34 Tex. Admin. Code § 3.288 - Direct Payment Procedures and Qualifications
(a) Qualified consumers may give a direct
payment blanket exemption certificate in lieu of the taxes imposed by the Tax
Code, Chapter 151, for taxable items which they purchase for their own use and
which items will not be resold in any manner.
(b) All applicants for a direct payment
permit must comply with the following conditions, prerequisites, and
qualifications.
(1) The applicant must be
annually purchasing at least $800,000 worth of taxable items for the person's
own use and not for resale. A statement to this effect must be submitted to the
comptroller. Adequate records must be available to support this statement. The
statement must accompany the application for a direct payment permit.
(2) The applicant must be able to establish
to the satisfaction of the comptroller that the applicant is a responsible
person and that the applicant's accounting methods clearly distinguish between
taxable and nontaxable purchases. A clear statement of the accounting method
intended to be used must accompany the application for a direct payment
permit.
(3) The applicant must
agree to accrue and pay all taxes imposed by the Tax Code, §
151.101, on the direct
payment return for items not specifically exempted and to make the payments to
the state on or before the 20th day of the month following each monthly period
in which the items become subject to the tax by reason of use or consumption in
this state. A written agreement to this effect must be furnished to the
comptroller, and it must be signed and returned along with the application for
a direct payment permit.
(4) The
applicant must agree to give a resale certificate (as opposed to a direct
payment exemption certificate) for any taxable item that will be resold as
provided by the Tax Code, §
151.054 or §
151.104.
(c) Applicants for a direct
payment permit should write to the Comptroller of Public Accounts of the State
of Texas, Austin, Texas 78774, requesting that an application be forwarded to
them.
(d) Any consumer whose direct
payment permit is either voluntarily forfeited or canceled by action of the
comptroller's office must immediately notify all vendors from whom purchases of
taxable items are made advising them that the exemption certificate issued to
them pursuant to the direct payment permit is no longer valid. Failure to give
notification is a violation of the Limited Sales, Excise, and Use Tax
Act.
(e) A direct payment permit is
issued to a legal entity, including all branches and divisions purchasing
taxable items. A direct payment exemption certificate issued to a supplier by
one branch or division applies to purchases made by all branches or divisions
from the same supplier. Direct payment permit holders may not authorize any
other person or firm to purchase any taxable items under their permit. Use by
other persons may result in revocation of the permit.
(f) Direct payment exemption certificates may
be issued to contractors performing separated contracts. The contractor, in
this instance, will purchase the taxable items for resale and accept the direct
payment exemption certificate in lieu of charging tax. The contractor may not
accept a direct payment exemption certificate in lieu of paying tax on
consumables or equipment. In addition, under no circumstances should a direct
payment exemption certificate be issued to a contractor performing a lump-sum
contract. Direct payment permit holders persisting in this practice may have
their permits revoked. For a discussion of lump-sum and separated contracts,
see §
3.291 of this title (relating to
Contractors).
(g) Direct payment
permit holders may not issue direct payment exemption certificates to persons
providing nontaxable services.
(h)
When a direct payment permit holder is doing business with a person who may be
selling taxable items as well as nontaxable services, the direct payment
exemption certificate must indicate that it does not cover any nontaxable
services that the servicer may provide.
(i) If storage facilities contain taxable
items purchased under a direct payment exemption certificate and at the time of
storage it is not known whether the taxable items will be used in Texas, then
the taxpayer may elect to report the use tax either when the taxable items are
first stored in Texas or are first removed from inventory for use in Texas, as
long as use tax is reported in a consistent manner. Use tax is not applicable
to purchases of taxable items that are to be transported outside Texas for use
solely outside Texas or on purchases of taxable items that are to be processed,
fabricated, or manufactured into other property or attached or incorporated
into other property and then transported outside Texas for use solely outside
Texas. See §
3.325 of this title (relating to
Refunds and Payments under Protest) and §
3.338 of this title (relating to
Allowance of Credit for Tax Paid to Suppliers) for refund and credit
provisions. See also §
3.346 of this title (relating to
Use Tax).
(j) All direct payment
permit holders must file direct payment returns, whether or not they have tax
to report. If the permit holder has no city, MTA/CTD, or county tax to report,
a zero return must be filed. A direct payment permit will be canceled when
annual purchases are less than the amount required. See §3.377 of this
title (relating to Divergent Use of a Direct Payment, Resale, or Exemption
Certificate) and §3.427 of this title (relating to Divergent Use of a
Direct Payment, Resale, or Exemption Certificate).
(k) A blanket exemption certificate described
in this section may be given by qualified consumers in lieu of the tax upon
purchases from their suppliers. Each exemption certificate must be accompanied
by a direct payment permit number.
(l) The
holder of a direct payment permit may not make an occasional sale of taxable
items under the Tax Code, §
151.304(b)(1).
See §
3.316 of this title (relating to
Occasional Sales).
Notes
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