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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE SALES AND USE TAX
RULE §3.369Sales Tax Holiday--Certain Energy Star Products

(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.

  (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. An order is accepted for layaway by the retailer when the retailer removes the items from normal inventory or clearly identifies the items as sold to the person.

  (5) Qualifying products--Energy-efficient products eligible for exemption from sales and use tax if purchased, leased or rented during the period described in paragraph (3) of this subsection as established under Tax Code, §151.333. Qualifying products are limited to the following energy-efficient products:

    (A) air conditioners priced at $6,000 or less (room and central units);

    (B) clothes washers;

    (C) ceiling fans;

    (D) dehumidifiers;

    (E) dishwashers;

    (F) incandescent or fluorescent light bulbs;

    (G) programmable thermostats; and

    (H) refrigerators (including mini-fridges) priced at $2,000 or less.

  (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.

(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) Rentals and leases of qualifying products, including "rent to own" contracts, qualify for exemption when the contract for the rental or lease is entered into 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 the contract is renewed or extended during the exemption period.

(c) Taxable sales. The exemption under this section does not apply to:

  (1) items not specifically identified in subsection (a)(5) of this section, including other types of energy-efficient products such as home insulation materials, water heaters, clothes dryers, attic fans, heat pumps, wine refrigerators, kegerators, freezers, or residential beverage chillers;

  (2) repair or replacement parts for Energy Star qualified 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;

  (3) the first $6,000 of 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;

  (4) the first $2,000 of 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;

  (5) 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 priced at $6,000 or less must be 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

  (6) 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 the qualifying product. 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.

Cont'd...

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