Texas Comptroller of Public Accounts STAR System
October 1, 2007
RE: Multistate Tax Credits
Thank you for directing our attention to the discrepancy between the
information provided on the Occasional Use Tax webpage and the information
contained in Comptroller Rule 3.338(b)(2) regarding multistate tax credits. I
have restated the facts pertaining to this issue below, followed by my
Rule 3.338(b) provides that as a member of the Multistate Tax Compact, Texas
will allow as a credit against Texas use tax due any combined amounts of
legally imposed sales or use taxes paid on the same property to another state
or any subdivision of another state. The rule further provides that the credit
shall be applied first against any amount of local use tax due, then shall be
applied to the state.
The Occasional Use Tax web page provides instructions for calculating the
amount of use tax owed when claiming a multistate tax credit. The instructions
simply direct taxpayers to reduce the taxable sales for both the state and
local jurisdictions using the same calculation. The reduced amount of taxable
sales is then used to determine the total amount of state and local sales and
use taxes due to both the state and local jurisdictions. The directions on the
web page (and use tax return, Form 01-156) do not instruct taxpayers to apply
the credit to the local taxes first.
You asked whether the information contained in the rule is correct or whether
the instructions on the form and web page are correct.
Response: Neither source of information is correct.
The directions in Comptroller Rule 3.338(b)(2) mistakenly instruct taxpayers to
apply a multistate tax credit to local taxes first, then to state tax. As
noted above, the use tax web page instructs taxpayers to claim a multistate tax
credit proportionally against all Texas state and local use taxes due by
reducing the amount reported as a taxable purchase.
In actuality, by statute, multistate tax credits should be applied to state tax
first, then to local taxes.
Texas Tax Code Section 141.001, Article 5, Paragraph 1 states:
1. Each purchaser liable for a use tax on tangible personal property shall be
entitled to full credit for the combined amount or amounts of legally imposed
sales or use taxes paid by him with respect to the same property to another
state and any subdivision thereof. The credit shall be applied first against
the amount of any use tax due the state, and any unused portion of the credit
shall then be applied against the amount of any use tax due a subdivision."
Therefore, you should disregard the directions in Rule 3.338(b)(2) and the
instructions on the use tax web page and return and instead apply the credit in
accordance with the statute.
The credit should be applied first against state use tax due. Then, any
remaining credit should be applied against any local use taxes due, based on
the following hierarchy. After state tax, the credit should first be applied
to any transit tax due, if any; then against any amount of special purpose
district tax due, if any; then against county use tax due, if any, and finally,
any remaining credit shall be applied against any city use tax due, if any.
The following example illustrates how the tax should be calculated:
You buy a laptop computer in Oklahoma for $1300 and pay 5 percent sales tax,
and then take the computer to Dallas. You owe use tax on this purchase at the
rate of 8.25 percent, but you can receive a credit for the 5 percent tax that
you paid to Oklahoma. The 8.25 percent use tax is based on 6.25 percent state
tax, 1.0 percent Dallas city tax, and 1.0 percent Dallas MTA tax.
8.25% Texas state and local tax rate @ point of delivery/use - 5.00% Oklahoma
state and local sales tax / 3.25% remaining amount of Texas state and local use
tax owed = $42.25 total additional use tax due
Tax allocation using 141.001, Article 5 (credit applied to state taxes first)
$1300.00 x 1.25 % (Texas state use tax) = $16.25 use tax owed to the state
$1300.00 x 1 % (Dallas MTA use tax) = $13.00 use tax owed to the Dallas MTA
$1300.00 x 1 % (Dallas city use tax) = $13.00 use tax owed to the City of
The Comptroller's office will amend Rule 3.338 and the information provided on
the use tax web page and Form 01-156 to reflect the guidelines established by
Thank you for bringing this matter to our attention.
Complete Texas sales tax information, including rules, statutes, publications,
and frequently asked questions can be found on the Sales and Use Tax web page
This opinion is based on the information presented. Other information, though
similar, may provide a different result.
If you have any questions or need additional information, you can reply to this
email, call me at 1-800-531-5441 ext. 31810, or write to Tax Policy Division,
P. O. Box 13528, Austin, Texas 78711-3528.
Our goal is to provide you with prompt, professional service. Please take a
moment to complete our on-line survey at
Texas Comptroller of Public Accounts
ACCESSION NUMBER: 200710104L
DOCUMENT TYPE: L
TAX TYPE: SALES