34 Tex. Admin. Code § 3.287 - Exemption Certificates
(a) Definition.
Exemption certificate--A document that, when properly executed, allows the
tax-free purchase of an item that would otherwise be subject to tax. Except as
otherwise stated, the exemption certificate described in this section refers to
the Texas Sales and Use Tax Exemption Certification, Form 01-339 (Back) or a
document substantially in the same format. There is no provision in Tax Code,
Chapter 151 (Limited Sales, Excise, and Use Tax) for an exemption number or a
tax exempt number to be issued or used in connection with the Texas Sales and
Use Tax Exemption Certification, Form 01-339 (Back).
(b) Who may issue an exemption certificate.
An exemption certificate of the type described in this section may only be
issued by one of the following:
(1) an
organization that has qualified for exemption under Tax Code, §
151.309 (Governmental
Entities) or §151.310 (Religious, Educational, and Public Service
Organizations). See §
3.322 of this title (relating to
Exempt Organizations); or
(2) a
person purchasing an item that is exempt under Tax Code, Chapter 151,
Subchapter H (Exemptions).
(c) Exemptions addressed by other sections of
this title: Direct payment permit holders, maquiladoras, agriculture, timber,
qualifying data centers, qualified research, prior contracts and sales for
resale.
(1) Purchasers using direct pay
permits should refer to §
3.288 of this title (relating to
Direct Payment Procedures and Qualifications).
(2) Purchasers using maquiladora exemption
permits should refer to §
3.358 of this title (relating to
Maquiladoras).
(3) Purchasers
claiming an agriculture exemption should refer to §
3.296 of this title (relating to
Agriculture, Animal Life, Feed, Seed, Plants, and Fertilizer).
(4) Purchasers claiming a timber exemption
should refer to §
3.367 of this title (relating to
Timber Items).
(5) Purchasers
claiming a qualifying data center exemption should refer to §
3.335 of this title (relating to
Property Used in a Qualifying Data Center or Qualifying Large Data Center
Project; Temporary State Sales Tax Exemption).
(6) Purchasers claiming a qualified research
exemption should refer to §
3.340 of this title (relating to
Qualified Research).
(7) Purchasers
claiming a prior contract exemption should refer to §
3.319 of this title (relating to
Prior Contracts) and §
3.334 of this title (relating to
Local Sales and Use Taxes).
(8)
Purchasers claiming a sale for resale exemption should refer to §
3.285 of this title (relating to
Resale Certificate; Sales for Resale).
(d) Accepting an exemption certificate.
(1) All gross receipts of a seller are
presumed subject to sales or use tax unless a valid and properly completed
resale or exemption certificate is accepted by the seller. A properly completed
exemption certificate contains the information required by subsection (f) of
this section. Resale certificates are addressed in detail in §
3.285 of this title.
(2) A seller does not owe tax on a sale,
lease, or rental of a taxable item if the seller accepts a properly completed
exemption certificate in good faith. An exemption certificate is deemed to be
accepted in good faith if:
(A) the exemption
certificate is accepted at or before the time of the transaction;
(B) the exemption certificate is properly
completed, meaning that all of the information required by subsection (f) of
this section is legible; and
(C)
the seller does not know, and does not have reason to know, that the sale is
not exempt. It is the seller's responsibility to be familiar with Texas sales
tax law as it applies to the seller's business and to be familiar with the
exemptions that are available for the items the seller sells.
(3) A person commits an offense if
the person: intentionally or knowingly makes a false entry in, or a fraudulent
alteration of, an exemption certification; makes, presents, or uses an
exemption certificate with knowledge that it is false and with the intent that
it be accepted as a valid exemption certificate; or intentionally conceals,
removes, or impairs the verity or legibility of an exemption certificate or
unreasonably impedes the availability of an exemption certificate.
(A) If the tax evaded by the invalid
certificate is less than $20, the offense is a Class C misdemeanor.
(B) If the tax evaded by the invalid
certificate is $20 or more but less than $200, the offense is a Class B
misdemeanor.
(C) If the tax evaded
by the invalid certificate is $200 or more but less than $750, the offense is a
Class A misdemeanor.
(D) If the tax
evaded by the invalid certificate is $750 or more but less than $20,000, the
offense is a felony of the third degree.
(E) If the tax evaded by the invalid
certificate is $20,000 or more, the offense is a felony of the second
degree.
(4) The seller
should obtain the properly executed exemption certificate at the time the
transaction occurs. All certificates obtained on or after the date the
comptroller's auditor actually begins work on the audit at the seller's place
of business or on the seller's records after the entrance conference are
subject to verification. All incomplete certificates will be disallowed
regardless of when they were obtained.
(A)
The seller has 90 days from the date written notice is received by the seller
from the comptroller, or until a later date agreed to in writing by the
comptroller and the seller, referred to in this section as "the period," in
which to deliver the certificates to the comptroller. Written notice shall be
given by the comptroller no earlier than the filing of a petition for
redetermination or claim for refund.
(B) For the purposes of this section, written
notice given by mail is presumed to have been received by the seller within
three business days from the date of deposit in the custody of the United
States Postal Service. The seller may overcome the presumption by submitting
proof from the United States Postal Service or by other competent evidence
showing a later delivery date.
(C)
Any certificates delivered to the comptroller during the period will be subject
to independent verification by the comptroller before any exemptions will be
allowed. Certificates delivered after the period will not be accepted and the
exemption will not be granted. See §
3.282 of this title (relating to
Auditing Taxpayer Records) and §
3.286(relating to Seller's and
Purchaser's Responsibilities) of this title.
(5) A seller may accept a blanket exemption
certificate given by a purchaser who purchases only items that are exempt. For
information on blanket exemption certificates received for agricultural
exemptions, see §
3.296 of this title. For
information on blanket exemption certificates received for timber items see
§
3.367 of this title.
(6) An exemption certificate is not
acceptable when an exemption is claimed because tangible personal property is
exported outside the United States. For proper documentation required for proof
of export, see §
3.323 of this title (relating to
Imports and Exports) and §
3.360 of this title (relating to
Customs Brokers).
(7) Exemption
certificates are subject to the provisions of §
3.281 of this title (relating to
Records Required; Information Required). A seller is required to keep exemption
certificates for a minimum of four years from the date on which the sale is
made and throughout any period in which any tax, penalty, or interest may be
assessed, collected, or refunded by the comptroller or in which an
administrative hearing or judicial proceeding is pending.
(e) Taxable use of items purchased under an
exemption certificate; improper use of an exemption certificate.
(1) When an item purchased under a valid
exemption certificate is used in a taxable manner, whether the use is in Texas
or outside the state, the purchaser is liable for payment of sales tax based on
the value of the tangible personal property or taxable service for the period
of time used. If the exemption certificate was invalid at the time of its
issuance, the purchaser owes tax on the original purchase price.
(2) The value of tangible personal property
is the fair market rental value of the tangible personal property. The fair
market rental value is the amount that a purchaser would pay on the open market
to rent or lease the tangible personal property for use. If tangible personal
property has no fair market rental value, sales tax is due based upon the
original purchase price.
(3) The
value of a taxable service is the fair market value of the taxable service. The
fair market value is the amount that a purchaser would pay on the open market
to obtain that taxable service. If a taxable service has no fair market value,
sales tax is due based upon the original purchase price.
(4) At any time, the person who purchased
tangible personal property or a taxable service under a valid exemption
certificate and is using the tangible personal property or taxable service in a
divergent taxable manner may stop paying tax on the value of tangible personal
property or taxable service and instead pay sales tax on the original purchase
price. When the person elects to pay sales tax on the purchase price, credit
will not be allowed for taxes previously paid based on value.
(5) Sales tax is not due when a taxable item
purchased under a valid exemption certificate is donated to an organization
exempt from tax under Tax Code, §
151.309 or §
151.310(a)(1)
or (2), provided the purchaser does not use the donated tangible personal
property or the donated taxable service.
(6) This subsection is not applicable when an
item purchased under Tax Code, §
151.318 (Property Used in
Manufacturing) is used in a taxable manner. A purchaser who uses such items in
a taxable manner is liable for sales or use tax and should refer to §
3.300 of this title (relating to
Manufacturing; Custom Manufacturing; Fabricating; Processing).
(f) Content of an exemption
certificate. An exemption certificate must show:
(1) the name and address of the
purchaser;
(2) a description of the
item to be purchased;
(3) the
reason the purchase is exempt from tax;
(4) the signature of the purchaser and the
date; and
(5) the name and address
of the seller.
(g)
Purchases of taxable items by agents of the Federal Deposit Insurance
Corporation (FDIC). The FDIC may purchase items tax-free for use in operating a
property or business to which it has title. An exemption certificate may be
issued by the FDIC or by persons acting as agents for the FDIC when purchasing
items that are incorporated into or used on the property or business being
managed. The certificate must state that the purchases are being made by or for
the FDIC. The FDIC or persons managing property or a business for the FDIC may
issue an exemption certificate when:
(1) the
FDIC provides documentation to the person managing the property or business
showing that title to the property or business being managed was transferred to
the FDIC; and
(2) the FDIC has
entered into a written agreement with the person managing the property or
business that designates that person as its agent and authorizes that person to
make purchases on its behalf. The agreement must be in the person's files for
review by the comptroller. It is not necessary to provide a copy of the
agreement to suppliers.
(h) Form of an exemption certificate. An
exemption certificate must be in substantially the form of a Texas Sales and
Use Tax Exemption Certification, Form 01-339 (Back). Copies of the form may be
obtained from the Comptroller of Public Accounts, Tax Policy Division or by
calling 1-800-252-5555. The form is also available online at
https://comptroller.texas.gov/forms/01-339.pdf.
Notes
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