News & Insights

Texas Adopts Amendments to Rule on Sales Tax Holiday for Energy Star and WaterSense Products

Tax Development Nov 15, 2016

The Texas Comptroller’s recent amendments to sales tax Rule 3.369 on Energy Star and WaterSense products will be effective on November 20, 2016. In 2015, the Texas Legislature expanded the Memorial Day sales tax holiday to include sales of WaterSense products and water-conserving products. Amended Rule 3.369 defines WaterSense and water-conserving products, provides guidelines for documenting exempt sales, and requires that a purchaser prove that tax was paid on a qualifying item to obtain a tax refund.

WaterSense products are products that are certified by the United States Environmental Protection Agency under its WaterSense program. Water-conserving products are items that conserve water, retain groundwater, recharge the water table, or decrease the ambient air temperature and that are purchased by an individual for personal use on residential property (not for use in a business). Examples of water-conserving products include soaker or drip-irrigation hoses, mulch, rain barrels, permeable ground cover, grasses, plants, shrubs, and trees, and products that help water penetrate the soil.

The regulation provides that a seller is not required to obtain an exemption certificate on sales of energy-efficient and WaterSense products. Certificates are not required on sales of water-conserving products that are listed in the amended rule, but the rule requires the seller to keep records that identify the water-conserving products sold, including sales dates and prices. In addition, a seller must obtain a completed exemption certificate on sales of any water-conserving items not listed in the rule.

The amended rule combines layaway sales with Internet and mail-order sales and defines “when a seller accepts an order,” (i.e., when a seller takes action to fill an order). (Under the previous rule, a seller was deemed to have accepted a layaway order when he removed the item from inventory or identified the item as sold.) The rule exempts qualifying items that are ordered but not delivered during the holiday if the seller accepts the order and schedules the order for immediate delivery. Further, the rule exempts qualifying items placed in layaway or taken out of layaway during the holiday.

When a qualifying item is returned, the Comptroller assumes that no tax was paid unless the purchaser provides a tax-paid invoice or receipt. The previous rule required a seller to obtain a tax-paid receipt or invoice if a qualifying item was returned within 30 days of the tax-free holiday.

TECHNICAL INFORMATION CONTACT:

Adina Christian
Director
Ryan
512.476.0022
adina.christian@ryan.com