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RULE §3.371Effect of Rules; Permits and Certificates; Exclusion of Certain Sales

(a) For the purpose of administering the Local Sales and Use Tax Act (hereafter referred to as the City Act), all rules and regulations relating to the Limited Sales, Excise, and Use Tax Act (hereafter referred to as the State Act) shall have the same effect with respect to the local sales and use tax (hereafter referred to as city tax) except in those situations where rules and regulations relating to city taxes have been issued to clarify specific statutory provisions.

(b) Only those taxable items that are subject to taxation by the State of Texas under the State Act shall be subject to taxation under the City Act. All exemptions granted to agencies of government, organizations, persons, and to the sale, storage, use, and other consumption of certain taxable items under the provisions of the Tax Code, §§151.301-151.332, also apply to the imposition and collection of the city tax unless otherwise modified.

(c) Permits, exemption certificates, and resale certificates required for the state limited sales and use tax (hereafter referred to as state tax) shall satisfy the requirements of the City Act; no additional permit or certificates shall be required as a result of the City Act. See §3.285 of this title (relating to Resale Certificate; Sales for Resale), §3.286 of this title (relating to Seller's and Purchaser's Responsibilities), §3.287 of this title (relating to Exemption Certificates), and §3.288 of this title (relating to Direct Payment Procedures and Qualifications).

(d) An exception is made to the provision of subsection (c) of this section when an exemption is claimed from the city tax on taxable items that will be used in the performance of certain written contracts and bids executed prior to the effective date of the city tax. In order to claim this latter exemption, which applies only to the city tax, a special exemption certificate form is required. See §3.376 of this title (relating to Prior Contract Exemptions) for further details regarding eligibility for the exemption.

(e) Exclusion of sales for an amount on which no tax may be collected from the customer shall be as follows.

  (1) Any retailer who can establish to the satisfaction of the comptroller that 50% or more of his total receipts from sales of taxable items arise from individual transactions in which the total sales price is an amount on which no tax may be collected may exclude the receipts from such individual sales when reporting and paying the tax. No such reporting method shall be used unless the comptroller has given prior written approval to the retailer. Prior written approval may be obtained only by providing the comptroller with records which conclusively establish that 50% or more of the applicant's receipts are from sales in an amount on which no tax may be collected. If two or more items, each of which sells for an amount on which no tax may be collected, are sold together for a total sales price that requires tax to be collected, the receipts from such sales may not be treated as two separate sales and not taxed.

  (2) Every retailer desiring to use the method mentioned in paragraph (1) of this subsection must maintain adequate records, satisfactory to the comptroller, to support his eligibility. After the written approval of the comptroller is granted to any retailer to use the method, the retailer must maintain adequate records to support every report. If during any reporting period the retailer's records fail to establish the facts necessary to exclude sales in an amount on which no tax may be collected, the tax for such period(s) must be reported paid on all receipts from sales of taxable items.

Source Note: The provisions of this §3.371 adopted to be effective January 1, 1976; amended to be effective October 19, 1979, 4 TexReg 3620; amended to be effective November 13, 1989, 14 TexReg 5787.

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