sellers, and purchasers who owe tax that was not collected by sellers, who have less than $1,500 in state tax per quarter to report may file returns quarterly. The quarterly reporting periods end on March 31, June 30, September 30, and December 31. The returns must be filed on or before the 20th day of the month following the period ending date.

(2) Sellers, and purchasers who owe tax that was not collected by sellers, who have less than $1,000 state tax to report during a calendar year may file yearly returns upon authorization from the comptroller.

(A) Authorization to file returns on a yearly basis is conditioned upon the correct and timely filing of prior returns.

(B) Authorization to file returns on a yearly basis will be denied if a taxpayer's liability exceeded $1,000 in the prior calendar year.

(C) A taxpayer who files on a yearly basis without authorization is liable for applicable penalty and interest on any previously unreported quarter.

(D) Authority to file on a yearly basis is automatically revoked if a taxpayer's state sales and use tax liability is greater than $1,000 during a calendar year. The taxpayer must file a return for that month or quarter, depending on the amount, in which the tax remittance or liability is greater than $1,000. On that report, the taxpayer must report all taxes that are collected and all accrued liability for the year, and must file monthly or quarterly, as appropriate, so long as the yearly tax liability is greater than $1,000.

(E) Once each year, the comptroller reviews all accounts to confirm yearly filing status and to authorize permit holders who meet the filing requirements to file yearly returns.

(F) Yearly filers must report on a calendar year basis. The return and payment are due on or before January 20 of the next calendar year.

(3) Sellers, and purchasers who owe tax that was not collected by sellers, who have $1,500 or more in state tax per quarter to report must file monthly returns except for sellers who prepay the tax.

(4) A printer who is not required to collect tax on the sale of printed materials because the transaction meets the requirements of subsection (d)(7) of this section must file a quarterly special use tax report with the comptroller on or before the last day of the month following the quarter. The special use tax report must contain the name and address of each purchaser with the sales price and date of each sale. The printer is still required to file sales and use tax returns to report and remit taxes that the printer collected from purchasers on transactions that do not meet the requirements of subsection (d)(7) of this section.

(5) Each taxpayer who is required to file a city, county, special purpose district (SPD), or metropolitan transit authority/city transit department (MTA/CTD) sales and use tax return must file the return at the same time that the state sales and use tax return is filed.

(6) State agencies. State agencies that deposit taxes directly with the comptroller's office according to Accounting Policy Statement Number 8 are not required to file a separate tax return. A fully completed deposit request voucher is deemed to be the return filed by these agencies. Paragraphs (1)-(3) of this subsection do not apply to these state agencies. Taxes must be deposited with the comptroller's office within the time period otherwise specified by law for deposit of state funds.

(7) Retailers must report the total amount of sales tax refunded for sale of merchandise exported beyond the territorial limits of the United States and documented by licensed customs broker certifications under Tax Code §151.307(b)(2). Retailers who refund tax on exports based on customs broker certifications must file the supplemental report on a form prescribed by the comptroller. Retailers file the supplemental reports at the same time and for the same reporting period as the retailer's state sales and use tax return.

(g) Filing the return; prepaying the tax; discounts; penalties.

(1) The comptroller makes forms available to all persons who are required to file returns. The failure of the taxpayer to obtain the forms does not relieve that taxpayer from the requirement to file and remit the tax timely. Each taxpayer may claim a discount for timely filing and payment as reimbursement for the expense of collection of the tax. The discount is equal to 0.5% of the amount of tax due. Certain sellers and purchasers are required to file returns and pay tax electronically, as provided in subsection (e)(4) of this section.

(2) The return for each reporting period must reflect the total sales, taxable sales, and taxable purchases for each outlet. The 0.5% discount for timely filing and payment may be claimed on the return for each reporting period and computed on the amount timely reported and paid with that return.

(3) Prepayments may be made by taxpayers who file monthly or quarterly returns. The amount of the prepayment must be a reasonable estimate of the state and local tax liability for the entire reporting period. "Reasonable estimate" means at least 90% of the total amount due or an amount equal to the actual net tax liability due and paid for the same reporting period of the immediately preceding year.

(A) A taxpayer who makes a timely prepayment based upon a reasonable estimate of tax liability may retain an additional discount of 1.25% of the amount due.

(B) The monthly prepayment is due on or before the 15th day of the month for which the prepayment is made

(C) The quarterly prepayment is due on or before the 15th day of the second month of the quarter for which the tax is due.

(D) On or before the 20th day of the month that follows the quarter or month for which a prepayment was made, the taxpayer must file a return showing the actual liability and remit any amount due in excess of the prepayment. If there is an additional amount due, the taxpayer may retain the 0.5% reimbursement provided that both the return and the additional amount due are timely filed. If the prepayment exceeded the actual liability, the taxpayer will be mailed an overpayment notice or refund warrant.

(4) Remittances that are less than a reasonable estimate as required by paragraph (3) of this subsection are not regarded as prepayments. The 1.25% discount will not be allowed. If the taxpayer owes more than $1,500 in a calendar quarter, the taxpayer is regarded as a monthly filer. All monthly reports that are not filed because of the invalid prepayment are subject to late filing penalty and interest.

(5) If a taxpayer does not file a return together with payment on or before the due date, the taxpayer forfeits all discounts and incurs a mandatory 5.0% penalty. After the first 30 days delinquency, an additional mandatory penalty of 5.0% is assessed against the taxpayer, and after the first 60 days delinquency, interest begins to accrue at the prime rate, as published in the Wall Street Journal on the first business day of each calendar year, plus 1.0%. For taxes that are due on or before December 31, 1999, interest is assessed at the rate of 12% annually.

(6) Permit holders are required to file sales and use tax returns. A permit holder must file a sales and use tax return even if the permit holder has no sales or tax to report for the reporting period. A person who has failed to file timely reports on two or more previous occasions must pay an additional penalty of $50 for each subsequent report that is not filed timely. The penalty is due regardless of whether the person subsequently files the report or whether no taxes are due for the reporting period.

(h) Records required.

(1) Records must be kept for four years, unless the comptroller authorizes in writing a shorter retention period. Exemption and resale certificates must be kept for four years following the completion of the last sale covered by the certificate. See §3.281 of this title (relating to Records Required; Information Required) and §3.282 of this title (relating to Auditing Taxpayer Records).

(2) The comptroller or an authorized representative has the right to examine, copy, and photograph any records or equipment of any person who is liable for the tax in order to verify the accuracy of any return or to determine the tax liability in the event that no return is filed.

(3) A person who intentionally or knowingly conceals, destroys, makes a false entry in, or fails to make an entry in, records that are required to be made or kept under Tax Code, Chapter 151, commits a criminal offense. See §3.305 of this title.

(i) Resale and exemption certificates.

(1) Any person who sells taxable items in this state must collect sales and use tax on taxable items that are sold unless a valid and properly completed resale certificate, exemption certificate, direct payment exemption certificate, or maquiladora exemption certificate is received from the purchaser. Simply having permit numbers on file without properly completed certificates does not relieve the seller from the responsibility for collecting tax.

(2) A seller may accept a resale certificate only from a purchaser who is in the business of reselling the taxable items within the geographical limits of the United States of America, its territories and possessions, or in the United Mexican States. See §3.285 of this title (relating to Resale Certificate; Sales for Resale). To be valid, the resale certificate must show the 11-digit number from the purchaser's Texas tax permit or the out-of-state registration number of the out- of-state purchaser. A Mexican retailer who claims a resale exemption must show the Federal Taxpayers Registry (RFC) identification number for Mexico on the resale certificate and give a copy of the Mexican Registration Form to the Texas seller.

(3) A seller may accept an exemption certificate in lieu of the tax on sales of items that will be used in an exempt manner or on sales to exempt entities. See §3.287 of this title (relating to Exemption Certificates). There is no exemption number. An exemption certificate does not require a number to be valid.

(4) A purchaser who claims an exemption from the tax must issue to the seller a properly completed resale or exemption certificate. The seller must act in good faith when accepting the resale or exemption certificate. If a seller has actual knowledge that the exemption claimed is invalid, the seller must collect the tax.

(5) A person who intentionally or knowingly makes, presents, uses, or alters a resale or exemption certificate for the purpose of evading sales or use tax is guilty of a criminal offense. See §3.305 of this title.

(6) Direct payment permit holders are entitled to issue exemption certificates when purchasing all taxable items, other than those purchased for resale. The direct payment exemption certificate must show the purchaser's direct payment permit number. See §3.288 of this title (relating to Direct Payment Procedures and Qualifications).

(7) Maquiladora export permit holders are entitled to issue maquiladora exemption certificates when they purchase tangible personal property, other than that purchased for resale. Maquiladora export permit holders should refer to §3.358 of this title (relating to Maquiladoras).

(8) The seller should obtain a properly executed resale or exemption certificate at the time a transaction occurs. All certificates obtained on or after the date the auditor actually begins work on the audit at the seller's place of business or on the seller's records are subject to verification. All incomplete certificates will be disallowed regardless of when they were obtained. The seller has 60 days from the date on which the seller receives written notice from the comptroller of the seller's duty to deliver certificates to the comptroller. For the purposes of this section, written notice given by mail is presumed to have been received by the seller within three business days from the date of deposit in the custody of the United States Postal Service. The seller may overcome the presumption of three business days for mail delivery by submitting proof from the United States Postal Service or by providing other competent evidence that shows a later delivery date. Any certificates that are delivered to the comptroller during the 60-day period are subject to verification by the comptroller before any deductions are allowed. Certificates that are delivered to the comptroller after the 60-day period will not be accepted and the deduction will not be granted. See §3.285 of this title (relating to Resale Certificate; Sales for Resale), §3.287 of this title (relating to Exemption Certificates), §3.288 of this title (relating to Direct Payment Procedures and Qualifications) and §3.282 of this title (relating to Auditing Taxpayer Records).

(j) Suspension of permit.

(1) If a person fails to comply with any provision of Tax Code, Title 2, or with the rules issued by the comptroller under those statutes, the comptroller may suspend the person's permit or permits.

(2) Before a seller's permit is suspended, the seller is entitled to a hearing before the comptroller to show cause why the permit or permits should not be suspended. The comptroller shall give the seller at least 20 days notice, which shall be in accordance with the requirements of §1.14 of this title (relating to Notice of Setting).

(3) After a permit has been suspended, a new permit will not be issued to the same seller until the seller has posted sufficient security and satisfied the comptroller that the seller will comply with both the provisions of the law and the comptroller's rules and regulations.

(4) A person who operates a business in this state as a seller of tangible personal property or taxable services after the permit has been suspended commits a criminal offense. Each day that a person operates a business with a suspended permit is a separate offense. See §3.305 of this title.

(k) Refusal to issue permit. The comptroller is required by Tax Code, §111.0046, to refuse to issue any permit to a person who:

(1) is not permitted or licensed as required by law for a different tax or activity administered by the comptroller; or

(2) is currently delinquent in the payment of any tax or fee collected by the comptroller.

(l) Cancellation of sales tax permits with no reported business activity.

(1) Permit cancellation due to abandonment. Any holder of a sales tax permit who reported no business activity in the previous calendar year is deemed to have abandoned the permit, and the comptroller may cancel the permit. "No Business Activity" means zero total sales, zero taxable sales, and zero taxable purchases.

(2) Re-application. If a permit is cancelled, the person may reapply and obtain a new sales tax permit upon request provided the issuance is not prohibited by subsection (k)(1) or (2) of this section, or by Tax Code, §111.0046.

(m) Direct payment. Yearly and quarterly filing requirements, prepayment procedures and discounts for timely filing do not apply to holders of direct payment permits. See §3.288 of this title (relating to Direct Payment Procedures and Qualifications). Direct payment returns and remittances are due monthly on or before the 20th day of the month following the end of the calendar month for which payment is made.

(n) Liability related to acquisition of a business or assets of a business. Tax Code, §111.020 and §111.024, provides that the comptroller may impose a tax liability on a person who acquires a business or the assets of a business. See §3.7 of this title (relating to Successor Liability: Liability Incurred by Purchase of a Business).

(o) Criminal penalties. Tax Code, Chapter 151, imposes criminal penalties for certain prohibited activities or for failure to comply with certain provisions under the law. See §3.305 of this title.

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 March 24, 2005.

TRD-200501274

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.295

The Comptroller of Public Accounts adopts an amendment to §3.295, concerning natural gas and electricity, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 480).

The adopted amendment implements legislative changes made by House Bill 1194, 78th Legislature, 2003. New subsection (i) is added to address pipeline safety fees that are not subject to sales and use tax.

No comments were received regarding adoption of the amendment.

The amendment implements Utilities Code, §121.211.

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 March 24, 2005.

TRD-200501275

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.303

The Comptroller of Public Accounts adopts an amendment to §3.303, concerning transportation and delivery charges, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 483).

The adopted amendment clarifies that separately stated postage charges will not be subject to sales and use tax when incurred by the seller at the request of a client to distribute both taxable tangible personal property and taxable services to third party recipients as designated by the client. Subsection (d) is amended accordingly.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code §151.005 and §151.007.

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 March 24, 2005.

TRD-200501278

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.323

The Comptroller of Public Accounts adopts an amendment to §3.323, concerning imports and exports, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 483). The previous proposed version contained a typographical error. Subsection (c)(2) has a misplaced bracket. The bracket will be moved to enclose a second "the" in the sentence. The comptroller has deleted the statutory references in the title of the section to shorten the title.

This section is being amended to implement House Bill 109, 78th Regular Session of the Texas Legislature. Effective January 1, 2004, the legislation amends Tax Code §151.157, §151.158, §151.307, and adds §151.1575 regarding customs broker export certifications. Subsection (c)(2) of the proposed section contains information about this change and references §3.360, concerning customs brokers, which is being amended to reflect the new customs broker certification requirements. New subsection (g) explains the reporting requirements for retailers who refund sales tax based on licensed customs broker certifications. Other amendments to the language of the section are for the purposes of clarity.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code, Chapter 151.

§3.323.Imports and Exports.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Air forwarder--A licensed International Air Transportation Association freight forwarder.

(2) Consignee--The person named in a bill of lading to whom or to whose order the bill promises delivery.

(3) Consignor--The person named in a bill of lading as the person from whom the goods have been received for shipment.

(4) Licensed and certificated carrier--A person authorized by the appropriate United States agency or by the appropriate state agency within the United States to operate an aircraft, vessel, train, motor vehicle, or pipeline as a common or contract carrier. Certificates of inspection or airworthiness certificates are not the appropriate documents for authorizing a person to operate as a common or contract carrier. These documents relate to the carrier device itself rather than a person's right to operate a carrier business.

(5) Licensed customs broker--A person who is licensed by the United States Customs Service to act as a custom house broker and who holds a Texas Customs Broker's License issued by the comptroller as provided in §3.360 of this title (relating to Customs Brokers).

(6) Ocean forwarder--A licensed Federal Maritime Commission freight forwarder.

(b) United States Constitution. On the basis of the import and export clause of the United States Constitution, Article 1, §10, clause 2, tangible personal property imported into or exported from Texas is exempt from taxation by the Tax Code, §151.307 and §151.330, so long as the property retains its character as an import or export.

(1) When an exemption is claimed because tangible personal property is exported beyond the territorial limits of the United States, proof of export may be shown only by:

(A) a copy of a bill of lading issued by a licensed and certificated carrier of persons or property that shows the seller as consignor, the buyer as consignee, and a delivery point outside the territorial limits of the United States;

(B) documentation that is valid under §3.360 of this title (relating to Customs Brokers) provided by a licensed customs broker certifying that the property will be exported to a point outside the territorial limits of the United States;

(C) formal entry documents from the country of destination showing that the property was imported into a country other than the United States. For the country of Mexico, the formal entry document would be the pedimento de importaciones document with a computerized, certified number issued by Mexican customs officials, or an alternative type of formal entry document also used by Mexican customs officials, such as the boleta;

(D) a copy of the original airway, ocean, or railroad bill of lading issued by a licensed and certificated carrier that describes the property being exported and a copy of the air forwarder's, ocean forwarder's, or rail freight forwarder's receipt if an air, ocean, or rail freight forwarder takes possession of the property in Texas; or

(E) a maquiladora exemption certificate issued by an organization of the type defined in §3.358 of this title (relating to Maquiladoras). The maquiladora must also provide a copy of its maquiladora export permit issued by the comptroller.

(2) The retailer is responsible for obtaining proof of exportation. Only one type of proof relating to a particular piece of property is necessary. For example, a furniture store sells a table and collects sales tax. The purchaser returns to the store a week later with a valid pedimento de importaciones showing that the table was imported into Mexico. The retailer may accept the pedimento, alone, as proof of export and refund the tax. It is not necessary for the retailer to also obtain an export certification form issued by a licensed customs broker. Except as provided in §3.358 of this title (relating to Maquiladoras), exemption certificates, affidavits, or statements from the purchaser that the property will be or has been exported are not sufficient to exempt the sale as an export. The certification form provided by a licensed Texas customs broker as provided in §3.360 of this title (relating to Customs Brokers), is acceptable as proof of export. A passport number taken by a seller from a passport issued by a foreign country is not acceptable as proof of export. For information concerning resale certificates given by Mexican retailers, see §3.285 of this title (relating to Resale Certificate; Sales for Resale).

(3) Storing property in Texas by the owner prior to exportation is a use of that property in Texas. Property stored or otherwise used or consumed in Texas by the owner loses its exemption as an export. For example, clothing or jewelry actually worn by the purchaser in Texas is used in Texas; automotive parts (not including electronic audio equipment) installed on the purchaser's motor vehicle in Texas are used in Texas if the vehicle is subsequently driven in Texas; and food ready for immediate consumption that is purchased in Texas is presumed to be used in Texas. By law, electronic audio equipment retains the exemption even if installed in a motor vehicle that is driven in Texas prior to export. Sufficient time will be allowed to arrange for shipping. Property in Texas longer than 30 days from date of purchase will be presumed to have been stored. Any use of the property in Texas by the owner prior to export also causes the loss of the export exemption. Property in the hands of a freight forwarder is not covered by this provision.

(4) The sale of property to military personnel is taxable unless proof of export is maintained as outlined in paragraph (1) of this subsection.

(5) If a seller delivers property to a purchaser in Texas, the seller must collect tax at the time of sale unless the sale is exempt for a reason other than export and the seller accepts a properly completed resale or exemption certificate. Tax may not be refunded until the property has actually been exported from the territorial limits of the United States and the seller has received valid proof of export as described in this subsection. There is a rebuttable presumption that an export certification form issued by a licensed customs broker who complies with §3.360 of this title (relating to Customs Brokers) is valid. Tax not collected will be assessed against the seller. This paragraph does not apply when proof of export is provided to the seller at the time of sale by a maquiladora according to the terms of paragraph (1)(E) of this subsection.

(d) Imports. Property imported into Texas from another country is exempt from Texas use tax as long as the property retains its character as an import. When transit ceases in Texas, the import becomes subject to the Texas use tax.

(e) Refunds.

(1) A retailer who collects sales tax on tangible personal property that qualifies for exemption under subsection (b) of this section may refund the tax to the original purchaser or the original purchaser's assignee upon receipt of export documentation as required by subsection (c) of this section.

(2) A retailer who receives documentation that is valid under subsection (c)(1)(B) of this section, must report the total amount of sales tax refunded as provided in subsection (g) of this section, may not refund the tax paid under this chapter on that purchase before:

(A) the 24th hour after the hour stated as the time of export on the documentation, if the retailer is located in a county that borders the United Mexican States; or

(B) the seventh day after the day stated as the date of export on the documentation, if the retailer is located in a county that does not border the United Mexican States.

(3) The refund may be made by certified check, company check, money order, credit memo, or cash. If the refund is made in cash, the retailer must receive at the time the refund is made a receipt showing a description of the property purchased, the amount and date of the refund, and the name, address, and signature of the purchaser and, if applicable, the purchaser's assignee. A retailer who issues a tax refund to the purchaser's assignee must also receive a copy of the purchaser's written assignment of the right to a refund. A retailer who makes a refund before the time prescribed by subsection (e)(2)(A) or (B) of this section or makes a refund that is undocumented or improperly documented is liable for the tax refunded plus interest.

(4) A copy of the certified check, company check, money order, credit memo, or signed cash receipt and a copy of the written assignment of the purchaser's right to a refund, if applicable, must be attached to the original export documents and maintained in the seller's files.

(5) In an audit, the auditor must be able to tie the export documents to the original taxable transaction. The seller must retain the original invoice of the sale. Cash register receipts and other records of the original taxable transaction that do not include a detailed, specific description of the items purchased are not sufficient to tie the export documents to the original taxable transaction. Refunds made pursuant to undocumented or improperly documented export exemptions will be assessed against the seller.

(f) Records. Please refer to §3.281 of this title (relating to Records Required; Information Required), §3.282 of this title (relating to Auditing Taxpayer Records), and §3.360 of this title (relating to Customs Brokers).

(g) Reports. Retailers are required to report the total amount of sales tax refunded for items exported beyond the territorial limits of the United States based on licensed customs broker certifications on a supplemental sales tax report prescribed by the comptroller at the same time and for the same reporting period as the retailer's state sales and use tax return.

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 March 24, 2005.

TRD-200501276

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.325

The Comptroller of Public Accounts adopts an amendment to §3.325, concerning refunds, interest, and payments under protest, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 485).

The amendment readopts, as subsection (c)(3), a provision that was inadvertently deleted from the most recent version of this rule. Subsection (c)(2)(B) is clarified, a new subsection (c)(3) relating to the statute of limitations for refund claims filed pursuant to a deficiency determination is added to implement longstanding agency policy, and the remaining subsections are relettered accordingly.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code §111.104(d).

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 March 24, 2005.

TRD-200501277

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.365

The Comptroller of Public Accounts adopts an amendment to §3.365, concerning sales of clothing and footwear during a three-day period in August, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 487).

The amendment implements the repeal of the opt out provision for local taxing authorities made by House Bill 2425, 78th Legislature, 2003. Subsection (q) is deleted accordingly. Subsections (f)(1), (n)(1), and (n)(2) are amended for clarity.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code §151.326.

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 March 24, 2005.

TRD-200501279

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.367

The Comptroller of Public Accounts adopts an amendment to §3.367, relating to timber items, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 490).

The amendment clarifies that persons who use off-road heavy-duty diesel equipment in timber operations may be exempt from the Texas Emissions Reduction Plan Surcharge imposed on that equipment. A new subsection (f) is added and the remaining subsections are relettered accordingly.

No comments were received regarding adoption of the amendment.

The amendment implements Tax Code §151.3162 and §151.0515.

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 March 24, 2005.

TRD-200501280

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter S. MOTOR FUEL TAX

34 TAC §3.430

The Comptroller of Public Accounts adopts new §3.430, concerning records required, information required, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 492). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule sets out records required to be maintained by motor fuel tax license holders, unlicensed retail dealers of motor fuel, and unlicensed users of motor fuel claiming refund. The new rule also provides information required to obtain a motor fuel tax license or registration under Tax Code, Chapter 162.

No comments were received regarding adoption of the new section.

The new rule is adopted 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 Tax Code. Title 2.

The new rule implements Tax Code, §§162.004, 162.012, 162.107, 162.108, 162.115, 162.127, 162.216, 162.208, 162.209, 162.229, and 162.309.

§3.430.Records Required, Information Required.

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) Records Required.

(1) A supplier and permissive supplier, as those terms are defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution of gasoline or diesel fuel and shall keep records showing:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month;

(B) the number of gallons of all gasoline or diesel fuel refined, compounded, or blended;

(C) the number of gallons of all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale, distribution, or use;

(E) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident; and

(F) an itemized statement showing by load the number of gallons of all gasoline or diesel fuel:

(i) received during the preceding calendar month for export and the location of the loading;

(ii) exported from this state by destination state or country; and

(iii) imported during the preceding calendar month by state or country of origin.

(2) A supplier or permissive supplier when acting as a distributor, importer, exporter, blender, aviation fuel dealer, or motor fuel transporter is subject to the record keeping requirements of that license.

(3) A distributor of gasoline or diesel fuel, as that term is defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution of gasoline or diesel fuel and shall keep records that show:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month;

(B) the number of gallons of all gasoline or diesel fuel refined, compounded, or blended;

(C) the number of gallons of all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale, distribution, or use;

(E) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident;

(F) an itemized statement showing by load the number of gallons of all gasoline or diesel fuel:

(i) received during the preceding calendar month for export and the location of the loading;

(ii) exported from this state by destination state or country; and

(iii) imported during the preceding calendar month by state or country of origin; and

(G) proof of payment of tax to the destination state in a form acceptable to the comptroller for gasoline or diesel fuel exported from this state under Tax Code, §162.204(a)(4)(A).

(4) A distributor when acting as an importer, exporter, blender, aviation fuel dealer, or motor fuel transporter is subject to the record keeping requirements of that license.

(5) An importer, as that term is defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution of gasoline or diesel fuel and shall keep records that show:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month;

(B) the number of gallons of all gasoline or diesel fuel refined, compounded, or blended;

(C) the number of gallons of all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale, distribution, or use;

(E) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident; and

(F) an itemized statement showing by load the number of gallons of all gasoline or diesel fuel:

(i) received during the preceding calendar month for export and the location of the loading;

(ii) exported from this state by destination state or country; and

(iii) imported during the preceding calendar month by state or country of origin.

(6) An importer when acting as an exporter or blender is subject to the record keeping requirements of that license.

(7) An exporter, as that term is defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution and shall keep records that show:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month;

(B) the number of gallons of all gasoline or diesel fuel refined, compounded, or blended;

(C) the number of gallons of all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale or use;

(E) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident;

(F) an itemized statement showing by load the number of gallons of all gasoline or diesel fuel:

(i) received during the preceding calendar month for export and the location of the loading; and

(ii) exported from this state by destination state or country;

(G) proof of payment of tax to the destination state or proof that the transaction was exempt in the destination state, in a form acceptable to the comptroller if an exemption under Tax Code, §162.104(a)(4)(B) and §162.204(a)(4)(B) is claimed.

(8) A blender, as that term is defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution and shall keep records that show the number of gallons of:

(A) all gasoline or diesel fuel inventories on hand at the first of each month;

(B) all gasoline or diesel fuel refined, compounded, or blended;

(D) all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(E) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale or use; and

(F) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident.

(9) A terminal operator, as that term is defined in Tax Code, §162.001, shall keep a record showing:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month, including the name and license number of each owner and the amount of gasoline or diesel fuel held for each owner;

(B) the number of gallons of all gasoline or diesel fuel received, showing the name of the seller and the date of each purchase or receipt;

(C) the number of gallons of all gasoline or diesel fuel sold, distributed, or used, showing the name of the purchaser and the date of the sale, distribution, or use;

(D) the number of gallons of all gasoline or diesel fuel lost by fire, theft, or accident; and

(E) the number of gallons of an itemized statement showing by load the number of gallons of all gasoline or diesel fuel:

(i) received during the preceding calendar month for export and the location of the loading;

(ii) exported from this state by destination state or country; and

(iii) imported during the preceding calendar month by state or country of origin.

(10) A dealer, as that term is defined in Tax Code, §162.001, shall keep the shipping documents that relate to each receipt for distribution and shall keep records that show the number of gallons of:

(A) gasoline or diesel fuel inventories on hand at the first of each month;

(B) all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) all gasoline or diesel fuel lost by fire, theft, or accident.

(11) An interstate trucker, as that term is defined in Tax Code, §162.001, shall keep a record on an individual-vehicle basis of:

(A) the total miles traveled, evidenced by odometer or hubodometer readings, everywhere by all vehicles traveling to or from this state, and the total miles traveled, evidenced by odometer or hubodometer readings, in this state, including for each individual vehicle:

(i) date of each trip (starting and ending);

(ii) trip origin and destination;

(iii) beginning and ending odometer or hubodometer reading of each trip;

(iv) odometer or hubodometer reading entering Texas, and odometer or hubodometer reading leaving Texas;

(v) power unit number or vehicle identification number or license plate number;

(B) the total quantity purchased and delivered at retail of gasoline, diesel fuel or liquefied gas everywhere by all vehicles traveling to or from this state, and the total quantity of gasoline, diesel fuel or liquefied gas purchased and delivered into the fuel supply tanks of motor vehicles in this state, including for each individual vehicle:

(i) date of purchase;

(ii) name and address of seller;

(iii) number of gallons or liters purchased;

(iv) type of fuel purchased;

(v) price per gallon or liter; and

(vi) unit number of the vehicle into which the fuel was placed.

(C) An interstate trucker that uses a distribution log to record removals from the person's own bulk storage into a motor vehicle must include on each log the person's stamped or preprinted name and address, and for each individual delivery:

(i) date of delivery;

(ii) number of gallons or liters of gasoline, diesel fuel or liquefied gas delivered;

(iii) license plate or vehicle identification number or power unit number;

(iv) odometer or hubodometer reading; and

(v) signature of the user.

(D) An interstate trucker that maintains bulk fuel storage must keep a record of the number of gallons of gasoline, diesel fuel, or liquefied gas beginning and ending inventories, all invoices of bulk purchases and records to substantiate all fuel withdrawals from storage.

(12) An aviation fuel dealer, as that term is defined in Tax Code, §162.001, shall keep the shipping document that relates to each receipt for distribution and shall keep records that show:

(A) the number of gallons of all gasoline or diesel fuel inventories on hand at the first of each month;

(B) the number of gallons of all gasoline or diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) the number of gallons of all gasoline or diesel fuel sold or used in aircraft or aircraft servicing equipment; and

(i) the name of the purchaser or user of gasoline or diesel fuel;

(ii) the date of the sale or use of gasoline or diesel fuel; and

(iii) the registration or "N" number of the airplane or a description or number of the aircraft or a description or number of the aircraft servicing equipment in which gasoline or diesel fuel is used.

(13) A dyed diesel fuel bonded user, as that term is defined in Tax Code, §162.001, shall keep a record showing the number of gallons of:

(A) dyed and undyed diesel fuel inventories on hand at the first of each month;

(B) dyed and undyed diesel fuel purchased or received, showing the name of the seller and the date of each purchase or receipt;

(D) dyed and undyed diesel fuel used in off-highway equipment or for other nonhighway purposes and described in Tax Code, §162.229(c); and

(E) dyed and undyed diesel fuel lost by fire, theft, or accident.

(14) A motor fuel transporter, as that term is defined in Tax Code, §162.001, shall keep a complete and separate record of each intrastate and interstate transportation of gasoline or diesel fuel, showing:

(A) the date of transportation;

(B) the name of the consignor and consignee;

(D) the quantity and kind of gasoline or diesel fuel transported;

(E) the points of origin and destination;

(F) the import verification number if that number is required by §3.441 of this title (relating to Documentation of Imports and Exports, Import Verification Numbers, Export Sales, and Diversion Numbers); and

(G) full data concerning the diversion of shipments, including the number of gallons diverted from interstate to intrastate and intrastate to interstate commerce, the diversion number if that number is required by §3.441 of this title.

(15) A licensed liquefied gas dealer, as that term is described in Tax Code, §162.304, shall keep a record of all liquefied gas sold or delivered for taxable purposes.

(16) A person who does not hold a license under Tax Code, Chapter 162, who files a claim for refund of gasoline or diesel fuel taxes shall keep the shipping document that relates to each receipt of gasoline or diesel fuel, original invoice issued by the seller, and distribution log to support gallons of gasoline or diesel fuel removed from the person's own bulk storage and for each individual delivery:

(A) the date of delivery;

(B) the number of gallons of gasoline or diesel fuel delivered;

(D) the type or description of off-highway equipment into which the gasoline or diesel fuel was delivered or the type of motor vehicle identified by state highway licensed plate number, vehicle identification number, or unit number assigned to motor vehicle and odometer or hubmeter reading.

(c) The comptroller may require selective schedules from a supplier, permissive supplier, distributor, importer, exporter, blender, terminal operator, motor fuel transporter, dealer, aviation fuel dealer, dyed diesel fuel bonded user, and interstate trucker for any purchase, sale, or delivery of gasoline or diesel fuel if the schedules are consistent with the requirements of Tax Code, Chapter 162.

(d) The records required by this section must be kept for at least four years and must be open to inspection at all times by the comptroller and the attorney general.

(e) A person who claims a deduction or exclusion authorized by law must keep records that substantiate the claim. When records regarding the amount and applicability of any deductions or exclusions from the motor fuels tax are insufficient, the comptroller may estimate deductions or exclusions based on any records available or may disallow all deductions and exclusions. No exclusions for loss by fire, accident, or theft will be allowed unless accompanied by fire department, environmental regulatory agency, or police department reports that verify the fire, accident, or theft.

(f) Failure to keep adequate records. If any person who is required by this section to keep accurate records of receipts, purchases, sales, distributions, or uses of gasoline or diesel fuel, fails to keep those records, the comptroller may estimate the tax liability based on any information available.

(g) The comptroller may suspend any permit or license the comptroller has issued to a person if the person fails to keep the records required by this section.

(h) Records may be written, kept on microfilm, stored on data processing equipment, or may be in any form that the comptroller can readily examine.

(i) Information required.

(1) The comptroller may require any person who must hold a license or registration under Tax Code, Chapter 162, to furnish information that the comptroller needs to:

(A) identify any person who applies for a motor fuels license, uses a signed statement to purchase tax-free dyed diesel fuel, or transports motor fuel in Texas by truck, railcar, or vessel, or any person who is required to file a return;

(B) determine the amount of bond, if any, required to commence or continue business;

(D) determine the amount of tax the person is required to remit, if any.

(2) The information required may include, but is not limited to, the following:

(A) name of the actual owner of the business;

(B) name of each partner in a partnership;

(D) all trade names under which the owner operates;

(E) mailing address and actual locations of all business outlets;

(F) license numbers, title numbers, and other identification of business vehicles;

(G) identification numbers assigned by other governmental agencies, including social security numbers, federal employers identification numbers, and driver's license numbers;

(H) names of gasoline and diesel fuel suppliers or distributors with whom the person will transact business; and

(I) names and last known addresses of former owners of the business.

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 March 24, 2005.

TRD-200501304

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.432

The Comptroller of Public Accounts adopts new §3.432, concerning refunds on gasoline and diesel fuel tax, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 496). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The amendment incorporates legislative changes made by House Bill 2458, 78th Legislature, 2003, Regular Session, which amended Tax Code by adding Chapter 162. The proposed rule provides guidelines for claiming a tax refund or credit for taxes paid on gasoline or diesel fuel used off the highway, resold to certain exempt entities, exported from Texas, loss caused by fire, theft, or accident, and other exempt uses authorized by law.

No comments were received regarding adoption of the new section.

This rule is adopted under Tax Code §111.102, 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 new rule implements Tax Code §§162.104, 162.125, 162.127, 162.128, 162.204, 162.227, 162.229, and 162.230.

§3.432.Refunds on Gasoline and Diesel Fuel Tax.

(b) Refunds and credits. A person may file a claim for refund or a license holder may take a credit on a return for taxes paid on gasoline or diesel fuel used off the highway, for certain resale, for export from Texas, for loss caused by fire, theft, or accident, or other use if authorized by law. The claim for refund or credit must be filed in accordance with this section.

(c) Time limitation. A claim for refund or credit must be filed before the expiration of the following time limitations, as provided by Tax Code, §162.128 and §162.230:

(1) one year from the first day of the calendar month that follows:

(A) purchase;

(B) tax exempt sale;

(D) export from Texas; or

(E) loss by fire, theft, or accident; or

(2) for dyed and undyed diesel fuel used in off-highway equipment, stationary engines, or for other nonhighway purpose on or after January 1, 2004, a claim for refund on diesel fuel under subsections (e), (f), and (g) of this section must be postmarked no later than December 31, 2004, or

(3) four years from the due and payable date for a tax return on which an overpayment of tax was made by a licensed supplier, permissive supplier, distributor, importer, exporter, or blender who determines that taxes were erroneously reported or that more taxes were paid than were due because of a mistake of fact or law. The supplier, permissive supplier, distributor, importer, exporter, or blender must establish the credit by filing an amended tax return for the period in which the error occurred and tax payment was made to the comptroller.

(d) Filing forms and documentation. A claim for refund or credit must be on a form prescribed by the comptroller and must be submitted within the applicable limitations period provided by subsection (c) of this section. A person or license holder is required to maintain and have available for inspection the following documentation and information to substantiate a claim for refund or credit:

(1) an original purchase invoice with the name and address of the seller or name of the purchaser, whichever is applicable. For refund or credit purposes, the original invoice may be a copy of the original impression if the copy has been stamped "Customer Original Invoice," "Original for Tax Purposes," or similar wording. If a copy is so stamped, the original and all other copies must then be stamped "Not Good for Tax Purposes" or similar wording. Invoices of original impression submitted in support of refund claims must be without the above wording stamped or imprinted;

(2) evidence as to who paid the tax. A purchaser claiming a refund or credit must have an invoice that either separately states the tax amount paid or a written statement that the price included state tax. A seller claiming a refund or credit must have issued an invoice, signed by the purchaser, that contains a statement that no state tax was collected or that it was a tax-free sale;

(3) if refund or credit is claimed on fuel purchased at retail the purchase invoice must note the identification of each vehicle or type of equipment (e.g., including railway engines, motor boats, refrigeration units, stationary engines, off-highway equipment, or nonhighway farm equipment that has traveled between multiple farms or ranches as allowed in §3.440 of this title (relating to On-Highway Travel of Farm Machinery)) in which the fuel was delivered and used;

(4) if refund or credit is claimed on fuel removed from the claimant's own bulk storage, then a distribution log as provided by Tax Code, §162.127 and §162.229. The distribution log must contain the name and address of the user and, for each individual removal from the bulk storage the following information:

(A) the date the fuel was removed;

(B) the number of gallons removed;

(D) signature of the person removing the fuel; and

(E) the type or description of the off-highway equipment into which the fuel the was delivered, or the identification of both on-highway and off-highway motor vehicles into which the fuel was delivered, including the state highway license number or vehicle identification number and odometer or hubmeter reading, or description of other off-highway use.

(e) Refund or credit for gasoline or dyed and undyed diesel fuel used solely for an off-highway purpose. A claim for refund or credit for gasoline or dyed and undyed diesel fuel used solely for off-highway purposes must list each off-highway vehicle or piece of equipment or document other nonhighway use and the total number of gallons used by way of a distribution log as described in subsection (d) of this section. The refund or credit for dyed or undyed diesel fuel used for off-highway purpose expires on January 1, 2005.

(f) Refund or credit for gasoline or dyed and undyed diesel fuel used by a lessor of off-highway equipment. The lessor of off-highway equipment who claims a refund or credit of state fuel tax must maintain documentation that shows that the state tax was assessed and paid, a list of each piece of off-highway equipment, and a distribution log as described in subsection (d) of this section of the number of gallons of gasoline, dyed diesel fuel, and undyed diesel fuel used in both on-highway and off-highway vehicles and equipment. A lessor who claims a refund of state fuel tax may include a separate refueling, fuel reimbursement, or fuel service charge on the invoice, if the invoice contains a statement that the fuel charge does not include state motor fuel taxes. The refund or credit for dyed or undyed diesel fuel used by a lessor of off-highway equipment expires on January 1, 2005.

(g) Refund or credit for gasoline or dyed and undyed diesel fuel used in a motor vehicle operated exclusively off-highway, except for incidental highway use. A claim for refund or credit may be filed by a person who used gasoline or dyed and undyed diesel fuel in motor vehicles incidentally on the highway, when the incidental travel on the public highway is infrequent, unscheduled, and insignificant to the total operation of the motor vehicle, and only for the purpose of transferring the base of operation or to travel to and from required maintenance and repair. A refund or credit for dyed or undyed diesel fuel used in a motor vehicle operated exclusively off-highway, except for incidental highway use, expires on January 1, 2005.

(1) A record that shows the date and miles traveled during each highway trip must be maintained.

(2) 1/4 gallon for each mile of incidental highway travel shall be deducted from the number of gallons claimed.

(h) Refund or credit for gasoline used in gasoline-powered motor vehicles equipped with power take-off or auxiliary power units. A person who files a claim for refund or a license holder who takes a credit on a tax return for gasoline used in the operation of power take-off or auxiliary power units must use one of the following methods in determination of the amount of gasoline used:

(1) direct measurement method. The use of a metering device, as defined by §3.435 of this title (relating to Metering Devices Used to Claim Refund of Tax on Gasoline Used in Power Take-Off and Auxiliary Power Units) is an acceptable method for determination of fuel usage. A person who claims a refund or credit for gasoline used to propel motor vehicles with approved measuring or metering devices that measure or meter the fuel used in stationary operations must maintain records on each vehicle so equipped, and the records must reflect:

(A) the miles driven as shown by any type of odometer or hubmeter;

(B) the gallons delivered to each vehicle; and

(2) gasoline-powered ready mix concrete trucks and solid waste refuse trucks equipped with power take-off or auxiliary power units. Operators of gasoline-powered ready mix concrete trucks and solid waste refuse trucks that are equipped with power take-off or auxiliary power units that are mounted on the motor vehicle and use the fuel supply tank of the motor vehicle may claim refund on 30% of the total gasoline used in this state by each vehicle. A solid waste refuse truck means a motor vehicle equipped with a power take-off or auxiliary power unit that provides power to compact the refuse, open the back of the container before ejection, and eject the compacted refuse;

(3) mileage factor method. The nontaxable use may be determined by computing the taxable use at 1/4 gallon for each mile traveled, as recorded by the odometer or hubmeter and subtracting that amount from the total quantity of gasoline delivered into the motor vehicle fuel supply tanks. The remainder will be considered nontaxable, and a tax refund or tax credit may be claimed on that quantity of fuel;

(4) two tank method. A motor vehicle may be equipped with two fuel tanks and an automatic switching device that a spring-activated air release parking brake operates, and that switches from one tank that is designated for highway use to another tank that is not so designated when the vehicle is stationary. The highway tank and the not-for-highway tank may not be connected by crossover line or equalizer line of any kind. The tax paid on the gasoline delivered to the tank designated not-for-highway use may be claimed as a tax refund or taken as a tax credit. All gasoline delivered into the fuel supply tanks of a vehicle that is equipped with an automatic switching device must be invoiced as taxable. Separate invoices must be issued for deliveries of fuel into each tank. A notation that indicates that fuel was delivered into the tank designated not- for-highway use must be made on invoices;

(5) fixed percentage method. In lieu of the use of one of the previously mentioned methods, the owner or operator of a gasoline-powered motor vehicle that is equipped with a power take-off or auxiliary power unit that is mounted on the vehicle may claim a credit or refund of the tax paid on 5.0% of the total taxable gasoline used in this state by each vehicle so equipped;

(6) proposed alternate methods. Proposals for the use of methods that this section does not specifically cover to determine the amount of gasoline used in power take-off operations or auxiliary power units may be submitted to the comptroller for approval;

(7) accurate mileage records must be kept regardless of the method used;

(8) beginning September 1, 2003, motor vehicle air conditioning and heating systems are no longer considered power take-off systems. A person may file a claim for refund of state taxes paid on gasoline used in the operation of an air conditioning or heating system prior to September 1, 2003.

(i) Refund or credit for gasoline or diesel fuel sold to or used by an exempt entity.

(1) A license holder, other than an aviation fuel dealer, may take a credit on a return for taxes paid on the purchase of gasoline or diesel fuel that is resold tax-free if the purchaser was one of the follow entities:

(A) the United States or federal government and the purchase is for its exclusive use. The federal government means any department, board, bureau, agency, corporation, or commission that the United States government has created or wholly owns. Exclusive use by the federal government means use of fuel only in motor vehicles or other equipment that the federal government operates. A person operating under a contract with the federal government is not an exempt entity. Evidence that sales were made to the federal government must be maintained and consist of:

(i) a United States tax exemption certificate--Standard Form 1094 or similar certificate that includes the same information as the Standard Form 1094; or

(ii) copies of the invoice(s) when a United States National credit card--Standard Form 149, was used for the purchase, which invoice must include the license plate number or official vehicle designation, if fuel is delivered into the fuel supply tank of a motor vehicle; or

(iii) a copy of a contract between the seller and the federal government supporting the sales invoices or purchase vouchers;

(B) a Texas public school district and the purchase is for its exclusive use. Exclusive use by a public school district means use of fuel only in motor vehicles or other equipment that the public school district operates;

(C) a commercial transportation company with a contract to provide public school transportation services to a Texas public school district under Education Code, §34.008, and the gasoline or diesel is used exclusive to provide those services;

(D) a Texas non-profit electric cooperative organized under Utilities Code, Chapter 161, and telephone cooperative organized under Utilities Code, Chapter 162, and the purchase is for its exclusive use. Exclusive use by an electric or telephone cooperative means use of fuel only in motor vehicles or other equipment that the electric or telephone cooperative operates.

(2) An exempt entity enumerated in paragraph (1)(A)-(D) of this subsection, may claim a refund of taxes paid on gasoline or diesel fuel purchased for its exclusive use.

(j) Refund or credit for gasoline or diesel fuel exported from Texas or sold for export.

(1) A person may claim a refund or a licensed supplier, permissive supplier, distributor, importer, exporter, or blender may take a credit on a return for taxes paid on gasoline or diesel fuel that the person or the license holder exports from this state in quantities of 100 or more gallons. Proof of export must be one of the following:

(A) proof of export that United States Customs officials have certified, if the fuel was exported to a foreign country;

(B) proof of export that a port of entry official of the state of importation has certified, if the state of importation maintains ports of entry;

(C) proof from the taxing officials of the state into which the fuel was imported that shows that the exporter has accounted for the fuel on that state's tax returns;

(D) other proof that the fuel has been reported to the state into which the gasoline or diesel fuel was imported; or

(E) a common or contract carrier's transporting documents (see §3.439 of this title (relating to Motor Fuel Transporting Documents)) that list the consignor and consignee, the points of origin and destination, the number of gallons shipped or transported, the date of export, and the kind of fuel exported;

(2) A licensed supplier, permissive supplier or distributor may take a credit on a return for taxes paid on gasoline or diesel fuel resold tax-free to a licensed supplier, permissive supplier, distributor, importer, or exporter for immediate export from this state under the following circumstances:

(A) a shipping document or bill of lading issued by the seller that shows the destination state;

(B) the purchaser (exporter) is licensed in Texas as a supplier, permissive supplier, distributor, importer, or exporter; and

(D) if the destination is a foreign country, a shipping document or bill of lading issued by the seller that shows the foreign destination.

(3) Effective January 1, 2006, a licensed supplier or permissive supplier must collect either the destination state's tax or Texas tax from the purchaser on gasoline or diesel fuel exported to another state.

(k) Refund or credit for gasoline or diesel fuel loss by fire, theft, or accident. A person may claim a refund or a license holder may take a credit on a return for taxes paid on 100 or more gallons of gasoline or diesel fuel loss by fire, theft, or accident. The claimant must maintain records of the incident that establishes that the exact quantity of fuel that has been claimed as lost was actually lost, and that the loss resulted from that incident. The time limitation prescribed in subsection (c)(1) of this section is determined by the date of the first incident of a multiple incident loss that totals 100 gallons or more. A claim for refund for loss by fire, theft, or accident shall be accompanied by fire department, police department, or regulatory agency reports as appropriate.

(1) If the incident is a drive-away theft at a retail outlet (i.e., theft occurs when a person delivers gasoline or diesel fuel into the fuel supply tank(s) of a motor vehicle at a retail outlet without payment for the fuel), the following documentation shall be maintained:

(A) a police department report or evidence that the incident of drive-away theft has been or will be taken as a deduction on the federal income tax return during the same or the subsequent reporting period; and

(B) separate report for each incident that the employee(s) who witnessed the event prepared and signed. The report must include the date and time of occurrence, type of fuel, number of gallons, outlet location, and, if the theft is reported to a police department, the police case number.

(2) If the accidental loss was incurred through a leak in a line or storage tank, the minimum proof required is:

(A) a statement by the person who actually dug up or otherwise examined the hole or leak. Such statement should articulate the extent of the leak, the date of the examination, and the person's name and title; and

(B) a statement of the actual loss as determined by computing the measured inventory next preceding the discovery of the accidental leak, plus motor fuel salvaged from the leaky tank or line, if any, less intervening withdrawals for sale or use.

(3) A person claiming a refund or credit under this subsection must take inventory on the first of each month and promptly correct the inventory for any loss that has occurred in the preceding month. If inventories have not been accurately or timely measured, or if complete records have not been kept of all withdrawals for sale or use as required by law, a claim for refund or credit cannot be honored for payment.

(l) Refund or credit for gasoline or diesel moved between terminals. A licensed supplier or permissive supplier may take a credit on a return for tax paid on gasoline or diesel fuel removed from an IRS registered terminal that is transferred by truck or railcar to another IRS registered.

(m) Refund or credit for gasoline or diesel fuel sold to or purchased by a licensed aviation fuel dealer.

(1) A licensed supplier, permissive supplier, or distributor may take a credit on a return for tax paid on gasoline or diesel fuel sold to a licensed aviation fuel dealer for delivery solely into the fuel supply tanks of aircraft, aircraft servicing equipment, or into a bulk storage tank of a licensed aviation fuel dealer.

(2) A licensed aviation fuel dealer may claim refund for tax paid on gasoline or diesel fuel delivered into the fuel supply tanks of aircraft, aircraft servicing equipment, or into a bulk storage tank of another licensed aviation fuel dealer.

(n) Refund or credit for gasoline or diesel fuel used outside of Texas by a licensed interstate trucker. A licensed interstate truck may take a credit on a tax return for tax paid on gasoline or diesel fuel purchased in Texas and used outside of Texas in commercial vehicles operated under an interstate trucker license. The credit may be taken on the return for the period in which the purchase occurred. If the credit exceeds the amount of tax reported due on that return, the licensed interstate trucker:

(1) may carry forward the excess credit on any of the three successive quarterly returns until exhausted, or until the due date of the third successive quarterly return, whichever occurs first; or

(2) may seek refund of the excess credit by filing a claim for refund on or before the due date of the third successive quarterly return; or

(3) if returns are filed on an annual basis an interstate trucker may seek refund or credit no later than the due date of the annual return; and

(4) any remaining credit not taken on return or claimed as a refund before the prescribed deadline expires.

(o) Refund for gasoline or diesel fuel sold on Indian reservations. A retailer located on an Indian reservation recognized by the United States government may claim refund of tax paid on gasoline or diesel fuel resold tax-free to exempt tribal entities and tribal members. The retail dealer must maintain records that include the original purchase invoices that show that the state tax was paid and sales invoices that include:

(1) the name of the purchaser;

(2) the date of the sale;

(3) the number of gallons sold;

(4) the type of fuel sold; and

(5) a written statement that no state tax was collected or that it was a tax-free sale.

(p) The right to receive a refund or take a credit under this section is not assignable.

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 March 24, 2005.

TRD-200501305

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.441

The Comptroller of Public Accounts adopts new §3.441, concerning documentation of imports and exports, import verification numbers, export sales, and diversion numbers, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 499). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides requirements for a license holder to document imports and exports of motor fuel, procedure to obtain import verification and diversion numbers and conditions under which a license holder makes an export sale.

No comments were received regarding adoption of the new section.

The new rule implements Tax Code, §§162.001, 162.004 and 162.016.

§3.441.Documentation of Imports and Exports, Import Verification Numbers, Export Sales, and Diversion Numbers.

(b) Imports.

(1) Imports. Motor fuel imported into Texas by or for a seller constitutes an import by that seller. Motor fuel imported into Texas by or for a purchaser constitutes an import by that purchaser.

(2) Import Verification Number. An importer must obtain from the comptroller an import verification number for each load of gasoline or diesel fuel imported into Texas by truck or railroad tank car. An import verification number must be obtained within 72 hours before or after the gasoline or diesel fuel enters Texas. The importer must write the import verification number on the shipping document issued for that fuel.

(3) Documentation. An importer must possess a shipping document created by the terminal or bulk plant where the fuel was loaded (see §3.439 of this title (relating to Motor Fuel Transportation Documents) for motor fuel imported by any means into Texas).

(1) A licensed supplier, permissive supplier or distributor makes an export sale when it sells motor fuel in Texas to a licensed exporter, importer, distributor, supplier or permissive supplier who then, prior to any other sale or use in Texas, sends or transports the motor fuel outside the state. The bill of lading or shipping document must list the out of state destination.

(2) A licensed supplier, permissive supplier, or distributor who makes an export sale will not be liable for tax on motor fuel that the purchaser diverts provided that the seller issued a bill of lading or shipping document that shows that the fuel is to be delivered to a destination outside Texas.

(3) Documentation.

(A) The comptroller may request proof of export from the exporter to verify that the motor fuel was exported from Texas. This proof may consist of:

(B) proof of export that a U.S. customs office has certified, if the fuel was exported from this state to a foreign country;

(C) proof of export that a port of entry of the state of importation has certified, if ports of entry are maintained by that state;

(D) proof from the tax officials of the state into which the motor fuel was imported, which shows that the exporter has accounted for the motor fuel on the state's tax report; or

(E) other proof that the fuel has been reported to the state into which the motor fuel was imported.

(d) Diversion Number. An importer or exporter who diverts the delivery of a load of gasoline or diesel fuel being transported by truck or railroad tank car from the destination state or country that is preprinted on the shipping document that has been issued for that fuel to another state or country must obtain a diversion number from the comptroller. A diversion number must be obtained within 72 hours before or after the diversion. The importer, exporter, or common or contract carrier must write the diversion number on the shipping document issued for that fuel.

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 March 24, 2005.

TRD-200501306

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.442

The Comptroller of Public Accounts adopts new §3.442, concerning bad debts or accelerated credit for non-payment of taxes, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 500). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides the criteria necessary for a licensed distributor, supplier, or permissive supplier to file a claim for refund on the monthly return for a bad debt deduction or accelerated credit for the non-payment of tax, requirements for repaying tax when payment is recovered, and criminal and civil penalties for issuing bad checks for the payment of fuel.

No comments were received regarding adoption of the new section.

The new rule implements Tax Code, §§162.113, 162.116, 162.126, 162.214, 162.228, and 162.409.

§3.442.Bad Debts or Accelerated Credit for Non-payment of Taxes.

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004, under Tax Code, Chapter 162. Motor fuel transactions that occur before January 1, 2004, are governed by provisions of Chapter 3, Subchapter L of this title, and promulgated under Tax Code, Chapter 153.

(b) Bad Debt Deductions. A licensed distributor, supplier, or permissive supplier may file a claim for refund on the monthly return of taxes paid on fuel that was sold on account that is later determined to be uncollectible, worthless, and previously written off as bad debt at the time that the distributor, supplier, or permissive supplier held an active license.

(1) The claim for refund must be in writing, state the fuel type (gasoline or diesel), state the beginning and ending date of sales on which the bad debt is claimed, the number of gallons, and the dollar amount of bad debts. The licensed distributor, supplier, or permissive supplier must establish the bad debt amount by providing information on the form required by the comptroller. Required information includes but is not limited to the following:

(A) the date of sale or invoice date;

(B) invoice fuel amount, and invoice fuel tax amount;

(D) all payments or credits applied to the account of the purchaser; and

(E) uncollected amounts in the purchaser's account that were written off as bad debt in the distributor's, supplier's, or permissive supplier's records, including the number of gallons of fuel represented by the motor fuel portion of the bad debt.

(2) All payments and credits made by the purchaser must be applied to the purchaser's account to determine the bad debt amount, and if the purchaser's account also contains purchases of goods other than motor fuel, then the payments and credits to that account should be applied ratably between motor fuel, including tax, and other goods sold to the purchaser. The comptroller will only allow a claim for refund of tax on the number of gallons represented by the motor fuel portion of the bad debt. The maximum amount of refund claimed cannot exceed the tax paid on the fuel sold on account that has been written off as a bad debt.

(3) A claim for refund of taxes based on a bad debt must be filed within four years from the date the account is entered in the distributor's, supplier's, or permissive supplier's books as a bad debt.

(c) Accelerated Credit. If a licensed supplier or permissive supplier reported and remitted taxes on a tax return for fuel sold on account to a purchaser who is licensed as a distributor or importer at the time of the transaction and who subsequently fails to pay the taxes to the seller, the licensed supplier or permissive supplier may take a credit against tax liability on a subsequent tax return if the licensed supplier or permissive supplier notifies the comptroller of the default within 60 days after the default occurs.

(1) The notification shall be provided in the form required by the comptroller, and credits may be taken beginning with the return for the reporting month in which the notification is made. When credits are taken on a return, the licensed supplier or permissive supplier must submit with that return information required by the comptroller.

(2) A licensed supplier or permissive supplier who fails to notify the comptroller of the default within the prescribed 60-day period cannot take a credit on a return, but may seek a refund of taxes based on bad debts subject to the requirements provided by subsection (b) of this section.

(3) All payments and credits made by the purchaser must be applied to the purchaser's account to determine that non-payment amount, and if the purchaser's account contains the purchase of goods or items other than motor fuel, then the payments and credits to that account should be applied ratably between motor fuel, including tax, and other goods or items sold to the purchaser. The comptroller will only allow a credit of tax on the number of gallons represented by the motor fuel portion of the unpaid amount. The maximum amount of credit taken cannot exceed the tax paid on the fuel sold on account that has been unpaid.

(4) If the notification of default was timely made to the comptroller, credits for taxes that were not collected from the licensed purchaser must be taken within four years from the date of default.

(5) A distributor, supplier, permissive supplier, or importer whose right to defer payment of tax to a supplier or permissive supplier has been suspended may seek reinstatement of the right to defer payment when all motor fuel tax liability has been satisfied and considered in good standing with the comptroller. The distributor, supplier, permissive supplier, or importer must request that the comptroller issue a notice of good standing for motor fuel taxes.

(d) Credit card sales. The refund for bad debts or credit for non-payment of taxes allowed under this section does not apply to sales of fuel that is delivered into the supply tank of a motor vehicle or motorboat when payment is made through the use and acceptance of a credit card. For purpose of this section, a credit card is defined as any card, plate, key, or like device by which credit is extended to and charged to the purchaser's account. Credit sales to commercial or agricultural customers at locations not open to the general public are eligible to the bad debt credit.

(e) A supplier, permissive supplier, or distributor who collects all or part of an account that was written off as a bad debt for which a refund was sought under subsection (b) of this section or who collects all or part of the unpaid tax after a credit was taken under subsection (c) of this section, must report and remit the collected amount on the return that is due for the reporting period in which the bad debt was originally claimed. The comptroller may assess a deficiency, including 10% penalty at the rate provided by Tax Code, §111.060, if the amount recovered is not reported and tax is not paid to the state during the month in which the recovery is made. Interest will accrue from the date the credit was taken.

(f) If the comptroller determines that a taxpayer obtained a refund from the comptroller or took a credit on a return when he knew or should reasonably have known that the account or tax was collectible, the comptroller may issue a deficiency for the tax plus 10% penalty and interest imposed from the date the refund was granted or the credit taken. In addition, other penalties provided by this section or by Tax Code, Chapters 111 or 162, may be imposed.

(g) The comptroller may issue a deficiency assessment for tax, plus penalty and interest applicable under Tax Code, Chapter 111, against the purchaser whose account was the subject of a refund for bad debt obtained or a credit claimed by a distributor, supplier, or permissive supplier.

(h) Criminal and civil penalties for issuing bad checks.

(1) A person commits an offense if he issues a check to a licensed distributor, licensed supplier, or permissive supplier for the payment of fuel knowing that his account with the bank on which the check is drawn has insufficient funds and if the payment is for an obligation that includes tax imposed by Tax Code, Chapter 162, that is required to be collected by the licensed distributor or licensed supplier. The offense is a Class C misdemeanor.

(2) If a licensed distributor, licensed supplier, or permissive supplier receives an insufficient fund check causing a refund to be sought or a credit taken in accordance with the provisions in this section, the licensed distributor or licensed supplier may notify the comptroller of the receipt of the insufficient fund check. When making the notification, a photocopy of both sides of the returned check should be furnished.

(3) A person who issues an insufficient fund check to a licensed distributor, licensed supplier, or permissive supplier for payment of an obligation that includes tax imposed by Tax Code, Chapter 162, that is required to be collected by the licensed distributor, licensed supplier, or permissive supplier may be assessed a penalty equal to 100% of the total amount of tax not paid to the licensed distributor, licensed supplier, or permissive supplier. This penalty is in addition to any penalties, interest, and collection actions authorized by the Tax Code.

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 March 24, 2005.

TRD-200501307

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.444

The Comptroller of Public Accounts adopts new §3.444, concerning temperature adjustment conversion table and metering devices, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 502). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides the method to be used to temperature adjust a volume of gasoline or diesel fuel to 60 degrees Fahrenheit and describes the frequency and methods required to test and maintain the accuracy of meters and thermometers used to measure the temperature of gasoline and diesel fuel.

No comments were received regarding adoption of the new section.

The new rule implements Tax Code, §162.103 and §162.202.

§3.444.Temperature Adjustment Conversion Table and Metering Devices.

(b) Temperature adjustment method. For the purpose of conversion of actual gasoline and diesel fuel volume to equivalent volume of 60 degrees Fahrenheit, Table 6B of revised ASTM-API-IP Petroleum Measurement Tables may be used in lieu of any conversion table which the comptroller may issue.

(c) Testing and accuracy of meters and thermometers or other devices designed to accurately measure the temperature of fuel. Meters must be tested each 90 days or after 10 million gallons through-put, whichever occurs first. The accuracy of any meter being used must be maintained within 1% of correct volume during all loading or unloading operations. The tests of meters shall be determined by the methods provided by the American Society of Mechanical Engineers- American Petroleum Institute for the Installation, Proving and Operation of Meters in Liquid Hydrocarbon Service. Thermometers or other devices designed to accurately measure the temperature of fuel must be tested each 90 days and must conform to standards set by the American Society of Mechanical Engineers-American Petroleum Institute or National Bureau of Standards.

(d) Records. A record of all tests must be maintained and open for examination by the comptroller for a period of four years.

(e) Posting of results. The results of the most recent tests on all meters and thermometers or temperature measuring devices being used must be posted in a conspicuous place at each terminal where the tests are required.

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 March 24, 2005.

TRD-200501308

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.446

The Comptroller of Public Accounts adopts new §3.446, concerning electronic filing of reports, civil penalties, and deferred tax payments, with changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 502). The comptroller has deleted the statutory references in the title of the section to shorten the title.

The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides requirements for electronic filing of reports and schedules by licensed suppliers, permissive suppliers, distributors, importers, exporters, blenders, motor fuel transporters, and terminal operators, conditions under which a civil penal may be assessed for failure to file reports or failure to file reports electronically when required to do so, and deferred tax payments to licensed suppliers and permissive suppliers by licensed suppliers, permissive suppliers, distributors and importers.

No comments were received regarding adoption of the new section.

The new rule implements Tax Code, §§162.114, 162.116, 162.118, 162.119, 162.120, 162.121, 162.122, 162.123, 162.215, 162.217, 162.219, 162.220, 162.221, 162.222, 162.223, 162.224, and 162.402.

§3.446.Electronic Filing of Reports, Civil Penalties, and Deferred Tax Payments.

(b) Electronic filing of reports and schedules.

(1) The comptroller may require a supplier, permissive supplier, distributor, importer, exporter, blender, or motor fuel transporter to file reports and schedules by means of electronic transmission under the following circumstances:

(A) the combined total number of gallons of gasoline and diesel fuel that a licensed supplier, permissive supplier, distributor, importer, exporter, or blender receives during the preceding 12 months exceeds five million gallons, or the total number of transactions that a licensed supplier, permissive supplier, distributor, importer, exporter, or blender reports on the monthly report schedules exceeds 100 transactions each month for three consecutive months on an individual license basis; or

(B) the total number of transactions that a motor fuel transporter reports on the quarterly report schedules exceeds 100 transactions.

(2) For the purpose of this section, one transaction means a single purchase, sale, import, or export of gasoline or diesel fuel, or the summary of multiple purchases, sales, imports, or exports of gasoline or diesel fuel during a reporting period, when the seller, purchaser, fuel type, motor fuel transporter, origin state or country, and destination state or country are the same.

(3) The taxpayer or its authorized agent shall enter into a written agreement with the comptroller to permit electronic filing of reports and schedules. The signature of the taxpayer or its authorized agent on the written agreement into which the parties enter for this purpose shall be deemed to appear on each report filed electronically.

(4) Electronic transmission of each report and schedule shall be made in a format that the comptroller approves and that is compatible with the comptroller's equipment and facilities.

(5) The comptroller shall notify the taxpayers to whom this subsection applies no less than 90 days before the taxpayer is required to begin filing its reports and schedules electronically.

(6) Suppliers, permissive suppliers, distributors, importers, exporter, blenders, and motor fuel transporters who are required to file reports and supplements electronically, but are unable to do so, may request a waiver from the comptroller.

(7) The license of a supplier, permissive supplier, distributor, importer, exporter, blender, or motor fuel transporter who is required to file electronically may be suspended if the supplier, permissive supplier, distributor, importer, exporter, blender, or motor fuel transporter fails to file reports and schedules by means of electronic transmission in an approved format, after being notified of such requirement.

(8) A terminal operator must file reports and schedules electronically.

(1) A motor fuel transporter who is required to file reports and schedules and who fails to do so, after being notified of such requirement, may be assessed a penalty not to exceed $200 for each report period and $25 for each reportable transaction. Each calendar quarter that a motor fuel transporter fails to file a report with the comptroller is a separate violation. The comptroller will send notice to the motor fuel transporter about the assessment of the penalty. The motor fuel transporter may request a redetermination under the terms of §§1.1-1.42 of this title (relating to Rules of Practice and Procedure). An oral hearing at the office of the Comptroller of Public Accounts in Austin, Texas, may be requested. The standard of proof in an administrative hearing pursuant to this section is by a preponderance of the evidence, unless otherwise provided by statute.

(2) A motor fuel transporter or terminal operator who is required to file reports and schedules electronically and who fails to do so in an approved format, after being notified of such requirement, may be assessed a penalty not to exceed $200 for each report period and $25 for each reportable transaction. The comptroller will send notice to the motor fuel transporter or terminal operator about the assessment of the penalty. The motor fuel transporter or terminal operator may request a redetermination under the terms of §§1.1-1.42 of this title (relating to Rules of Practice and Procedure). An oral hearing at the office of the Comptroller of Public Accounts in Austin, Texas, may be requested. The standard of proof in an administrative hearing pursuant to this section is by a preponderance of the evidence, unless otherwise provided by statute.

(d) Deferred tax payments.

(1) A licensed supplier, permissive supplier, distributor, or importer ordering a withdrawal of motor fuel at a terminal rack may elect to defer the payment of taxes to a supplier or permissive supplier until two days before the supplier or permissive supplier is required to remit the tax to the state. If two days before the report due date falls on a weekend or banking holiday, then the payment to the supplier or permissive supplier is to be made on the last business day prior to the weekend or banking holiday. For example, if the due date falls on a Tuesday the 25th, then the supplier or permissive supplier may draft the account on Friday the 21st.

(2) A supplier, a permissive supplier, or its representative shall give at least a two day notice by electronic means of the amount to be drafted from the account of the supplier, permissive supplier, distributor, or importer. If two days before the date the bank account is to be drafted falls on a weekend or banking holiday, then the notice to the supplier, permissive supplier, distributor or importer is to be made on the last business day prior to the weekend or banking holiday. For example, if the due date falls on a Tuesday the 25th, then the supplier or permissive supplier must give notice on Wednesday the 19th.

(3) The supplier, permissive supplier, distributor or importer shall pay the taxes to the supplier or permissive supplier by electronic funds transfer.

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 March 24, 2005.

TRD-200501309

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter W. AMUSEMENT MACHINE REGULATION AND TAX

34 TAC §3.601

The Comptroller of Public Accounts adopts an amendment to §3.601, concerning definitions, changes in ownership, gross receipts regulations, and record keeping requirements, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 504). This section is amended to provide notification and record keeping requirements.

Subsection (b)(2) is amended to require general business license holders to file written notification of change of ownership of a machine, as required for registration certificate holders. Subsection (d)(1)(F) is amended to require that directions to a location included in a licensee's records when location address is a rural route and box number. Subsection (d)(1)(G) is amended to require that the notification of change of machine ownership is included in a licensee's records.

No comments were received regarding adoption of the amendment.

This amendment is adopted under Tax Code, §111.002 and §111.0022, 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, and taxes, fees, or other charges which the comptroller administers under other law.

The amendment implements Occupations Code, §2153.201 and §2153.202.

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 March 24, 2005.

TRD-200501310

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

34 TAC §3.602

The Comptroller of Public Accounts adopts an amendment to §3.602, concerning licenses and certificates, renewals and due dates, occupation tax permits and exemptions, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 505).

This section is amended to update incorrect statutory references. The legislature changed the penalty for operating without a license or registration certificate. The legislature codified the Coin-Operated Machine law as Occupations Code, Chapter 2153. Additional amendments are made to provide notification requirements.

Subsection (a)(4) is amended to require general business license holders to file written notification of change of ownership of a machine, as is required for registration certificate holders. Subsection (b)(1) is amended to correct the statutory penalty to a Class A misdemeanor. Subsection (c)(1) is amended to correct the statutory penalty to a Class A misdemeanor. Subsection (d)(4) is amended to require a written notification of change of machine ownership before a tax permit is assigned. Subsection (d)(7) is amended to update statutory reference to Occupations Code, §2153.005.

No comments were received regarding adoption of the amendment.

This amendment is adopted under Tax Code, §111.002 and §111.0022, 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, and taxes, fees, or other charges which the comptroller administers under other law.

The amendment implements Occupations Code, §§2153.005, 2153.051, 2153.202, 2153.356 and 2153.404.

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 March 24, 2005.

TRD-200501311

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter AA. AUTOMOTIVE OIL SALES FEE

34 TAC §3.701

The Comptroller of Public Accounts adopts an amendment to §3.701, concerning reporting requirements, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 507).

The adopted amendment corrects the name of the Texas Natural Resource Conservation Commission (TNRCC) by changing the name to the Texas Commission on Environmental Quality (TCEQ).

No comments were received regarding adoption of the amendment.

This amendment is adopted under Tax Code, §111.002, and §111.0022, 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, and taxes, fees, or other charges which the comptroller administers under other law.

The amendment implements the Health and Safety Code, §371.062.

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 March 24, 2005.

TRD-200501312

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387

Subchapter KK. SCHOOL FUND BENEFIT FEE

34 TAC §3.1251

The Comptroller of Public Accounts adopts an amendment to §3.1251, concerning the school fund benefit fee, without changes to the proposed text as published in the February 4, 2005, issue of the Texas Register (30 TexReg 510).

This section is amended to correct statutory references to Tax Code, Chapter 153, motor fuels tax license holders, and §3.173, relating to refunds on gasoline and diesel fuel tax. The 78th Legislature, Regular Session (2003), replaced Tax Code, Chapter 153, with Chapter 162.

Subsection (b) is amended to correct references to Tax Code, Chapter 162, and to motor fuels license holders under the new code. Subsection (d) is amended to correct reference to Tax Code, Chapter 162. Subsection (c)(5) is amended to correct reference to §3.432, relating to refunds of gasoline and diesel fuel tax.

No comments were received regarding adoption of the amendment.

This amendment is adopted under Tax Code §111.002 and §111.0022, which provide 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, and taxes, fees, or other charges which the Comptroller administers under other law.

The amendment implements Tax Code, §162.204 and Transportation Code, Chapter 20, §20.002.

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 March 24, 2005.

TRD-200501272

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Effective date: April 13, 2005

Proposal publication date: February 4, 2005

For further information, please call: (512) 475-0387