PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
SUBCHAPTER O. STATE SALES AND USE TAX
The Comptroller of Public Accounts proposes an amendment to §3.365, concerning sales of clothing and footwear during a three-day period in August. This rule is being amended pursuant to House Bill 3314, 80th Legislature, 2007, which changed the timing of the three-day exemption period and expanded the exemption to include backpacks purchased for use by public elementary or secondary school students. The title of the existing rule has been amended to reflect the expansion of the exemption to an item other than clothing and footwear. Subsection (a) of the rule has been amended to provide the definition of "school backpack" and to add a generic term, "eligible item," that encompasses any item that is exempt from sales tax during the exemption period under this section. Subsection (b) has been amended to change the beginning of the three-day exemption period from the first Friday in August to the third Friday of the month. Subsection (c) of the rule is amended to exclude from the exemption backpacks that are not purchased for use by elementary or secondary school students. Subsection (o) has been amended to provide that a retailer who sells more than 10 school backpacks to a customer at the same time must obtain an exemption certificate from the customer verifying that the backpacks are being purchased for use by elementary or secondary school students. Conforming changes are made throughout the rule.
John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.
Mr. Heleman also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by clarifying the items that would be eligible for this sales and use tax exemption. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.
The amendment implements Tax Code, §151.326 and §151.327.
§3.365.Sales of Certain Items [Clothing and Footwear] During a Three-day Period in August.
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Clothing or footwear--An article of
apparel that the article manufacturer designs for wear on or about
the human body. Except as provided under paragraph (3) of this
subsection, for [For] the purposes of this section,
the term does not include accessories, such as jewelry, handbags,
purses, briefcases, luggage, wallets, watches, and similar items that
are carried on or about the human body, without regard to whether
the item is worn on the body in a manner that is characteristic of clothing.
(2) Eligible item--For the purposes of this section, an article of clothing or footwear or a school backpack that is eligible for the sales tax exemption established under Tax Code, §151.326 and §151.327, respectively.
(3) School backpack--A pack with straps that one wears on the back, including a backpack with wheels (provided it may also be worn on the back like a traditional backpack) or a messenger bag, that is purchased for use by a student in a public or private elementary or secondary school.
(b) Exempt sales.
(1) Sales or use tax is not due on the sale of an
eligible item [article of clothing or footwear] if:
(A) the sales price of the eligible item [article
] is less than $100; and
(B) the sale takes place during the period that begins
at 12:01 a.m. on the third [first] Friday in
August and ends at 12:00 a.m. (midnight) of the following Sunday.
(2) The exemption applies to each eligible item [
article of clothing or footwear] that sells for less than $100,
regardless of how many items are sold on the same invoice to a customer.
For example, if a customer purchases two shirts for $80 each, then
both items qualify for the exemption, even though the customer's total
purchase price ($160) exceeds $99.99.
(3) The exemption does not apply to the first $99.99
of an otherwise eligible item [article of clothing
or footwear] that sells for more than $99.99. For example, if
a customer purchases a pair of pants that costs $110, then sales tax
is due on the entire $110.
(c) Taxable sales. The [This] exemption
under this section does not apply to:
(1) any special clothing or footwear that the manufacturer primarily designed for athletic activity or protective use and that is not normally worn except when used for the athletic activity or protective use for which the manufacturer designed the article. For example, golf cleats and football pads are primarily designed for athletic activity or protective use and are not normally worn except when used for those purposes; therefore, they do not qualify for the exemption. However, tennis shoes, jogging suits, and swimsuits are commonly worn for purposes other than athletic activity and thus qualify for the exemption;
(2) accessories, such as jewelry, handbags, purses, briefcases, luggage, athletic bags, duffle bags, gym bags, computer bags, framed backpacks, umbrellas, wallets, watches, and similar items that are carried on or about the human body, without regard to whether the item is worn on the body in a manner that is characteristic of clothing;
(3) school backpacks that are not purchased for use by elementary or secondary school students;
(4) [(3)] the rental of clothing
or footwear. For example, the [this] exemption
under this section does not apply to the rental of formal wear,
costumes, uniforms, diapers, or bowling shoes;
(5) [(4)] taxable services that
are performed on the clothing or footwear, such as repair, remodeling,
or maintenance services, and cleaning or laundry services. For example,
sales tax is due on alterations to clothing, even though the alterations
may be sold or invoiced, and the customer pays such invoice, at the
same time as the clothing is being altered. If a customer purchases
a pair of pants for $90 and pays $15 to have the pants cuffed, then
the $90 charge for the pants is exempt, but tax is due on the $15
alterations charge; and
(6) [(5)] purchases of items
that are used to make or repair eligible items [clothing
or footwear], including fabric, thread, yarn, buttons, snaps,
hooks, and zippers.
(d) Articles normally sold as a unit. Articles that are normally sold as a unit must continue to be sold in that manner; they cannot be priced separately and sold as individual items in order to obtain the exemption. For example, if a pair of shoes sells for $150, then the pair cannot be split in order to sell each shoe for $75 to qualify for the exemption. If a suit is normally priced at $225 on a single price tag, the suit cannot be split into separate articles so that any of the components may be sold for less than $100 in order to qualify for the exemption. However, components that are normally priced as separate articles may continue to be sold as separate articles and qualify for the exemption if the price of an article is less than $100.
(e) Sales of sets containing both exempt and taxable items.
(1) When an eligible item is [exempt clothing or footwear is] sold together with taxable merchandise
as a set or single unit, the full price is subject to sales tax unless
the price of the eligible item [exempt clothing or
footwear] is separately stated. For example, if a boxed gift
set that consists of a French-cuff dress shirt, cufflinks, and a tie
tack is sold for a single price of $95, the full price of the boxed
gift set is taxable because the cufflinks and tie tack are taxable
and the sales price of the shirt is not separately stated.
(2) When an eligible item [exempt clothing
] is sold in a set that also contains taxable merchandise as
a free gift and no additional charge is made for the gift, the
eligible item [exempt clothing] may qualify for
the [this] exemption under this section
. For example, a boxed set may contain a tie and a free tie tack. If the price of
the set is the same as the price of the tie sold separately, the item
that is being sold is the tie, which is exempt from tax if the tie
is sold for less than $100 during the exemption period. Note: When
a retailer gives an item away free of charge, the retailer owes sales
or use tax on the purchase price that the retailer paid for the item.
(f) Discounts and coupons.
(1) A retailer may offer discounts to reduce the sales price of an item. If the discount reduces the sales price of an item to $99.99 or less, the item may qualify for the exemption under this section. For example, a customer buys a $150 dress and a $100 blouse from a retailer who offers a 10% discount. After application of the 10% discount, the final sales price of the dress is $135, and the blouse is $90. The dress is taxable (its price is over $99.99), and the blouse is exempt (its price is less than $100.00).
(2) When retailers accept coupons as a part of the sales price of any taxable item, the value of the coupon is excludable from the tax as a cash discount, regardless of whether the retailer is reimbursed for the amount that the coupon represents. Therefore, a coupon can be used to reduce the sales price of an item to $99.99 or less in order to qualify for the exemption under this section. For example, if a customer purchases a pair of shoes priced at $110 with a coupon worth $20, the final sales price of the shoes is $90, and the shoes qualify for the exemption.
(g) Buy one, get one free or for a reduced price. The total price of items that are advertised as "buy one, get one free," or "buy one, get one for a reduced price," cannot be averaged in order for both items to qualify for the exemption under this section. The following examples illustrate how such sales should be handled.
(1) A retailer advertises pants as "buy one, get one free." The first pair of pants is priced at $120; the second pair of pants is free. Tax is due on $120. Having advertised that the second pair is free, the store cannot register the charge for each pair of pants at $60 in order for the items to qualify for the exemption. However, if the retailer advertises and sells the pants for 50% off, and sells each pair of $120 pants for $60, each pair of pants qualifies for the exemption. Note: When a retailer gives an item away free of charge, the retailer owes sales or use tax on the purchase price that the retailer paid for the item.
(2) A retailer advertises shoes as "buy one pair at the regular price, get a second pair for half price." The first pair of shoes is sold for $100; the second pair is sold for $50 (half price). Tax is due on the $100 shoes, but not on the $50 shoes. Having advertised that the second pair is half price, the store cannot ring up each pair of shoes for $75 in order for the items to qualify for the exemption under this section. However, if the retailer advertises the shoes for 25% off, and thereby sells each pair of $100 shoes for $75, then each pair of shoes qualifies for the exemption.
(h) Rebates. Rebates occur after the sale and do not affect the sales price of an item purchased. For example, a customer purchases a sweater for $110 and receives a $12 rebate from the manufacturer. The retailer must collect tax on the $110 sales price of the sweater.
(i) Layaway sales. A layaway sale is a transaction
in which merchandise is set aside for future delivery to a customer
who makes a deposit, agrees to pay the balance of the purchase price
over a period of time, and, at the end of the payment period, receives
the merchandise. An order is accepted for layaway by the retailer
when the retailer removes the goods from normal inventory or clearly
identifies the items as sold to the customer. The [A]
sale of an eligible item [clothing]
under a layaway plan [sale] qualifies for exemption
when either:
(1) final payment on a layaway order is made by, and the merchandise is given to, the customer during the exemption period; or
(2) the customer selects the eligible item and the retailer accepts the order for the item during the exemption period, for immediate delivery upon full payment, even if delivery is made after the exemption period.
(j) Rain checks. Eligible items that customers purchase during the exemption period with use of a rain check will qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during the exemption period will not qualify an eligible item for the exemption if the item is actually purchased after the exemption period.
(k) Exchanges.
(1) If a customer purchases an eligible item [
of eligible clothing or footwear] during the exemption
period, but later exchanges the item for an item of a different size,
different color, or other feature, no additional tax is due even if
the exchange is made after the exemption period.
(2) If a customer purchases an eligible item [
of eligible clothing or footwear] during the exemption
period, but after the exemption period has ended, the customer returns
the item and receives credit on the purchase of a different item,
the appropriate sales tax is due on the sale of the newly purchased item.
(3) If a customer purchases an eligible item [
of eligible clothing or footwear] before the exemption
period, but during the exemption period the customer returns the item
and receives credit on the purchase of a different eligible item
[of eligible clothing or footwear], no sales tax is due
on the sale of the new item if the new item is purchased during the
exemption period.
(4) Examples:
(A) A customer purchases a $35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for the same shirt in a different size. Tax is not due on the $35 price of the shirt.
(B) A customer purchases a $35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for a $35 jacket. Because the jacket was not purchased during the exemption period, tax is due on the $35 price of the jacket.
(C) During the exemption period, a customer purchases a $90 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $90 dress for a $150 dress. Tax is due on the $150 dress. The $90 credit from the returned item cannot be used to reduce the sales price of the $150 item to $60 for exemption purposes.
(D) During the exemption period, a customer purchases a $60 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $60 dress for a $95 dress. Tax is not due on the $95 dress because it was also purchased during the exemption period and otherwise meets the qualifications for the exemption.
(l) Returned merchandise. For a 30-day period after the temporary exemption period, when a customer returns an item that would qualify for the exemption, no credit for or refund of sales tax shall be given unless the customer provides a receipt or invoice that shows tax was paid, or the retailer has sufficient documentation to show that tax was paid on the specific item. This 30-day period is set solely for the purpose of designating a time period during which the customer must provide documentation that shows that sales tax was paid on returned merchandise. The 30-day period is not intended to change a retailer's policy on the time period during which the retailer will accept returns.
(m) Mail, telephone, e-mail, and Internet orders and
custom orders. Under the Texas sales tax law, a sale of tangible personal
property occurs when a purchaser receives title to or possession of
the property for consideration. Therefore, an eligible item
[of eligible clothing or footwear] may qualify for this
exemption if:
(1) the item is both delivered to and paid for by the customer during the exemption period; or
(2) the customer orders and pays for the item and the retailer accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period. The retailer accepts an order when the retailer has taken action to fill the order for immediate shipment. Actions to fill an order include placement of an "in date" stamp on a mail order, or assignment of an "order number" to a telephone order. An order is for immediate shipment when the customer does not request delayed shipment. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders or because stock is currently unavailable to, or on back order by, the company.
(n) Shipping and handling charges.
(1) Shipping and handling charges are included as part
of the sales price of an eligible item [the clothing
or footwear], regardless of whether the charges are
separately stated. Except as provided in paragraph (2) of
this subsection, if multiple items are shipped on a single invoice,
the shipping and handling charge must be proportionately allocated
to each item ordered, and separately identified on the invoice, to
determine if any items qualify for the exemption. The following examples
illustrate the way [that
] these charges should be handled.[:]
(A) A customer orders a jacket for $95. The shipping charge to deliver the jacket to the customer is $5.00. The sales price of the jacket is $100. Tax is due on the full sales price.
(B) A customer orders a suit for $285 and a shirt for $95. The charge to deliver the items is $15. The $15 shipping charge must be proportionately and separately allocated between the items: $285 / $380 = 75%; therefore, 75% of the $15 shipping charge, or $11.25, must be allocated to the suit, and separately identified on the invoice as such. The remaining 25% of the $15 shipping charge, or $3.75, must be allocated to the shirt, and separately identified on the invoice as such. The sales price of the shirt is $95 plus $3.75, which totals $98.75; therefore, the shirt qualifies for the exemption.
(C) A customer orders a suit for $285 and a shirt for $95. The charge to deliver the items is $20. The $20 shipping charge must be proportionately and separately allocated between the items: $285 / $380 = 75%; therefore, 75% of the $20 shipping charge, or $15, must be allocated to the suit, and separately identified on the invoice as such. The remaining 25% of the $20 shipping charge, or $5.00, must be allocated to the shirt, and separately identified on the invoice as such. The sales price of the shirt is $95 plus $5.00, which totals $100; because the sales price of the shirt exceeds $99.99, the purchase of the shirt is taxable.
(2) If the shipping and handling charge is a flat rate per package and the amount charged is the same regardless of how many items are included in the package, for purposes of this exemption the total charge may be attributed to one of the items in the package rather than proportionately and separately allocated between the items. For example, a customer orders five shirts, with four priced at $98 and one at $85. The retailer charges $10 for shipping and handling the order. The retailer would have charged the same amount for shipping and handling whether the customer ordered one shirt or five shirts. The retailer may choose to attribute the $10 shipping and handling charge to the shirt that was sold for $85 rather than allocate the charge proportionately and separately between the shirts. If the charge is attributed to the $85 shirt, the sales price of that shirt is $95, and all of the shirts will qualify for the exemption.
(o) Documenting exempt sales.
(1) Except as provided in paragraph
(2) of this subsection, a [The] retailer is not required
to obtain an exemption certificate on sales of eligible items during
the exemption period; however [. However], the
retailer's records should clearly identify the type of item sold,
the date on which the item was sold, and the sales price of the item.
(2) A retailer who sells more than 10 backpacks to a customer at the same time must obtain an exemption certificate from the customer verifying that the backpacks are being purchased for use by elementary or secondary school students.
(p) Reporting exempt sales. No special reporting procedures are necessary to report exempt sales made during the exemption period. Sales should be reported as currently required by law.
This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on July 15, 2008.
TRD-200803604
Martin Cherry
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: August 31, 2008
For further information, please call: (512) 475-0387
The Comptroller of Public Accounts proposes amendments to §3.1001, concerning mixed beverage gross receipts tax. The proposed amendments change the name of this section, make consistent definitions that apply to both mixed beverage gross receipts tax under this section and the taxability of gratuities as provided by §3.337 of this title and clarify the taxability of cover charges, door charges, entry fees or admission fees.
Related to gratuities, subsection (a)(3) amends the definition of mandatory gratuity charge, subsection (a)(6) amends the definition of permittee, and new subsections (a)(7), (8), (11), and (12) are added to define qualified employees, reasonable mandatory gratuity charge, total direct compensation and voluntary gratuity. The amendment to subsection (c)(5) makes only that portion of a reasonable mandatory gratuity charge that is not distributed to qualified employees taxable instead of the entire amount of the mandatory gratuity charge. The amendment to subsection (c)(6) makes clear that the entire amount of mandatory gratuity charges when in excess of 20% is taxable. The amendments to subsections (f)(4) and (f)(5) make reference to voluntary and reasonable mandatory gratuity charges, which by amendment are more clearly defined. New subsection (i) summarizes the taxability of mandatory gratuity charges.
Related to the taxability of cover charges, door charges, entry fees or admission fees, the amendments to subsections (c)(3) and (l)(8) clarify that a cover charge, door charge, entry fee or admission fee is subject to mixed beverage gross receipts tax only when the collection of the charge or fee is in violation of the Texas Alcoholic Beverage Commission rules or regulations. Subsections (c)(4) and (f)(8) are deleted because an alternative method for calculating the mixed beverage gross receipts tax on cover charges is no longer necessary. The amendment to new subsection (c)(4) replaces the word 'promotional' with 'reduced'. The amendment to subsection (l)(8) deletes a reference to 16 TAC §45.103, and restates that a cover charge, door charge, entry fee or admission fee is subject to sales tax unless the fee or charge is in violation of a Texas Alcohol Beverage Commission rule or regulation.
New subsection (e) summarizes the tax responsibilities of non-profit organizations holding fundraising or special events.
The amendment to subsection (j) deletes a reference to Tax Code, §183.001 because mixed beverage permittees are defined in subsection (a) of this section. The amendment to subsection (f)(9) deletes a reference to August 28, 1995, the first date mixed beverage permittees could make a deduction for a bad debt. The amendment to subsection (g) clarifies the taxability of alcohol loss due to spillage or breakage. The amendment to subsection (h) clarifies the inventory records required for alcohol used in cooking.
John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.
Mr. Heleman also has determined that for each year of the first five years the rule is in effect, the proposed amendment would benefit the public by clarifying the taxability of purchases, charges and gratuities on the premises of a business permitted to sell mixed alcoholic beverages. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.
The amendment implements Tax Code, §183.021.
§3.1001.Mixed Beverage Gross Receipts[, Receipts Excluded From] Tax[, Records Required, and Information Required].
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Alcoholic beverage--Alcohol, or any beverage containing more than 0.5% of alcohol by volume, which is capable of use for beverage purposes, either alone or diluted.
(2) Complimentary alcoholic beverage--An alcoholic beverage served without any consideration paid to the permittee.
(3) Mandatory gratuity charge--Any amount required
by the permittee in excess of the charge for the sale of alcoholic
beverages [Gratuities--An amount given voluntarily by a
customer or member for the sale or service of alcoholic beverages
in addition to the charge for the alcoholic beverages or an amount
that is mandatory based on a percentage or other amount established
by the permittee in excess of the charge for the sale or service of
the alcoholic beverages].
(4) Minibar--A closed container, cabinet, or other device in a hotel guestroom that contains alcoholic beverages for use by guests registered in the hotel.
(5) Mixed beverage--A serving of a beverage composed
in whole or in part of an alcoholic beverage in a sealed or unsealed
container of any legal size for consumption on the premises where
served or sold by the holder of a mixed beverage permit, a private
club registration permit, a private club exemption certificate permit,
and any of the auxiliary permits held by the permittee [
permit holders].
(6) Permittee--A person, agent, or the officer,
director, manager or managing general partner of an entity that is
the [Permittee--A] holder of a mixed beverage permit,
a mixed beverage late hours permit, a mixed beverage permit holding
a food and beverage certificate, a daily temporary mixed beverage
permit, a private club registration permit, a private club exemption
certificate permit, a private club late hours permit, a daily temporary
private club permit, a private club registration permit holding a
food and beverage certificate, or a caterer's permit issued by the
Texas Alcoholic Beverage Commission [(TABC)].
(7) Qualified employees--Employees who customarily and regularly provide the service upon which a gratuity is based, including, but not limited to, waiters, waitresses, busboys, service bartenders, wine stewards, and maitres d'hotel. The term does not include janitorial help, chefs, cashiers, or dishwashers.
(8) Reasonable mandatory gratuity charge--Mandatory gratuity charges that do not exceed 20%.
(9) [(7)] Source record--A dated
customer service check or ticket; a dated cash register receipt, if
coded to reflect all required information; or the equivalent of a
customer service check or cash register receipt in some other form
subject to approval by the comptroller.
(10) [(8)] Temporary membership
card--A card printed and sold to a private club by the Texas
Alcoholic Beverage Commission [(TABC)]. The card
is then sold by the private club to an individual and entitles that
individual to all the privileges of membership in the private club
for a period not to exceed three days. The card also entitles the
holder to bring not more than three persons into the club as the holder's
guests.
(11) Total direct compensation--Total salaries paid to qualified employees. The term does not include other benefits paid or incurred on an employee's behalf, such as health and life insurance, sick leave, or vacation time.
(12) Voluntary gratuity--A tip added to the bill at the suggestion of the purchaser or money given freely by the purchaser over and above the price charged for the sale or service of alcoholic beverages.
(13) [(9)] Walked checks or tabs--An
industry term that refers to the instance of a customer that on a
particular business day consumes alcoholic beverages and leaves the
permittee's premises without paying or providing the appropriate consideration
for the alcoholic beverages.
(b) Mixed beverage gross receipts tax. A tax at the rate of 14% imposed on the gross receipts of a permittee received from the sale, preparation, or service of alcoholic beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee.
(1) The mixed beverage gross receipts tax is a tax on gross receipts and is not to be added to the charge for the sale or service of the alcoholic beverage and cannot be considered included in the gross receipts amount.
(2) Each permittee must file a monthly return due on the 20th day of the following month. If no sales or services of alcoholic beverages are made during a month, a report indicating that fact must be filed.
(c) Taxable mixed beverage receipts. The mixed beverage gross receipts tax applies to, but is not limited to, receipts for the following items:
(1) receipts from the sale or service of alcoholic beverages;
(2) receipts from the sale or service of nonalcoholic beverages that are mixed and consumed with alcoholic beverages on the permittee's premises;
(3) receipts from cover charges, door charges, entry
fees, or admission fees only when the Texas Alcoholic Beverage
Commission has determined that the collection of the cover
charge or admission fee is in violation of the Texas Alcoholic Beverage
Commission rules or regulations. The [are related to reduced
prices for alcoholic beverages as described in 16 TAC §45.103
(relating to Regulations of "Happy Hour"). If cover charges are determined
to be related to reduced prices for alcoholic beverages, the]
tax base will be the entire receipts from the cover charge or
admission fee plus the reduced sales or service prices received
for the alcoholic beverages;
[(4) as an alternative to paragraph
(3) of this subsection, a permittee may elect to report the services
or sales of alcoholic beverages at the normal service or selling price
and exclude the cover charges, door charges, entry fees, or admission
fees from the tax base. The normal sales or service price is the price
charged for the alcoholic beverage when no cover charge, door charge,
entry fee, or admission fee is collected. When the permittee elects
to use this option, the cover charges, door charges, entry fees, or
admission fees will be subject to sales tax under §3.298 of this
title (relating to Amusement Services);]
(4) [(5)] the normal selling
price of alcoholic beverages served with meals with no separate charge.
If the specific alcoholic beverage is being sold or served at a
reduced [promotional
] price at the same time as the meal,
the tax base for the alcoholic beverage will be the
reduced [promotional] price[
. This subsection refers to promotions
usually promoted as "free drink(s) with a meal"];
(5) [(6)] any portion of
a reasonable mandatory gratuity charge that is not disbursed to qualified
employees; [mandatory gratuities of 20% or less that are
not entirely distributed to qualifying employees. "Qualifying employees"
are employees such as, but not limited to, waitpersons, buspersons,
bartenders, wine stewards, and maitre d'hotel who customarily and
regularly provide the services upon which the charge is based. Nonqualifying
employees or recipients include, but are not limited to, owners, club
managers with no direct involvement in the particular event, janitorial
help, chefs, cashiers, and dishwashers.]
[(A) If compensation is made to nonqualifying
employees or recipients, the entire portion of the gratuity attributable
to the sale or service of alcoholic beverages is subject to the mixed
beverage gross receipts tax.]
[(B) If the total direct compensation
due all qualifying employees during each reporting period (month)
equals or exceeds the total amount collected as mandatory gratuities
and no compensation is paid nonqualifying employees, the mandatory
gratuity is exempt from the mixed beverage gross receipts tax.]
(6) [(7) all] mandatory gratuity
charges when in excess of 20%. If a mandatory charge exceeds 20% then
the entire mandatory gratuity [gratuities that exceed 20%
of the] charge is [for alcoholic beverages are
] subject to [the] mixed beverage gross receipts tax
regardless of how the gratuity is disbursed;
(7) [(8)] miscellaneous charges
in conjunction with the sale or service of alcoholic beverages such
as bar set-up fees, bartender fees, corkage fees, maitres d'hotel
[maitre d'hotel] charges, etc., are subject to the mixed beverage
gross receipts tax;
(8) [(9)] all sales or services
of alcoholic beverages by caterers;
(9) [(10)] all sales or services
of alcoholic beverages sold or served by the holder of a temporary
permit listed in subsection (a)(6) of this section or by the holder
of a beer and wine only temporary permit issued to a mixed beverage
permittee [permit holder];
(10) [(11)] all sales of coupons,
tokens, tickets, etc., that are redeemed or used in any manner to
purchase or pay for the service of an alcoholic beverage; and
(11) [(12)] thefts of money or
legal tender received from the sale or service of alcoholic beverages
are not deductible from the mixed beverage tax base.
(d) Private clubs, special events, and functions. Mixed beverage gross receipts tax on alcoholic beverages served at special events or functions such as golf or tennis tournaments at private clubs, when a lump-sum charge entitles the member or guest to various items such as green fees, food, alcoholic beverages, golf cart rentals, etc., shall be computed by one of the following methods.
(1) The club shall maintain documentation that shows the normal cost to a member or guest for each of the items provided for the lump-sum charge. The permittee will then compute the percentage of the total of all the charges attributable to the sale or service of the alcoholic beverages. This percentage then will be applied to the actual lump-sum amount paid by the member or guest to derive the tax base for the mixed beverage gross receipts tax. For example, if the total of all the items would normally cost $300 and the permittee estimates that the portion attributable to the sale or service of alcoholic beverages is $30, then 10% of the actual lump-sum amount would be reported as subject to the mixed beverage gross receipts tax. If the amount paid by the member or guest is $200, then $20 would be the tax base. The documentation used by the permittee is subject to review by the comptroller's personnel and any amounts determined to be inaccurate or unreasonable may be adjusted.
(2) The permittee may choose to use the normal sales or service prices of the alcoholic beverages as the tax base for the mixed beverage gross receipts tax.
(e) Nonprofit organizations holding fundraising and other special events where 100% of the net profit of the event goes to the nonprofit organization. Nonprofit organizations with an IRS Section 501(c)(3), (4), (8), (10), or (19) status who are issued a temporary mixed beverage permit will determine the mixed beverage gross receipts tax base in the following situations:
(1) if tickets are sold to an event with an open bar, the nonprofit organization owes mixed beverage gross receipts tax on their cost of the alcoholic beverages purchased for the event;
(2) if tickets are sold to an event with an open bar and the alcoholic beverages are donated to the nonprofit organization, the nonprofit organization does not owe mixed beverage gross receipts tax or use tax as provided by Tax Code, Chapter 151, on the donated alcoholic beverages, but owes mixed beverage gross receipts tax on the cost of any alcoholic beverages purchased for the event;
(3) if an event is one with a cash or ticket bar (with or without an entry fee), the nonprofit organization owes mixed beverage gross receipts tax on the total receipts from the sale and service of alcoholic beverages;
(4) if an event is one with no entry fee and open bar, the nonprofit organizations does not owe mixed beverage gross receipts tax, but owes use tax as provided by Tax Code, Chapter 151, on the cost of any alcoholic beverages purchases for the event.
(f) [(e)] Items excluded from
the mixed beverage gross receipts tax base.
(1) Complimentary alcoholic beverages served without
any consideration paid to the permittee. Use tax as provided by [
the] Tax Code, Chapter 151, is due on the taxable ingredients of
the complimentary alcoholic beverages.
(2) Complimentary alcoholic beverages served during
promotional periods such as happy hours at hotels or motels. If, however,
there is an increase in guest room rates attributable to the promotional
periods, the comptroller will have the option to tax either the increase
in the room rate under [the] Tax Code, Chapter 156, or
assess use tax on the taxable ingredients of the complimentary drinks.
The comptroller will have the authority to use information such as
the room rates at comparable hotels and motels in the area to determine
if an increased rate is attributable to the promotional period alcoholic
beverages.
(3) Complimentary alcoholic beverages served to holders of free drink cards or free drink tokens, for which no consideration was paid to the permittee.
(4) Voluntary [All voluntary] gratuities.
(5) Reasonable [All] mandatory gratuity
charges [gratuities, not to exceed 20% of the charge for
the alcoholic beverages, that are distributed to qualifying personnel
as outlined in subsection (c)(6) and (c)(6)(B) of this section].
(6) Walked checks or tabs. These differ from bad debts in that no agreement exists to extend credit to the customer or guest.
(7) Receipts from cover charges, door charges, entry
fees, or admission fees that are [not related to reduced prices
for alcoholic beverages and] assumed for entertainment, food
specials, and other purposes. Sales tax as provided by §3.298
of this title (relating to Amusement Services) is due on these receipts.
[(8) Cover charges collected when the
permittee elects to use the reporting method described in subsection
(c)(4) of this section.]
(8) [(9)] Bad debts. The unpaid
portion of the gross receipts on sales or services [made on or
after August 28, 1995,] that have been charged off the books
as a bad debt and that are deducted for federal tax purposes during
the same or subsequent reporting period.
(g) [(f)] Alcohol loss[,
sales tax not due]. No mixed beverage gross receipts [
Although use tax per the Tax Code, Chapter 151, is due on the taxable
ingredients of complimentary drinks, no use] tax is due on alcoholic
beverages destroyed due to spillage or breakage [or used in cooking].
(h) [(g)] Inventory for cooking.
Alcoholic beverages used in cooking may be stored with regular bar
stock or in a separate storage area. The withdrawal from inventory
of alcoholic beverages used in cooking must be recorded at the time
of withdrawal on a service check or other permanent record.
[(1) Inventory of alcoholic beverages
used in cooking may be stored:]
[(A) with regular bar stock; or]
[(B) in a separate storage area.]
[(2) The withdrawal from inventory
of alcoholic beverages used in cooking must be recorded at the time
of withdrawal on a:]
[(A) service check; or]
[(B) other permanent record.]
(i) Mandatory gratuity charges.
(1) Reasonable mandatory gratuity charges are specifically excluded from the mixed beverage gross receipts tax base if they are:
(A) separated from the sales price of the alcoholic beverage served;
(B) identified as a tip or gratuity by any reasonable means, including such terms as service fee or service charge; and
(C) disbursed to qualified employees. Any portion of a reasonable mandatory gratuity charge that is retained by the employer is subject to mixed beverage gross receipts tax.
(2) Mandatory gratuity charges in excess of the 20%. If a mandatory charge exceeds 20% then the entire mandatory gratuity charge is subject to mixed beverage gross receipts tax regardless of how they are disbursed.
(j) [(h)] Record requirement.
Records required by the comptroller for mixed beverage permittees[,
as that term is defined in Tax Code, §183.001,] must be
kept for a period of four years. Records must be made available upon
request within a reasonable time for examination by the comptroller
or authorized agents or employees. The records, in general, must reflect
the total gross receipts from the sale or service of alcoholic beverages
and those associated services that are subject to the gross receipts
tax, as provided by subsections (c), (d) and (e) [and
(d)] of this section. Records may be written, kept on microfilm,
or stored on data processing equipment. Permittees must contact the
Texas Alcoholic Beverage Commission [TABC
] for information concerning Texas Alcoholic Beverage Commission [
TABC] record keeping requirements.
(k) [(i)] Source records.
(1) The following information is required to be printed on a source record in a manner that makes such information clearly evident or by a system of symbols (codes) if such symbols and their meaning are printed on the source record or maintained on the licensed premises.
(A) Each individual serving of an alcoholic beverage and the price charged. When using service checks, it is permissible to make one entry on a service check for more than one individual serving if all of the servings are of the same type (e.g., 3 Scotch & Water @ $2.00 = $6.00). If all of the servings are not of the same type, a separate entry must be made on the service check for each type of service (e.g., 3 Scotch & Water @ $2.00 = $6.00, 2 Rum & Coke @ $2.00 = $4.00). When using a cash register only, regardless of the type of service, each individual serving must be rung up separately. When using a combination of service checks and a cash register, it is not necessary to itemize each serving on the cash register tape if all the required information is shown on the service check.
(B) For an alcoholic beverage not served as an individual separate serving, the unit of the serving used and the price charged. When using service checks, units of servings that are more than an individual separate serving shall be recorded as such (e.g., 2 pitchers of beer @ $3.25 = $6.50, 1 pitcher of daiquiri @ $6.00 = $6.00). When using a cash register only, each unit of serving which is more than an individual separate serving must be rung up separately, with the price list identifying the unit of serving. When using a combination of service checks and a cash register, it is not necessary to itemize each serving on the cash register tape if all the required information is shown on the service check.
(C) Each separate serving or other unit shall be clearly
identified as to the kind of drink (e.g. [i.e.],
daiquiri, tequila sunrise) or class of beverage (e.g., beer,
wine, whiskey) as the case may be. If a cash register does not have
sufficient keys for the classification, the price list used for identifying
the units of servings must also identify the kinds of servings.
(D) The date of the transaction. For this purpose the "date" begins as of 3:00 a.m. one day and continues until 3:00 a.m. the next day.
(E) Complimentary alcoholic beverages shall be recorded
on service checks only. A check should be prepared for each individual
or party served. The check should be prepared as if it was a normal
sale and then clearly marked as being complimentary. The service checks
should be grouped daily and filed with the daily summary showing the
information on the summary as required by subsection (l) [
(j)] of this section. A serving of an alcoholic beverage shall
not be a complimentary alcoholic beverage if it is served under conditions
which include, but are not limited to the following: the alcoholic
beverage is served in connection with food or any other thing sold
to the recipient, or if any entertainment or entry fee is charged.
Any alcoholic beverage served under the above or similar conditions
is subject to the gross receipts tax, computed on the basis of the
normal charge for the sale or service of such alcoholic beverage.
(F) Mandatory gratuity charges [gratuities
] that exceed 20% of the charge for alcoholic beverages must
be recorded and identifiable on a source record. A mandatory gratuity
that is [less than] 20% or less of the charge
for the sale or service of alcoholic beverages must be recorded and
identifiable on the source record only if the gratuity is disbursed
to nonqualified [nonqualifying] employees or
recipients, which include but are not limited to, owners, club managers
with no direct involvement in the particular event, janitorial help,
chefs, cashiers, and dishwashers. All voluntary gratuities are not
to be recorded on a source ticket.
(2) Source records shall be maintained in sequence by date.
(l) [(j)] Daily Summaries. Each
permittee must maintain a daily summary, including the following information:
(1) all information required to be recorded on source records;
(2) complimentary alcoholic beverages dispensed, showing the number of services, type of service, kind of drink, and normal selling price;
(3) alcoholic beverages that were lost through theft, showing the number of containers lost by size, brand, and class. The theft must be reported to the proper police department and must be substantiated by the report of such police department;
(4) alcoholic beverages that were lost through a disaster, showing the number of containers lost by size, brand, and class. The disaster must be reported to the comptroller;
(5) alcoholic beverages that were lost through breakage or spillage, showing the number of containers lost by size, brand, and class or type of drink and size. A written report must be prepared at the time of the loss;
(6) alcoholic beverages that were lost through the cleaning, servicing, or repair of dispensing equipment lines, showing the amount lost by class or type of drink and supported by:
(A) reports prepared by the permittee at the time of the malfunction; and/or
(B) repair/service invoices prepared by the repair/service company;
(7) alcoholic beverages used in cooking, with purchases documented:
(A) by purchase invoices that have such beverages clearly denoted by either the seller or purchaser; or
(B) by separate purchase invoice;
(8) cover charges, door charges, entry fees, or admission
fees. Admission fees [related to the reduced price for alcoholic
beverages as described in 16 TAC §45.103 (relating to Regulations
of "Happy Hour")] are subject to sales [the
mixed beverage gross receipts tax. Sales] tax as provided by
[34 TAC] §3.298 of this title, unless the Texas
Alcoholic Beverage Commission determines that the admission fees collected
are in violation of the Texas Alcoholic Beverage Commission rules
or regulations [(relating to Amusement Services) is due
on admission fees not related to reduced prices of alcoholic beverages.
Permittees should consult the TABC to determine if a cover charge
is prohibited under 16 TAC §45.103]; and
(9) information pertaining to changes made during the month concerning prices, glass sizes, bulk machine (e.g., margarita machine) recipes, ounces per serving, parties, or promotions.
(m) [(k)] Purchase invoices.
(1) A record of all alcohol and alcoholic beverages purchased or received showing the date, name and address of the person from whom purchased or received, the point from where shipped, point received, the quantity and kind of beverage (brand and class) received, and the total price paid for each brand and class received.
(2) Alcoholic beverages used in mixing drinks as the secondary ingredient (e.g., vermouth, triple sec) must be supported by purchase invoices which have such beverages clearly denoted by the purchaser.
(n) [(l)] Bad debts refund or credit.
(1) A mixed beverage permittee may take a credit against
taxes to be paid to the comptroller or claim a refund on taxes paid
to the comptroller for bad debt on sales [made on or after August
28, 1995].
(2) To establish bad debt credit or refund, a permittee's records must show:
(A) date of sale or service;
(B) name and address of purchaser;
(C) source records of sale or service;
(D) evidence that the gross receipts tax was paid to the comptroller;
(E) all payments or credits applied to the account of the purchaser;
(F) a designation that the account is a bad debt; and
(G) evidence that the account has been or will be claimed as a bad debt deduction for federal income tax purposes.
(3) To determine the amount of bad debt allowance for tax, all payments or credits in reduction of a customer's account must be applied ratably between alcoholic beverages and other goods sold to that customer.
(4) If all or part of the amount claimed as a bad debt is later collected, the amount collected must be reported as a taxable receipt in the reporting period in which the collection was made.
(5) Accounts may not be labeled as a bad debt for the purpose of delaying the payment of the tax.
(o) [(m)] Audit and examination of tax account.
(1) Determination of tax liability. In examining the tax account of any permittee, the comptroller may compute and determine the amount of gross receipts tax liability based on reports filed with the comptroller, records or information obtained from the permittee, or records or information obtained from any seller who furnished alcoholic beverages to the permittee, or such other information which may come to the attention of the comptroller. The comptroller presumes that the disposition of all alcoholic beverages purchased by the permittee is taxable until established otherwise.
(2) Access to all information. The comptroller may examine all books, records, papers, documents, supplies, and equipment of a mixed beverage permittee. Additional records that may be required to be presented include, but are not limited to, the following:
(A) all procedure and operation manuals;
(B) all financial ledgers, journals, and registers;
(C) all financial statements prepared internally or by an outside bookkeeper, accountant, or C.P.A.;
(D) all bank statements;
(E) all federal income tax returns; and
(F) all state and federal employment tax returns and supporting documents.
(3) Failure to maintain or make records available for audit. In examining the tax account of each permittee, if the comptroller finds that the permittee has failed to maintain or make available the records required by any regulation of the comptroller, the comptroller may compute and determine the amount of the gross receipts tax liability from any available source or records, and estimates of the tax liability may be made by use of any available records for any period for which the permittee has failed to maintain records or file a report with the comptroller. In the event records are not made available, the comptroller will presume all alcohol purchased was sold. In the absence of records or evidence to the contrary, the comptroller may accept an average pour figure of 1.25 ounces per serving of liquor.
This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on July 17, 2008.
TRD-200803655
Martin Cherry
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: August 31, 2008
For further information, please call: (512) 475-0387
SUBCHAPTER C. PROCUREMENT
The Comptroller of Public Accounts proposes an amendment to §20.34, concerning Centralized Master Bidders List (CMBL). This section is being amended to clarify the annual fee for registration on the CMBL.
Government Code, §2155.266, authorizes the comptroller to charge a fee in an amount designed to recover the costs in making and maintaining the CMBL and in soliciting bids and proposals. The comptroller is proposing amendments to this rule to clarify the annual registration fee for the CMBL.
Subsection (a) is being amended to correct references to the Texas Building and Procurement Commission (TBPC). The TBPC was renamed the Texas Facilities Commission and the state purchasing function was transferred to the Comptroller of Public Accounts by House Bill 3560, 80th Legislature, 2007. House Bill 3560 also repealed the Catalog Information Systems Vendors (CISV) program. Therefore, the comptroller removes the reference to CISV from subsection (a).
Subsection (b) is being amended to clarify that the annual fee for the CMBL is $70.00. Subsection (d)(2) is being amended to remove the word "annual" and replace it with "required." This is a stylistic change to remove any limitation or requirement of the fee from subsection (d). The fee will be identified in subsection (b) only, to avoid confusion.
The references to TBPC in subsections (d)(1), (f), and (g) are corrected to comptroller. Lastly, the reference to the CISV program is removed from subsection (h).
John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.
Mr. Heleman also has determined that for each year of the first five years the rule is in effect, it would benefit the public by clarifying the process for state government procurement as well as the cost for vendors to participate in this process. There is no anticipated economic cost to individuals who are required to comply with the proposed rule. There are no significant anticipated fiscal implications for small businesses.
Comments on the proposal may be submitted to Ron Pigott, Deputy General Counsel, Texas Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Government Code, §2155.267, which authorizes the comptroller to adopt rules to administer the CMBL; and Government Code, §2155.0012, which authorizes the comptroller to adopt rules to administer Chapter 2155.
The amendment implements Government Code, Chapter 2155, Subchapter E.
§20.34.Centralized Master Bidders List.
(a) The comptroller [TBPC] maintains
the Centralized Master Bidders List (CMBL) of the names and addresses
of vendors which have registered for inclusion on the CMBL. The CMBL
is maintained for the state's use in obtaining competitive bids for
purchases [and for registering vendors who wish to be designated
as catalog information systems vendors (CISV)]. Bid invitations
and requests for proposals shall be transmitted to vendors on the
CMBL for the solicited commodity and/or service designated by the
vendor for open market, term contracts, competitive sealed proposal
acquisitions and delegated purchases in excess of the non-competitive
bid limit.
(b) Registration for the Centralized Master Bidders
List is an on line process with a vendor managed web based system.
There is a $70.00 annual fee to remain registered on the CMBL. [
The established fee is to be paid annually.]
(c) It is the vendor's responsibility to maintain their CMBL profile to ensure correct information for receipt of bids based on products or services which can be provided for selected districts for the State of Texas.
(d) A vendor may be administratively removed from the CMBL for one or more of the following reasons:
(1) failing to pay or unnecessarily delaying payment
of damages assessed by the comptroller [TBPC];
(2) failing to remit the required [annual] CMBL fee; or
(3) any factor set forth in Texas Government Code, §2155.070 and §2155.077.
(e) A vendor which has been removed from the CMBL shall not be reinstated until expiration of the period for which the vendor was removed and approval is granted.
(f) An error in addressing a bid invitation or request
for proposal or a failure of the post office to deliver the solicitation
will not be sufficient reason to require the comptroller [
TBPC] to reject all other bids or proposals.
(g) State agencies shall use the CMBL to select bidders
for competitive bids or proposals and to the fullest extent possible
for purchases exempt from the comptroller's [TBPC's]
purchasing authority. This requirement does not apply to the Texas
Department of Transportation or to an institution of higher education
as defined by Education Code, §61.003, [Education
Code,] but an institution of higher education should use the
CMBL when possible.
(h) As set forth in Texas Government Code, §2155.269,
state agencies may waive the requirement to solicit only from bidders
listed on the Centralized Master Bidders List (CMBL) by obtaining
approval from the agency head or designee to add non-CMBL bidders
to the final bid list. Non-CMBL bidders can be added to the final
bid list for specific solicitations where the requirement to solicit
only CMBL bidders is not warranted, such as to increase competition.
[This does not apply to purchases in §113.19 of this title,
relating to Catalog of Information Systems Vendors (CISV).]
This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on July 15, 2008.
TRD-200803595
Martin Cherry
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: August 31, 2008
For further information, please call: (512) 475-0387