<<Prev Rule

Texas Administrative Code

Next Rule>>
TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE SALES AND USE TAX
RULE §3.322Exempt Organizations

subject to tax.

  (2) For nonprofit organizations that are granted an exemption under Tax Code, §151.310(a)(2), the revocation, withdrawal, or loss of the federal income tax exemption automatically terminates the sales tax exemption effective the earlier of the date on which the IRS serves formal written notice of the revocation on the nonprofit organization or the date on which the IRS notifies the comptroller.

    (A) The effective date of a revocation for a nonprofit organization that was granted an exemption as a recognized subordinate is the date on which the organization ceased to be recognized as a subordinate under the federal group exemption. All subsequent purchases by the organization are subject to tax.

    (B) The organization must notify the comptroller in writing of the revocation, withdrawal, or loss of exemption immediately upon receiving notice from the IRS of such revocation, withdrawal, or loss.

    (C) Under a federal/state exchange agreement, the IRS may notify the comptroller when an organization no longer qualifies for federal exemption.

  (3) An organization that loses its exempt status must immediately notify its suppliers that its purchases are subject to tax. Failure to so notify a supplier is a violation of the sales tax law.

  (4) After revocation, the organization may re-apply for exempt status under other provisions of this section.

(g) Purchases by an exempt organization.

  (1) The purchase, lease, or rental of a taxable item that relates to the purpose of an exempt organization listed in subsection (b)(1), (2), (3), or (5) of this section is exempt from tax when the organization or an authorized agent of the organization pays for the item and provides the vendor an exemption certificate in the form prescribed by the comptroller. See §3.287 of this title (relating to Exemption Certificates).

  (2) The purchase, lease, or rental of a taxable item to an exempt organization listed in subsections (c) and (b)(4), (6), (7), (8), or (9) of this section is exempt from tax when the organization or an authorized agent pays for the taxable item and provides the vendor an exemption certificate in lieu of tax.

  (3) A purchase voucher issued by any one of the entities identified in subsection (c) of this section is sufficient proof of the entity's exempt status.

  (4) An exemption certificate must be given to a vendor when an authorized agent makes a cash purchase of merchandise for an exempt organization.

  (5) An employee of an exempt organization cannot claim an exemption from tax when the employee purchases taxable items of a personal nature even though the employee receives an allowance or reimbursement from the organization.

  (6) A person who travels on official business for an exempt organization must pay sales tax on taxable purchases whether reimbursed on a per diem basis or reimbursed for actual expenses incurred.

(h) Sales by an exempt organization.

  (1) An exempt organization that sells taxable items must obtain a sales tax permit and is responsible for collection and remittance of tax on all sales of taxable items that the organization makes, unless such sales are otherwise exempt from the tax. See §3.293 of this title (relating to Food; Food Products; Meals; Food Service), §3.299 of this title (relating to Newspapers, Magazines, Publishers, Exempt Writings), and §3.298 of this title (relating to Amusement Services).

  (2) A religious, educational, charitable, eleemosynary organization, or an organization exempt under IRC, §501(c)(3), (4), (8), (10), or (19) and each of its bona fide chapters, may have two one-day tax-free sales or auctions each calendar year. During a tax-free sale or auction lasting only one day, the organization is not required to collect sales tax on the sales price of taxable items sold for $5,000 or less. Additionally, a taxable item may be sold tax-free during a one-day tax-free sale or auction regardless of price if the item is manufactured by the organization or is donated to the organization and is not sold to the donor.

    (A) One day is a consecutive 24-hour period. If a designated tax-free sale or auction exceeds a consecutive 24-hour period, the organization or chapter may not hold another tax-free sale or auction that calendar year. An organization or chapter may hold the two tax-free sales or auctions consecutively, but the two tax-free sales or auctions by that organization or chapter cannot exceed a maximum of 48 consecutive hours in a calendar year.

    (B) The organization may employ an auctioneer to conduct the sale or auction and pay the auctioneer a reasonable fee not to exceed 20% of the gross receipts.

    (C) If two or more exempt organizations or chapters jointly hold a tax-free sale or auction, each is considered to have held a tax-free sale or auction during that calendar year. Each exempt organization that participates in a joint tax-free sale or auction may hold one additional tax-free sale or auction during that calendar year.

  (3) Sales by agencies and instrumentalities of the federal government are subject to tax, and the agencies and instrumentalities must collect and remit tax unless the collection of tax is specifically prohibited by federal law. If the collection is prohibited by specific federal law, the purchaser of the taxable item shall be liable for reporting the tax directly to the state.

(i) Organizations that do not qualify for exempt status. Examples of organizations that cannot qualify for exempt status include professional groups, certain mutual benefit or social groups, political, trade, business, bar, or medical associations. For information on exempt sales by senior citizens' organizations or exempt sales by student organizations affiliated with a college or university, see §3.316 of this title (relating to Occasional Sales and Other Tax-Free Sales).

(j) Consular officers, administrative, and technical employees.

  (1) Foreign diplomatic personnel stationed in the United States are exempt from the payment of sales or use tax if they hold a photo-identification card issued by the United States Department of State. Cards are not transferable and may not be used by others, including spouses.

  (2) Procedure for retailers.

    (A) A retailer should retain a copy of the sales invoice or contract signed by the consular official that bears the consular exemption certificate number appearing on the back of the card.

    (B) Certain cards are limited in what and how much may be purchased tax free. This information is contained on the card itself. Retailers who make sales to persons with cards that require purchases to exceed a certain dollar limit should include only those taxable items that are purchased in the same transaction to determine if the appropriate level has been reached. Purchases made in separate transactions may not be added together to reach minimum exemption levels.

(k) The Alabama-Coushatta, Kickapoo, and the Tigua Native American tribes.

  (1) The purchase, lease, or rental of a taxable item to a tribal council or a business owned by a tribal council of these Native American tribes is exempt from sales tax. An exemption certificate or purchase order from the tribal council is sufficient proof of the exempt sale.

  (2) Sales made by a tribal council or a business owned by a tribal council of these Native American tribes within the boundaries of the reservation are exempt from sales tax if:

    (A) the taxable item being sold is made by a member of the tribe; and

    (B) the taxable item is a cultural artifact of the tribe.

  (3) Sales made off the reservation or sales made on the reservation of items that are not cultural artifacts are taxable.

(l) Bordering states and governmental units of states that border Texas.

  (1) The State of Arkansas, State of Louisiana, State of New Mexico, State of Oklahoma, or a governmental unit of a state that borders Texas may qualify for exemption on the purchase, lease, or rental of taxable items, but only to the extent that the bordering state or governmental unit of a state that borders Texas exempts or does not impose a tax on similar sales of items to the State of Texas or a political subdivision of the State of Texas.

  (2) A bordering state or a governmental unit of a state that borders Texas may enter into a reciprocal agreement with the comptroller for the exemption of taxable items purchased, leased or rented to the State of Texas or a political subdivision of the State of Texas.

  (3) The purchase, lease, or rental of a taxable item to a bordering state or a governmental unit of a bordering state is exempt from sales tax to the extent allowed under the terms of the reciprocal agreement. An exemption certificate from a qualifying bordering state or a governmental unit of a bordering state is sufficient proof of the exempt sale.


Source Note: The provisions of this §3.322 adopted to be effective January 1, 1976; amended to be effective October 10, 1976, 1 TexReg 2669; amended to be effective September 15, 1977, 2 TexReg 3392; amended to be effective November 17, 1981, 6 TexReg 4065; amended to be effective February 6, 1984, 9 TexReg 414; amended to be effective November 19, 1984, 9 TexReg 5717; amended to be effective June 18, 1986, 11 TexReg 2553; amended to be effective September 10, 1991, 16 TexReg 4681; amended to be effective September 19, 1996, 21 TexReg 8734; amended to be effective June 20, 2000, 25 TexReg 5915; amended to be effective December 2, 2002, 27 TexReg 11160

Next Page Previous Page



Home TxReg TAC OM NewTac Public Footer Bar