Texas Administrative Code
Title 34 - PUBLIC FINANCE
Part 1 - COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 3 - TAX ADMINISTRATION
Subchapter O - STATE AND LOCAL SALES AND USE TAXES
Section 3.328 - Optional Reporting Methods for Grocers and Other Vendors

Universal Citation: 34 TX Admin Code § 3.328

Current through Reg. 50, No. 13; March 28, 2025

(a) Retail grocer defined. Persons who sell food at retail to be consumed off the premises where such food is sold, and who sell household supplies and nondurable household goods, but whose receipts from the sale of any other tangible personal property do not exceed 5.0% of their total receipts, are referred to in this section as retail grocers. Beer and wine are not food products or food, and therefore are tangible personal property. If the receipts from the sale of beer and/or wine exceed 5.0% of the total receipts, a grocer is disqualified from using the 15% reporting method (Method C).

(b) Reporting methods.

(1) First method (B).
(A) Eligibility is restricted to the following classes of retailers:
(i) any retail grocer;

(ii) any vendor who maintains a separate grocery department with separate records which may be audited by the state, as applies to the grocery department only;

(iii) any vendor whose taxable receipts from the sale of taxable items are less than 10% of his total receipts.

(B) Procedure:
(i) Add all invoices for merchandise purchased during the past calendar or fiscal year to obtain a total of those purchases.

(ii) Add all invoices for exempt merchandise purchased during the past calendar or fiscal year to obtain a total of those purchases.

(iii) To the total of exempt merchandise purchased in clause (ii) of this subparagraph, add the amount of taxable items purchased during the past calendar or fiscal year for which foodstamps were accepted from the purchaser in lieu of other consideration.

(iv) Divide the total amount of exempt merchandise purchased (clause (ii) and (iii) of this subparagraph) by the amount of total purchases (clause (i) of this subparagraph) to obtain a percentage relationship.

(v) Multiply the total receipts from all sales during the reporting period by the percentage thus obtained in clause (iv) of this subparagraph.

(vi) Deduct the figure obtained by this multiplication as described in clause (v) of this subparagraph from the total receipts for the reporting period. The remaining amount will be taxable receipts from the sale of taxable items. Any purchases upon which the use tax is due must be added to this amount.

(C) This method of calculating taxable receipts from the sale of taxable items is available for reporting purposes only, and is subject to audits as the comptroller may require. If an audit indicates the actual tax liability differs from the tax reported and paid, then the comptroller will assess additional tax or grant a refund. No penalties or interest will be assessed on additional taxes disclosed to be due by audit unless the audit discloses fraud or willful evasion of the tax.

(D) A retail grocer electing to use this method of reporting must maintain records which will substantiate purchases of exempt and taxable items as well as records which will substantiate total gross sales.

(2) Second method (C).
(A) Eligibility.
(i) Restricted to retail grocers, as defined in subsection (a) of this section, whose gross receipts do not exceed $100,000 per calendar year.

(ii) A person may use this method for one or more outlets which qualify, as set out in paragraph (1) of this subsection, only if all outlets under the same ownership qualify and combined gross receipts do not exceed $100,000.

(B) Procedure.
(i) Any retail grocer whose total receipts do not exceed $100,00 per calendar year may elect to report and pay the tax imposed by this chapter on the basis that taxable receipts from the sale of taxable items are equal to 15% of his total receipts.

(ii) If a grocer qualifies and elects to use this method, any audits performed on his account will be limited to this method. No additional taxes shall be assessed or refunds or credits allowed because of any showing that the amount of tax paid to the state under this method of reporting differs from the amount that would have been paid under any other reporting method. This method cannot be substituted for another method previously elected, and it is prospective only in nature.

(iii) Grocers electing to use this method of reporting are required to continue in the manner prescribed for a period of three years following such election providing the total receipts of such grocers continue to be $100,000 or less. At such time as the gross receipts of any grocer exceed $100,000, such grocer shall, upon the next succeeding calendar month, be ineligible to use this optional method, and he must promptly inform the comptroller of this fact and cease to use that basis immediately. Any retail grocer who fails to inform the comptroller of his ineligibility loses the immunity for audit assessment otherwise provided and consequently is liable for all back taxes, penalty, and interest prescribed by this section and in accordance with the Tax Code, § 151.415.

(3) Third method (E). Any retailer, including those mentioned in this section, who establishes an accounting system in which the tax collected pursuant to the Limited Sales Tax Act is commingled with the receipts from the sale of taxable items may determine the taxable receipts in the following manner.
(A) He must subtract from his total receipts the receipts from any sales which are specifically exempt from or otherwise excluded from the tax imposed by this Act. The remainder consists of the receipts from the sale of taxable items plus the tax collected pursuant to the provisions of the Act.

(B) If the retailer is subject to state tax only, the remainder must be divided by the state tax rate, expressed as a percentage. If the retailer is subject to both state and city tax, the remainder shall be divided by the combined state and city tax rate, expressed as a percentage.
(i) If the retailer is subject to state, city, and Metropolitan Transit Authority taxes (MTA), the remainder must be divided by the combined state, city, and MTA tax rate, expressed as a percentage.

(ii) If the retailer is within a metropolitan transit authority but not subject to city tax, the remainder must be divided by the combined state and MTA tax rate, expressed as a percentage.

(iii) If the retailer is subject to state, city, and county sales taxes, the remainder must be divided by the combined state, city, and county tax rates, expressed as a percentage.

(iv) If the retailer is subject to state and county taxes but not subject to city tax, the remainder shall be divided by the combined state and county tax rates, expressed as a percentage. If the retailer is subject to state, city, MTA, and county taxes, the remainder must be divided by the combined total of all taxes expressed as a percentage.

(C) The answer resulting is the taxable gross receipts of the retailer for reporting purposes as prescribed by the Tax Code, § 151.410, of the Limited Sales Tax Act.

(D) The sole purpose of this third method is to permit the widest possible latitude in the internal accounting system of retailers and to avoid requiring certain retailers to remit to the state a tax computed upon a base which already includes the tax imposed by this Act. Nothing in this section may be construed to relieve the retailer of the obligation and duty of collecting the tax in the specific manner prescribed by the Tax Code, § 151.053, and the bracket system provided therein. Neither may anything in this third method be construed to relieve the taxpayer of the obligation of paying tax, penalty, and interest upon delinquent taxes.

(c) Purchase invoice records must be maintained for at least four years to verify a grocer's sales tax returns regardless of the method chosen for reporting purposes.

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