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 3.369 - Sales Tax Holiday-Certain Energy Star Products, Certain Water-Conserving Products, and WaterSense Products
Universal Citation: 34 TX Admin Code § 3.369
Current through Reg. 49, No. 52; December 27, 2024
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1)
Energy-efficient product--A product that has been designated as an Energy Star
qualified product under the Energy Star program jointly operated by the United
States Environmental Protection Agency and the United States Department of
Energy and that is an:
(A) air conditioner
priced at $6,000 or less (room and central units);
(B) clothes washer;
(C) ceiling fan;
(D) dehumidifier;
(E) dishwasher;
(F) incandescent or fluorescent light bulb;
(G) programmable thermostat; or
(H) refrigerator (including a
mini-fridge) priced at $2,000 or less.
(2) Exchange--The act of giving or taking one
thing in return for another.
(3)
Exemption period--The period beginning at 12:01 a.m. on the Saturday preceding
the last Monday in May (Memorial Day) and ending at 11:59 p.m. on the last
Monday in May.
(4) Layaway sales--A
transaction in which merchandise is set aside for future delivery to a person
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.
(5) Qualifying
products--Energy-efficient, water-conserving, and WaterSense products eligible
for exemption from sales and use tax if purchased, leased, or rented during the
exemption period.
(6) Rain check--A
document assuring that a person can take advantage of a sale or special offer
made by a seller at a later time if the item offered is not
available.
(7) Water-conserving
product--
(A) tangible personal property that
is used on residential property and is not used for business or trade, and when
used or planted in an outdoor residential property, may result in:
(i) water conservation or groundwater
retention;
(ii) water table
recharge; or
(iii) a decrease in
ambient air temperature that limits water evaporation.
(B) Examples of water-conserving products
include:
(i) a soaker or drip-irrigation
hose;
(ii) a moisture control for
a sprinkler or irrigation system;
(iii) mulch;
(iv) a rain barrel or an alternative rain and
moisture collection system;
(v) a
permeable ground cover surface that allows water to reach underground basins,
aquifers, or water collection points;
(vi) grasses, plants, shrubs, and trees; and
(vii) water-saving surfactants
designed to help water penetrate the soil.
(C) Products purchased by a business,
including an apartment complex or nursing home, are used for business or trade
and are not water-conserving products.
(D) Products that are incorporated into real
property under a lump-sum contract are used for business or trade by the person
improving the real property and are not water-conserving products.
(8) WaterSense product--A product
that has been designated as a WaterSense certified product under the WaterSense
program operated by the United States Environmental Protection Agency, or a
similar successor program.
(b) Exempt sales.
(1) Sales or use tax is not due on the sale
of a qualifying product if the sale takes place during the exemption
period.
(2) There is no limit to
the number of qualifying products one can purchase exempt from sales tax during
the exemption period.
(3) The
exemption applies to each qualifying product sold during the exemption period,
regardless of how many qualifying products are sold on the same invoice to a
person. For example, if a person purchases two refrigerators for $1,800 each,
then both refrigerators qualify for the exemption, even though the person's
total purchase price ($3,600) exceeds $2,000.
(4) Qualifying products may be rented or
leased tax-free, including under a "rent to own" contract, if the rental or
lease contract is executed during the exemption period. The exemption applies
only to the specified rental or lease period designated by the contract.
Extensions or renewals of rental or lease contracts do not qualify for the
exemption unless executed during the exemption period.
(c) Taxable sales. The exemption under this section does not apply to:
(1) products
designated as Energy Star products under the Energy Star program that are not
specifically identified in subsection (a)(1) of this section;
(2) products that may conserve water but that
do not meet the definition of a water-conserving product provided in subsection
(a)(7) of this section;
(3) repair
or replacement parts for qualifying products that are used to repair or remodel
products already owned by a person and that do not otherwise qualify for
exemption. For example, an individual may own a central air conditioner with a
faulty compressor. The individual cannot obtain the exemption on the purchase
of a new Energy Star qualified compressor;
(4) an Energy Star qualified air conditioner
that sells for more than $6,000. For example, if a person purchases an Energy
Star qualified air conditioner that costs $6,055, then sales tax is due on the
entire $6,055;
(5) an Energy Star
qualified refrigerator that sells for more than $2,000. For example, if a
customer purchases an Energy Star qualified refrigerator that costs $2,055,
then sales tax is due on the entire $2,055;
(6) system components sold individually.
Qualifying products must be sold as a unit in order to qualify for the
exemption. The components cannot be priced separately and sold as individual
items in order to obtain the exemption. For example, central air conditioners
must be priced at $6,000 or less and sold as a unit in order to qualify for the
exemption. If an Energy Star qualified central air conditioner sells for
$7,000, the entire $7,000 charge is subject to tax and cannot be split into
separate charges for a compressor, metering device, evaporator coil and blower
in order to qualify for the exemption; and
(7) disposal fees charged for the removal of
old appliances. Disposal or "haul away" fees charged for the removal of an old
appliance are taxable as a waste removal service.
(d) Sales of pre-packaged combinations containing both exempt and taxable items.
(1)
When a qualifying product is sold together with taxable merchandise in a
pre-packaged combination or single unit, the full price is subject to sales tax
unless the price of the qualifying product is separately stated. For example, a
clothes washer and clothes dryer sold as a "set" for a single price is taxable
if the washer and dryer are separate appliances. A separately stated charge for
the Energy Star rated washing machine is eligible for the sales tax exemption
during the holiday period. Tax is due on the dryer. An Energy Star rated
combination washer and dryer unit that is designed to be sold as a single unit
and that cannot be sold separately will, however, qualify for the
exemption.
(2) When a qualifying
product is sold in a pre-packaged combination that also contains a taxable item
as a free gift, and no additional charge is made for the gift, the qualifying
product may qualify for the exemption under this section. For example, the sale
of a dishwasher may include a free bottle of rinse aid. If the price of the set
is the same as the price of the dishwasher sold separately, the product that is
being sold is the dishwasher, which is exempt from tax if sold during the
exemption period. Note: When a retailer gives a taxable item away free of
charge, the retailer owes sales or use tax on the purchase price that the
retailer paid for the item. See §
3.301
of this title (relating to Promotional Plans, Coupons, Retailer
Reimbursement).
(e) Delivery charges.
(1) Air conditioners and
refrigerators. Delivery charges that are billed by the seller to the purchaser
are included as part of the total sales price of a qualifying product,
regardless of whether the charges are separately stated, and as such must be
considered when determining whether air conditioners and refrigerators qualify
for the exemption. The addition of delivery charges to the retail price of a
refrigerator or air conditioner will cause the loss of the exemption if the
total price exceeds the applicable cap. For example, assume a person purchases
an Energy Star qualified refrigerator priced at $1,985. The charge to deliver
the refrigerator is $25, causing the total sales price to be $2,010. Since the
total sales price of the refrigerator exceeds $2,000, the refrigerator does not
qualify for the exemption, and tax is due on the total sales price of
$2,010.
(2) Items other than air
conditioners and refrigerators. Delivery charges that are billed by the seller
to the purchaser are exempt if the product sold is exempt. For example,
delivery fees billed in connection with the sale of a qualifying
energy-efficient dishwasher during the exemption period are exempt.
(3) "Per item" delivery fees. Delivery
charges billed on a "per item" basis must be properly allocated when a delivery
to the same person contains both exempt and taxable items. Except as provided
in paragraph (4) of this subsection, if multiple items are shipped on a single
invoice, the delivery charges must be allocated to each item ordered and
separately identified on the invoice. For example, assume that a person
purchases a qualifying clothes washer tax-free during the exemption period. The
same person also purchases a clothes dryer, which does not qualify for the
exemption. The retailer charges the person an additional fee of $25 per
appliance for delivery. The $25 delivery fee connected to the delivery of the
qualifying clothes washer is exempt from sales tax, but the $25 fee connected
to the delivery of the clothes dryer is subject to tax.
(4) "Flat rate" delivery fees. If the
delivery charge is a flat rate per delivery address, and the amount charged is
the same regardless of how many items are included in the delivery, for
purposes of the exemption, the total charge may be attributed to one of the
items in the delivery rather than proportionately allocated between the items.
The delivery fee can be allocated to either an exempt qualifying product or a
taxable product. The following examples illustrate the way these charges should
be handled.
(A) Delivery fee allocated to
exempt item. Assume a seller charges a flat fee of $50 per customer address for
delivery regardless of the number of items delivered to that address and during
the exemption period, a person purchases an Energy Star qualified refrigerator
priced at $1,900, a taxable stove and a taxable microwave. The seller may
attribute the $50 delivery charge to the sale of the refrigerator bringing the
sales price of the refrigerator to $1,950. The refrigerator sales price does
not exceed $2,000, so it still qualifies for the exemption. The seller does not
have to allocate the delivery charge between the refrigerator, stove and
microwave. The sales invoice must clearly identify that the delivery charge was
attributed to the exempt item and must separately state the tax due on the
taxable items.
(B) Delivery fee
allocated to taxable item. Assume a seller charges a flat fee of $50 per
customer address for delivery regardless of the number of items delivered to
that address and during the exemption period, a person purchases an Energy Star
qualified refrigerator priced at $1,975 and a taxable stove. The seller may
attribute the entire $50 delivery charge to the sale of the stove, thus
allowing the total sales price of the refrigerator to remain $1,975. Since the
refrigerator sales price does not exceed $2,000 it still qualifies for the
exemption. The seller does not have to allocate the delivery charge between the
refrigerator and stove. The sales invoice must clearly identify that the
delivery charge was attributed to the taxable stove and must separately state
the tax due on the taxable item.
(f) Installation charges. A charge for the installation of a qualifying product purchased during the exemption period qualifies for exemption only if the item remains tangible personal property after installation. If the product becomes real property after installation, the charge for installation labor may be taxable or nontaxable depending on whether the product is installed in residential or nonresidential property or as part of a new construction contract.
(1)
Tangible personal property. Products that are free-standing or mobile, such as
clothes washers, dehumidifiers, refrigerators, portable dishwashers and window
or room air conditioning units are tangible personal property. If qualifying
tangible personal property retains its identity as tangible personal property
after installation, the installation charge billed by the seller of the item
becomes part of the sales price of the item. As part of the sales price, an
installation charge billed by the seller qualifies for the exemption, even if
the installation is performed after the exemption period. If however, the
charge for installation of an Energy Star qualified refrigerator, which remains
tangible personal property after installation, causes the total sales price to
exceed $2,000, the entire charge of the refrigerator, delivery and
installation, is taxable.
(2)
Improvements to real property. Items such as programmable thermostats, central
air conditioning units, ceiling fans and built-in refrigerators and dishwashers
that are plumbed, wired or otherwise permanently attached to a building
structure are improvements to real property. For items that become improvements
to real property, the taxability of the installation labor is determined by the
type of jobsite: residential, new construction or nonresidential repair or
remodeling.
(A) Residential and new
construction. No tax is due on charges for labor to install items such as
ceiling fans, programmable thermostats or central air conditioning units in
residential property or during a new construction project. See §
3.291 of
this title (relating to Contractors).
(B) Nonresidential repair and remodeling.
Nonresidential repair and remodeling is a taxable service. Therefore, tax is
due on charges for labor to install ceiling fans, built-in appliances,
programmable thermostats and central air conditioning units in existing
nonresidential real property, regardless of when the installation is performed.
Charges for installation labor performed on existing nonresidential real
property should be separately stated on the invoice from the sales price of
qualifying energy-efficient or WaterSense products. Separately stated charges
for products that may conserve water but that are not water-conserving products
because they are installed in nonresidential real property are taxable. A lump
sum charge for the purchase of a qualifying product and installation labor is
subject to tax as the purchase of nonresidential repair and remodeling. See
§
3.357
of this title (relating to Nonresidential Real Property Repair, Remodeling, and
Restoration; Real Property Maintenance).
(g) Purchases by real estate developers, dealers, service providers and contractors. Real estate developers, dealers, service providers and contractors may purchase qualifying products tax-free during the sales tax holiday as discussed in this subsection.
(1) An exemption or resale certificate is not
required for purchases of energy-efficient or WaterSense products.
(2) A resale certificate must be provided for
purchases of water-conserving products that will be subsequently resold to
customers or incorporated into customers' real property under a separated
contract.
(3) An exemption
certificate or resale certificate may not be provided for purchases of products
that may conserve water but will be incorporated into real property under a
lump-sum contract.
(4) There is no
limit to the number of qualifying products a person may purchase tax-free
during the exemption period.
(5)
Held in inventory. Qualifying products purchased tax-free during the exemption
period may be held in inventory until ready for use as discussed in this
subsection.
(A) No use tax is due if an
energy-efficient product or WaterSense product purchased tax free during the
exemption period by a contractor, developer, etc., is subsequently incorporated
into the realty of a contractor's customer under a lump sum contract for new
construction or residential repair and remodeling. See §
3.291 of
this title. Use tax is due on products that may conserve water but do not meet
the definition of water-conserving products provided in subsection (a)(7) of
this section because the products were incorporated into real property under a
lump sum contract.
(B) Sales tax is
due on sales of energy-efficient or WaterSense products transferred to
customers as part of a nonresidential repair and remodeling contract preformed
after the exemption period. Nonresidential repair and remodeling service
providers are responsible for collecting sales tax from customers on sales of
energy-efficient or WaterSense products under a separated contract or under a
lump sum contract for nonresidential repair and remodeling, unless the
transaction (the sale of the energy-efficient or WaterSense product) between
the customer and service provider, dealer or contractor occurs during the
exemption period under a separated contract. See §
3.357
of this title.
(h) Discounts and coupons. An Energy Star qualified air conditioner must be priced at $6,000 or less in order to qualify for the exemption. An Energy Star qualified refrigerator must be priced at $2,000 or less to qualify for the exemption. A seller may offer a discount or a coupon that reduces the sales price of an Energy Star qualified air conditioner or refrigerator. A discount or a coupon affects the application of the exemption as explained in paragraphs (1) and (2) of this subsection. The total sales price of the product includes delivery and installation charges as explained in subsections (e) and (f) of this section. See § 3.301 of this title.
(1) Discounts. If a discount
reduces the sales price of an Energy Star qualified air conditioner to $6,000
or less, or reduces the sales price of an Energy Star qualified refrigerator to
$2,000 or less, the air conditioner or refrigerator qualifies for the exemption
under this section. For example, a person buys an Energy Star qualified
free-standing refrigerator that has a sales price of $2,050, including
shipping, handling and installation of tangible personal property, from a
seller who offers a 10% discount. After application of the 10% discount, the
final sales price of the refrigerator is $1,845. The refrigerator is exempt
because its sales price does not exceed $2,000.
(2) Coupons. When sellers accept a
manufacture's or other coupon as a part of the sales price of any taxable item,
the value of the coupon reduces the sales price, the same 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
Energy Star qualified air conditioner to $6,000 or less, or to reduce the sales
price of an Energy Star qualified refrigerator to $2,000 or less. The item then
qualifies for exemption under this section. For example, a person buys an
Energy Star qualified free-standing refrigerator that has a sales price of
$2,050, including shipping, handling and installation of tangible personal
property, with a coupon worth $100. After application of the $100 coupon, the
sales price of the refrigerator is $1,950. The refrigerator is exempt because
its sales price does not exceed $2,000.
(i) Rebates.
(1) Rebates given at the time of sale.
Rebates provided by a seller are cash discounts when given at the time of sale
and as such are excludable from the tax base. The rebate, like a discount when
taken at the time of the sale, is a reduction in the amount subject to
tax.
(2) Rebates that occur after
the sale. Rebates that are paid to a purchaser after the exemption period do
not affect the sales price of an item purchased for purposes of determining
whether an item qualifies for exemption under this section. The full amount of
the sales price, before the rebate, is used to determine whether the exemption
applies. For example, if a person purchases an Energy Star qualified air
conditioner for $6,050 and receives a $300 mail-in rebate from the
manufacturer, the seller must collect tax on the $6,050 sales price of the air
conditioner.
(j) Layaway sales and purchases by means other than in person.
(1) the sale of an energy-efficient product,
WaterSense product, or water-conserving product under a layaway plan or
purchased by mail, telephone, email, internet, custom order, or any other means
other than in person qualifies for exemption when:
(A) the purchaser places the item on layaway
during the exemption period and the seller accepts the order for immediate
delivery upon full payment, even if delivery is made after the exemption
period;
(B) the purchaser places
the order and the seller accepts the order during the exemption period for
immediate shipment, even if delivery is made after the exemption period; or
(C) final payment on a layaway
order is made by, and the merchandise is given to, the purchaser during the
exemption period.
(2)
For purposes of this subsection, the seller accepts an order when the seller
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
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
seller.
(k) Rain checks. Qualifying products that are purchased during the exemption period with use of a rain check qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during the exemption period will not cause the purchase of a qualifying product to be exempt if the item is actually purchased after the exemption period.
(l) Exchanges.
(1) If a person purchases a qualifying
product during the exemption period, and, after the exemption period has ended,
exchanges the item for a qualifying product of equal or lesser value, no
additional tax is due. For example, a person purchases a $60 qualifying
dehumidifier during the exemption period. After the exemption period, the
person exchanges it for a $60 qualifying dehumidifier of a different brand. Tax
is not due on the $60 sales price of the new dehumidifier.
(2) If a person purchases a qualifying
product during the exemption period, and after the exemption period has ended,
exchanges the product for a qualifying product of greater value, tax is due on
the difference between the prices of the two products. For example, assume a
person purchases a $60 qualifying dehumidifier during the exemption period.
After the exemption period, the person exchanges it for $70 in qualifying light
bulbs. Tax is due on the $10 difference between the two sales prices.
(3) If a person purchases a qualifying
product during the exemption period, and after the exemption period has ended,
exchanges the products for a nonqualifying item, tax is due on the original
sales price of the nonqualifying item. For example, assume a person purchases a
$60 qualifying dehumidifier during the exemption period. After the exemption
period, the person exchanges it for a $60 nonqualifying microwave. Tax is due
on the $60 sales price of the nonqualifying microwave.
(4) If a person purchases a qualifying
product before the exemption period, but, during the exemption period, returns
the product and receives credit on the purchase of a different qualifying
product, no sales tax is due on the sale of the new product if the new item is
purchased during the exemption period. For example, assume a person purchases a
$60 qualifying dehumidifier before the exemption period. During the exemption
period, the person returns the dehumidifier and receives credit on the purchase
of a $70 qualifying ceiling fan. No tax is due on the sale of the ceiling fan
if it is purchased during the exemption period.
(m) Returned merchandise. When a person returns an item that would qualify for the exemption, no credit for or refund of sales tax shall be given unless the person 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.
(n) Documenting exempt sales.
(1) A seller is not required to obtain an
exemption certificate on sales of energy-efficient or WaterSense products
during the exemption period; 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
seller is not required to obtain an exemption certificate on sales of items
identified as examples of water-conserving products in subsection (a)(7)(B) of
this section; 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. A seller should obtain an exemption certificate on sales of items that do
not clearly meet the definition of a water-conserving product.
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