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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER PMUNICIPAL SALES AND USE TAX
RULE §3.376Prior Contract Exemptions

(a) Exemption. There are exempted from the taxes imposed by the Municipal Sales and Use Tax Act the receipts from the sale, use, or rental of, and the storage, use, or other consumption in this state of taxable items:

  (1) used for the performance of a written contract executed prior to the effective date of any city sales and use tax; or

  (2) used pursuant to the obligation of a bid or bids submitted prior to the effective date of any city sales and use tax, which bid or bids and contract entered into pursuant thereto are at a fixed price not subject to change or modification by reason of a tax imposed by any city under the Municipal Sales and Use Tax Act.

(b) Records. Persons claiming the exemption provided in subsection (a)(1) or (2) of this section must maintain records which may be verified by audit. Failure to maintain adequate records subject to examination by the Comptroller of Public Accounts results in an automatic loss of the exemption. Written notice of such contracts or bids to the Comptroller of Public Accounts will not be required.

(c) Limitations. The prior contract exemption provided by the Tax Code, Chapter 321, will have no effect on the receipts from the sale, use, or rental of, and the storage, use, or other consumption of taxable items in any city after three years has elapsed since the date on which the city sales and use tax in such city or annexed area became effective.

(d) General information. The provisions of §3.319 of this title (relating to Prior Contracts) concerning definitions and exclusions to the prior contract exemptions apply to this section.

  (1) Written contracts or bids executed prior to the effective date of imposition of a city sales and use tax which require a retailer to sell tangible personal property or taxable services to a user or consumer at a set price, to be delivered on or after the effective date of the city tax, will be exempt from city tax. See subsection (c) of this section regarding the statute of limitations for prior contracts.

  (2) Annexation of territory into a city having the city tax in effect may be a basis for claiming the prior contract exemption subject to the same requirements set forth in this rule.

  (3) If a written contract executed prior to the effective date of the city sales and use tax requires a retailer or lessor to lease or rent tangible personal property to another person for use, the retailer or lessor will not be required to collect the city sales and use tax and the lessee will be exempt from the local sales or use tax on the use of said property. Any renewal or exercise of an option to extend the time of the lease or rental contract shall be deemed to be a new contract. See subsection (c) of this section regarding the statute of limitations for prior contracts.

(e) Prior contract exemption certificate. An identification number is required on the prior contract exemption certificates furnished to vendors. The identification number should be the person's federal employer's identification (FEI) number or social security number if the person has not been assigned an FEI number. A suggested form for the exemption certificate is shown on the last page of this section.

Attached Graphic

Source Note: The provisions of this §3.376 adopted to be effective January 1, 1976; amended to be effective December 8, 1978, 3 TexReg 4116; amended to be effective March 6, 1985, 10 TexReg 631; amended to be effective January 1, 1992, 16 TexReg 7360.

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