Texas Comptroller of Public Accounts STAR System
August 5, 2003
Thank you for your inquiry and request for written confirmation of our
telephone conversation regarding House Bill 3534 and House Bill 2912 of the
78th regular session signed into law by the Governor on June 20, 2003, and the
effects to your client.
You supply the following situation. "Client" is a permitted retailer of
building materials from a single retail outlet that purchases the materials for
resale to a related entity. Client collects local city, county and special
purpose district sales taxes where the sale is consummated based on law, as it
currently exists before the effective date of HB 3534 and HB 2913. Client also
collects Texas local use tax, including any county, special purpose district or
mass transit authority tax due at a job site, which are legally due under the
State's 2 percent cap on local taxes.
Client also receives sales tax incentives from the City government and the
City's 4B Corporation. The local sales tax incentive is based on a percentage
of the City sales tax, including the City's 4B Corporation, that Client
collects and remits to the State of Texas on its sales of building materials to
the related entity. Client's sales outlet was in existence in the City prior
to May 27, 2003, and the City government and the City's 4B Corporation approved
Client's sales tax incentive agreement prior to the signing of HB 2912.
Question: House Bill 3534 amends the definition of a "place of business" so as
to exclude certain outlets from qualifying as a place of business and
stipulates that if such an outlet exists, a sale from that outlet is
consummated at the location from which the taxable items were purchased for
resale. You ask whether the following language from the bill would apply to
Client if the Comptroller were to determine that Client was in fact operating
one of these outlets: "the change in law made to Section 321.002(a)(3), Tax
Code, by this Act, may not, before September 1, 2005, be applied to an outlet,
office, facility, or location that was in existence on May 27, 2003."
Response: HB 3534 goes into effect on September 1, 2003, but provides a
two-year window for those types of outlets to continue to allocate taxes at the
outlet if the outlet were in existence on or before May 27, 2003. If Client
was operating one of these outlets on May 27, 2003, the new law does not change
its tax collection responsibilities until September 1, 2005.
HB 2912 was effective on the day it was signed, but does not apply to
agreements in effect or approved before that date. It also deals with outlets
set up to divert local taxes but uses a different strategy. It prohibits a
city's 4B Corporation from providing incentives to a business to locate in that
City in certain circumstances to divert taxes from another local jurisdiction.
The grandfather clause in this bill does not have a time limitation. Because
this bill was signed on June 20, 2003, and Client already had an existing
agreement by that date, this bill will not prohibit the City government and the
City's 4B Corporation from providing the agreed incentive to Client. However,
after August 31, 2005, neither the City nor the City's 4B Corporation would be
receiving taxes from Client's outlet if the outlet were determined to be
subject to HB 3534.
You are correct in your conclusion that notwithstanding these two new laws,
Client may continue to collect the local sales tax for the City where the
outlet currently receives orders for building materials/
This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.
You may call me toll free 1-800-531-5441, extension 3-4675, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
email address is .
Tax Policy Division
ACCESSION NUMBER: 200308043L
DOCUMENT TYPE: L
TAX TYPE: SALES