City of Coppell, Texas; City of Humble, Texas; City of DeSoto, Texas; City of Carrollton, Texas; And City of Farmer's Branch, Texas // Kelly Hancock, in His Official Capacity as Acting Comptroller of Public Accounts of the State of Texas v. Kelly Hancock, in His Official Capacity as Acting Comptroller of Public Accounts of the State of Texas // City of Coppell, Texas; City of Humble, Texas; City of DeSoto, Texas; City of Carrollton, Texas; City of Farmer's Branch, Texas; And City of Round Rock, Texas

ACCEPTED
15-25-00022-CV
FIFTEENTH COURT OF APPEALS
AUSTIN, TEXAS
9/26/2025 10:33 PM
No. 15-25-00022-CV CHRISTOPHER A. PRINE
CLERK
In the Court of Appeals FILED IN
15th COURT OF APPEALS
For the Fifteenth District of Texas AUSTIN, TEXAS
9/26/2025 10:33:15 PM
City of Coppell, Texas, et al., CHRISTOPHER A. PRINE
Clerk
Appellants,
v.
Kelly Hancock, in His Official Capacity as Acting Comptroller of Public
Accounts of the State of Texas,
Appellee.

Appeal from the 201st Judicial District Court, Travis County, Texas
(Hon. Karin Crump, Presiding)

Coppell Parties’ Opening Brief as Appellants

James B. Harris
State Bar No. 09065400
james.harris@hklaw.com
Stephen F. Fink
State Bar No. 07013500
stephen.fink@hklaw.com
Richard B. Phillips, Jr.
State Bar No. 24032833
rich.phillips@hklaw.com
Reed C. Randel
State Bar No. 24075780
reed.randel@hklaw.com
HOLLAND & KNIGHT LLP
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Phone: (214) 964-9500
Counsel for Coppell Parties

Oral Argument Requested
IDENTITY OF PARTIES AND COUNSEL
Appellants/Cross-Appellees Counsel

City of Coppell, Texas James B. Harris
City of Humble, Texas Stephen F. Fink
Richard B. Phillips, Jr.
City of DeSoto, Texas Reed C. Randel
City of Carrollton, Texas Brandon L. King
Cole W. Browndorf
City of Farmers Branch, Texas
Holland & Knight LLP
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Appellee/Cross-Appellant Counsel

Glen Hegar, in His Official Capac- Kyle Pierce Counce
ity as Texas Comptroller of Public Deputy Division Chief
Accounts Tax Litigation Division
Deborah Rao 1
Matthew Kennedy2
Amanda K. Romenesko 3
Office of the Attorney General of
Texas
P.O. Box 12548
Austin, Texas 78711

Ray Langenberg 4
Special Counsel for Tax Litigation
Texas Comptroller of Public Ac-
counts
Office of the Attorney General
Tax Division MC 029
P.O. Box 12548

1
Ms. Rao is no longer counsel for the Comptroller.
2
Mr. Kennedy is no longer counsel for the Comptroller.
3
Ms. Romenesko is no longer counsel for the Comptroller.
4
Mr. Langenberg is no longer counsel for the Comptroller.
i
Cross-Appellee Counsel

City of Round Rock, Texas Cindy Olson Bourland
Bourland Law Firm, P.C.
P.O. Box 546
Round Rock, Texas 78680

Bryan J. Dotson 5
Chamberlain Hrdicka
112 East Pecan Street, Ste. 1450
San Antonio, Texas 78205

Doug Sigel 6
Ryan Law Firm, PLLC
Terrace 1, 2600 Via Fortuna Drive
Suite 150
Austin, Texas 78746

5
Mr. Dotson is no longer counsel for the City of Round Rock.
6
Mr. Sigel has passed away and is no longer counsel for the City of Round Rock.
ii
TABLE OF CONTENTS
Page

Identity of Parties and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Index of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

Statement of Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv

Statement Regarding Record References . . . . . . . . . . . . . . . . . . . . . . . xv

Issue Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Local Sales Tax—The Statutory Background: Tax
Code Sections 321.002(a)(3)(A) and 321.203 . . . . . . . . . . . . . . 3

2. Local Sales Tax—The Regulatory Background: 34
TAC § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3. Internet Sales, Fulfillment Centers, and the
Changes to § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4. The Coppell Plaintiffs, Internet Sales, Fulfillment
Centers, and Local Sales Tax . . . . . . . . . . . . . . . . . . . . . . 11

Summary of Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

iii
Page

Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Argument and Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1. The subsections of current § 3.334 that the Coppell
Plaintiffs challenge that collectively re-define
“place of business” are facially invalid because
they contradict the statute they purport to
implement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2. The limiting conditions adopted by the
Comptroller in § 3.334 on how, when, where, by
and from whom, and how often an order can be
received contravene the plain meanings of
“receives” and “order” found in the statute the
rules purport to implement. . . . . . . . . . . . . . . . . . . . . . . . 18

A. The terms “receives” and “orders” by
themselves and as used in the phrases “receiving
orders” and “orders are received” must be given
their plain meanings. . . . . . . . . . . . . . . . . . . . . . . . 18

B. The plain meanings of “receives” and “order”
do not limit how, when, where, by whom, or
how often an order can be received or what it
must contain.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

C. The statutory histories of “place of business”
and the directives on “consummation” reinforce
that the Legislature intended that the plain
meanings of “receives” and “order” controls
their interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 21

iv
Page

(1) The creation of a statutory definition for place
of business was not intended to restrict
receipt of an order to only one location by
limiting how, when, where, by or from whom,
or how often an order can be received or what
it had to contain. . . . . . . . . . . . . . . . . . . . . . . 21

(2) The 1979 and later statutory changes to where
consummation occurs confirm that the
Legislature intended that the plain meaning of
“receives” and “order” do not limit how,
when, where, by or from whom, or how often
an order can be received or what it had to
contain. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

D. That the Legislature intended the plain
meanings of “receives” and “order” is reflected
by the Comptroller’s acceptance of those
meanings for 46 years. . . . . . . . . . . . . . . . . . . . . . . 33

3. In § 3.334, the Comptroller has strung together
intertwined regulatory provisions that improperly
add conditions contravening the plain meaning of
“receives” and “order” that result in the
displacement of origin-sourcing. . . . . . . . . . . . . . . . . . . . . 34

4. The arguments advanced by the Comptroller fail to
justify his effort to limit the plain meanings of
“receives” and “order.” . . . . . . . . . . . . . . . . . . . . . . . . . . 37

A. “Receives” and “order” by themselves or
together are not “terms of art,” with a meanings
different than their plain meanings. . . . . . . . . . . . . . . . 38

B. The phrase “for the purpose of receiving order”
in the definition of “place of business” does not
evidence context relevant to the meaning of that
phrase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
v
Page

C. Other states’ understanding of “receives” is not
“context.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

D. The plain meanings of “receives” and “order”
do not create an absurdity. . . . . . . . . . . . . . . . . . . . . 42

5. The Comptroller’s limiting conditions are based on
an outdated sales model – person to person – when
the definition of place of business and the
consummation directives are broad enough to
include new approaches based on technological
developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Conclusion and Prayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Appendix

A — Final Judgment
(CR:2797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab A

B — Conclusions of Law
(CR:2846) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab B

C — Texas Tax Code § 321.002 . . . . . . . . . . . . . . . . . . . . . Tab C

D — Texas Tax Code § 321.203 . . . . . . . . . . . . . . . . . . . . . Tab D

E — 45 Tex. Reg. No. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab E

F — 45 Tex. Reg. No. 21 . . . . . . . . . . . . . . . . . . . . . . . . . Tab F

G — 47 Tex. Reg. 6158 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab G

vi
H — 49 Tex. Reg. 2440 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab H

I — 49 Tex. Reg. 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab I

J — Comparison of Statutory Language and
Effect of Regulation . . . . . . . . . . . . . . . . . . . . . . . . . Tab J

vii
INDEX OF AUTHORITIES
Page

CASES

Brown v. City of Houston,
660 S.W.3d 749 (Tex. 2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Bullock v. Dunigan Tool & Supply Co.,
588 S.W.2d 633 (Tex. App.—Austin 1979,
writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Centerpoint Builders GP, LLC v. Trussway, Ltd.,
496 S.W.3d 33 (Tex. 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

City of San Antonio v. City of Boerne,
111 S.W.3d 22 (Tex. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Combs v. City of Webster,
311 S.W.3d 85 (Tex. App.—Austin 2009,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 29, 30, 40
ExxonMobil Pipeline Co. v. Coleman,
512 S.W.3d 895 (Tex. 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Graphic Packaging Corp. v. Hegar,
538 S.W.3d 89 (Tex. 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Harris Cnty. Appraisal Dist. v. Tex. Workforce Comm’n,
519 S.W.3d 113 (Tex. 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

In re Christus Santa Rosa Health Sys.,
492 S.W.3d 276 (Tex. 2016) (orig. proceeding) . . . . . . . . . . . . . . . . . 37

In re Texas Educ. Agency,
619 S.W.3d 679 (Tex. 2021) (orig. proceeding) . . . . . . . . . . . . . . . . . 18
Jaster v. Comet II Constr., Inc.,
438 S.W.3d 556 (Tex. 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

KMS Retail Rowlett, LP v. City of Rowlett,
593 S.W.3d 175 (Tex. 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

viii
Page

Lewis v. Jacksonville Bldg. & Loan Ass’n,
540 S.W.2d 307 (Tex. 1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Miles v. Texas Cent. R.R. & Infrastructure, Inc.,
647 S.W.3d 613 (Tex. 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . 49, 50

Rieves v. Buc-ee’s Ltd.,
532 S.W.3d 845 (Tex. App.—Houston [14th Dist.] 2017,
no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RJR Vapor Co., LLC v. Hegar,
681 S.W.3d 867 (Tex. App.—Austin 2023,
pet. granted). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Rodriguez v. Safeco Ins. Co. of Indiana,
684 S.W.3d 789 (Tex. 2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Rodriguez v. Serv. Lloyds Ins. Co.,
997 S.W.2d 248 (Tex. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tex. Dep’t of Protective & Regul. Servs. v. Mega Child Care, Inc.,
145 S.W.3d 170 (Tex. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Tex. Health Harris Methodist Hosp. Fort Worth v. Featherly,
648 S.W.3d 556 (Tex. App.—Fort Worth 2022,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38, 40

Tex. Mut. Ins. Co. v. Ruttiger,
381 S.W.3d 430 (Tex. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Tex. Mut. Ins. Co. v. Vista Cmty. Med. Ctr., LLP,
275 S.W.3d 538 (Tex. App.—Austin 2008,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Tex. State Bd. of Exam'rs of Marriage & Fam. Therapists v. Tex. Med.
Ass’n,
511 S.W.3d 28 (Tex. 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 18
TGS-NOPEC Geophysical Co. v. Combs,
340 S.W.3d 432 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

ix
Page

Wal-Mart Stores, Inc. v. Forte,
497 S.W.3d 460 (Tex. 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
STATUTES

Acts 1967, 60th Leg., R.S., ch. 36 . . . . . . . . . . . . . . . . . . . . . . 3, 5, 22, 24

Acts 1979, 66th Leg., R.S., ch. 624, § 6(B)(1) . . . . . . . . . . . . . . . . . 5, 6, 28
Acts 2009, 81st Leg., R.S., ch. 1360, § 5 . . . . . . . . . . . . . . . . . . . . . . 6, 31

Acts 2011, 82nd Leg., R.S., ch. 942 . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Acts 2013, 83rd Leg., R.S., ch. 1361 . . . . . . . . . . . . . . . . . . . . . . . . . 26

Tex. Bus. & Com. Code § 7.102(13) . . . . . . . . . . . . . . . . . . . . . . . . . 10

Tex. Gov’t Code § 311.011(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Tex. Gov't Code § 2001.038 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 16
Tex. Tax Code § 151.008(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tex. Tax Code § 151.011(d)–(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Tex. Tax Code §§ 151.401–432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tex. Tax Code § 231.303(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Tex. Tax Code § 321.002(a)(3)(A) . . . . . . . . . . . . . . . . . . . . . . . passim

Tex. Tax Code § 321.002(a)(3)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Tex. Tax Code § 321.003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tex. Tax Code § 321.101(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Tex. Tax Code § 321.203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
Tex. Tax Code § 321.303(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Tex. Tax Code § 321.501 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

x
Page

Tex. Tax Code § 321.502 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Tex. Tax Code § 321.510 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4
REGULATIONS

34 Tex. Admin. Code § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . passim

34 Tex. Admin. Code § 3.374(a)(2) (1986) . . . . . . . . . . . . . . . . . . . . . 6, 33
4 Tex. Reg. 3618 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 33

39 Tex. Reg. 9597 (2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 33
41 Tex. Reg. 260 (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 33

45 Tex. Reg. 98 (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

45 Tex. Reg. 3499 (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 34
47 Tex. Reg. 6158 (2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
48 Tex. Reg. 391 (2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
49 Tex. Reg. 53 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

49 Tex. Reg. 2440 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 47
49 Tex. Reg. 4797 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 35, 38, 41
OTHER AUTHORITIES

Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation
of Legal Texts (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Bruce M. Nelson & John C. Healy, Sales and Use Tax Answer Book
(2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Glen A. Rosenbaum, Taxation, 33 S.W.L.J. 569
(1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

HB 134, 89th Leg., R.S. (2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

xi
HB 4072, 87th Leg., R.S. (2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Page
HB 5089, 88th Leg., R.S. (2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Webster’s New Universal Unabridged Dictionary
(2d ed. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

xii
STATEMENT OF THE CASE

Nature of the Case Plaintiffs sued the Comptroller in his Official Ca-
pacity seeking a declaration that portions of 34
Tex. Admin. Code § 3.334 are invalid because they
conflict with the statutes they purport to imple-
ment. (CR:6–31; 35–69; 155–84; 1346–1513;
1866–1926; 1989–2026; 2396–2436; 2437–2570.)
Course of Proceed- The district court (the 250th Judicial District
ings Court, Travis County, Hon. Karin Crump, presid-
ing) conducted a bench trial. (6RR:8.)
Trial Court’s Disposi- Following the bench trial, the district court entered
tion judgment. (CR: 2797 (App. Tab A).) Both the
Comptroller and the Coppell Plaintiffs asked the
district court to modify the judgment to clarify its
meaning. (CR:2800–15; 2816–20.) The district
court denied both motions. (CR:2840; 2841.) At
the Coppell Plaintiffs’ request, the district court
entered conclusions of law, but those still did not
resolve the confusion. (CR:2846 App. Tab B).)
The Coppell Parties appealed (CR:2854–58) and
the Comptroller cross-appealed (CR: 2859–64).

xiii
STATEMENT OF JURISDICTION
This Court has jurisdiction over this appeal from a final judgment of the dis-
trict court. Tex. Gov’t Code § 22.220(a). This Court has exclusive jurisdiction over
this appeal because it is a case against an officer of the State in his official capacity
and it does not fall under any of the exceptions to this Court’s jurisdiction. Tex. Gov’t
Code § 22.220(d)(1).

xiv
STATEMENT REGARDING RECORD REFERENCES
The record on appeal comprises:
• The one-volume Clerk’s Record filed in this Court on March 26, 2025, which
will be cited as “CR:[page];”

• The twelve-volume Reporter’s Record filed in this Court on June 27, 2025,
which will be cited as “[volume]RR:[page];”

• The trial exhibits are in volumes 9 through 12 of the Reporter’s Record, and
they will be cited as follows:

o Coppell Parties’ Exhibits will be cited as “CPEx.[number] at [page];”
o Round Rock Exhibits will be cited as “RREx.[number] at [page];”

o The Comptroller’s Exhibits will be cited as “DEx.[number] at [page.]”

xv
ISSUE STATEMENT
The Comptroller cannot adopt rules that (1) contravene specific statu-
tory language; (2) run counter to the general objectives of the statutory
provisions it is implementing; or (3) impose additional burdens, condi-
tions, or restrictions in excess of or inconsistent with the statutory
provision. Under those tests, do the following subsections of 34 TAC §
3.334: (a)(9), (a)(18), (b)(1)(A), (b)(5), or (c)(7), individually and in
combination, invalidly rewrite the statutory definition of “place of busi-
ness of the retailer” in Tax Code § 321.002(a)(3)(A)?

xvi
INTRODUCTION
The City of Coppell, Texas, the City of Humble, Texas, the City of DeSoto,

Texas, the City of Carrollton, Texas, and the City of Farmers Branch, Texas (the

“Coppell Parties”) read the district court’s judgment as finding (1) that amendments

to an administrative rule adopted by the Comptroller of Public Accounts violate the

Tax Code and (2) that the process the Comptroller used to adopt the amendments

violated the Texas Administrative Procedure Act. The Comptroller’s cross-appeal

shows that the Comptroller agrees that the judgment found certain of the challenged

amendments were not properly adopted. But the Comptroller has advised the

Coppell Plaintiffs that he reads the judgment as denying the other, substantive relief

the Coppell Plaintiffs seek. Both sides asked the district court for clarification or

explanation of the judgment. (CR:2800–15; 2816–20.) But the district court’s

responses did not resolve the parties’ disagreement. (CR:2840; 2841; 2846 (App.

Tab B).)

The Coppell Plaintiffs sought a declaration that the amendments they

challenge contravene language in the Tax Code allocating local sales tax, impose

conditions not found in that language, and are at odds with the objectives the

Legislature sought to achieve in the allocation of local sales tax. The Coppell

Plaintiffs seek relief because if the amendments are valid, they will lose millions of

dollars in local sales tax generated by taxable sales from fulfillment centers (the

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 1
brick-and-mortar stores of the 21st century) located in their cities. That local sales

tax will instead go to cities where the purchasers are located. The challenged

amendments are expressly designed to have this effect on all fulfillment centers that

ship or deliver taxable goods exclusively in response to orders placed on websites

and transmitted through the internet.

If the Coppell Plaintiffs believe the district court’s judgment favors them, why

did they appeal? Both sides could wait to argue in future original proceedings about

the meaning of the judgment, and the Coppell Plaintiffs are confident that they would

prevail. But if they are wrong, not appealing now could waive the right to challenge

the judgment later. Moreover, the Comptroller is tasked with enforcing the disputed

local-sales-tax provisions. His disagreement about the meaning of the district court’s

judgment can therefore have practical consequences for the Coppell Plaintiffs. So

they cannot afford to ignore the Comptroller’s stated position, and they had no choice

but to appeal despite believing that the judgment granted them the relief they sought.

Although there is disagreement about the judgment’s meaning, because this

Court’s review is de novo, it can simply enter the judgment the trial court should

have rendered. See Rieves v. Buc-ee’s Ltd., 532 S.W.3d 845, 849–50 (Tex. App.—

Houston [14th Dist.] 2017, no pet.). After all, the Court could have heard the Coppell

Plaintiffs’ challenge directly. See Tex. Gov’t Code § 2001.038(f). Thus, rather than

lay out their interpretation of the judgment, the Coppell Plaintiffs will instead argue

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 2
in the first half of their brief why, as a matter of law, the amendments they have

challenged violate the Tax Code. And, in the second half, they will argue why the

Comptroller’s claimed justifications for the challenged amendments fail.

STATEMENT OF FACTS
1. Local Sales Tax—The Statutory Background: Tax Code Sections
321.002(a)(3)(A) and 321.203

In 1967 the Legislature authorized municipalities to impose a local sales and

use tax. See Acts 1967, 60th Leg., R.S., ch. 36 (the “1967 Act”). 7 This local sales

and use tax was in addition to the state sales and use tax established in 1961. See

Acts 1961, 57th Leg., 1st C.S., ch. 24 (the “1961 Act”). The Comptroller administers

the collection of local sales tax by receiving from retailers 8 the local sales tax they

collect in connection with their sale of taxable items with a report that identifies the

municipality the retailer is obligated to pay. See Tex. Tax Code §§ 151.401–432. The

Comptroller then distributes that local sales tax to the identified municipality. See id.

at §§ 321.501–502. The retailer’s decision about what municipality it is obligated to

pay can be audited by the Comptroller. See id. at § 321.510. If the Comptroller

7
The act is now found in Tax Code chapter 321 for cities and chapter 322 for counties. The
two chapters have the same purpose and are substantively identical. This appeal focuses on
chapter 321 because only municipalities are involved.
8
The provisions of chapter 151 of the Tax Code that apply to chapter 321 assign the same
broad definition to retailer or seller. Tex. Tax Code §§ 321.003; 151.008. The two words
describe the same entity.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 3
disagrees with the retailer’s decision he can “claw back” that local sales tax and send

it to the municipality he believes the retailer was obligated to pay. See id.

A fundamental issue presented to the Legislature in deciding what

municipality should receive the local sales tax from a taxable sale is how to define

where a sale was “consummated,” i.e., made or completed. That issue determines

which city could receive the local sales tax and whether tax has to be collected at all

(not every city has adopted a local sales tax). The choice has nearly universally been

between the purchaser’s location (destination-sourcing) and the retailer’s location

(origin-sourcing). See Bruce M. Nelson & John C. Healy, Sales and Use Tax Answer

Book, Q 20:11 (2022); (7RR:22–24.) Deciding which approach to implement

involves balancing the administrative burden on retailers to determine what local

sales tax applies9 against the wish to compensate the city that has the most direct

connection to and greatest investment in the activities that result in the sale. See, e.g.,

Combs v. City of Webster, 311 S.W.3d 85, 97–98 n.8 (Tex. App.—Austin 2009, pet.

denied).

9
If the local sales tax imposed is based on the retailer’s location, all sales are subject to the
same rate. If the local sales tax is based on the purchaser’s location, the retailer must
determine the rate where each purchaser is located. In Texas, there are over 1700 local
taxing jurisdictions, and each can set its own rate to a maximum of 2%. See 49 Tex. Reg.
2440, 2441 (2024) (App. Tab H); Tex. Tax Code § 321.101(f). The administrative burden
on the retailer is obviously greater if the amount of tax collected is determined by the
purchaser’s location.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 4
The 1967 Act addressed “consummation” by adopting origin-sourcing.10 If a

retailer 11 did business in one location all taxable sales were consummated at that

place of business.12 See 1967 Act, § 6(B)(1). If a retailer did business in more than

one location, the taxable sale was consummated at either the place of business: (a)

where the buyer took possession of and removed the items or (b) from where the

items were delivered to the purchaser. See id. For a city to receive local sales tax,

two conditions had to exist. The retailer had to have a place of business in the city,

and a sale had to be consummated at that place of business. 13 No sale could be

consummated at a location other than a place of business. See id.

The 1967 Act did not define place of business. In 1979, the Legislature

enacted a definition: an established location operated by the seller that has the

purpose of receiving orders or receives three or more orders in a calendar year. See

Acts 1979, 66th Leg., R.S., ch. 624, § 6(B)(1) (the “1979 Act”). The Legislature,

however, cabined a retailer’s ability to treat certain specified locations (a warehouse,

10
This preference for origin-sourcing continues. Texas has been and continues to be
considered an origin-sourcing state. See Nelson & Healy, Q 20:11.
11
Defined in pertinent part, at the time and currently, as “a person who makes more than
two sales of taxable items during a 12-month period, including sales made in the capacity
of an assignee for the benefit of creditors or receiver or trustee in bankruptcy” Tex. Tax
Code § 151.008(b)(2).
12
The Legislature referred to locations where the retailer conducted business as, fittingly,
“places of business of the retailer.” In this brief that term is shortened to “place of business.”
13
Given the statute’s subject-matter – local sales tax – “place of business” necessarily
referred only to locations in Texas. The Coppell Plaintiffs use the phrase throughout this
brief with the same understanding.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 5
storage yard, or manufacturing facility) as places of business by providing that, to

qualify, those facilities must receive at least three orders in a calendar year. See id.

Those statutory requirements have remained essentially unchanged for 46 years and

are currently found in Tax Code section 321.002(a)(3)(A). Their primary purpose—

to maximize tax collection by capturing the entire universe of locations involved in

the process of taxable sales—is evident from the original provision that is now Tax

Code section 321.303(a) (“Each place of business of a retailer must have a [sales

tax] permit issued by the comptroller… .”).

In 1979, and again in 2009, the Legislature also added to the statutory

directives on where consummation occurs to deal with circumstances not previously

addressed. See Acts 2009, 81st Leg., R.S., ch. 1360, § 5 (the “2009 Act”). Those

additions were consistent with the Legislature’s preference for “origin-sourcing.”

The statutory consummation directives are currently found in Tax Code section

321.203. (App. Tab D.) Those directives, not the definition of “place of business of

the retailer,” express the Legislature’s intention for which municipality, if any,

should receive local sales tax.

2. Local Sales Tax—The Regulatory Background: 34 TAC § 3.334

In response to the 1979 Act, the Comptroller issued rules about what is a place

of business and where consummation occurs. Those rules were amended several

times before 2020. See 4 Tex. Reg. 3618, 3621 (1979); 34 Tex. Admin. Code §

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 6
3.374(a)(2) (1986); 39 Tex. Reg. 9597, 9604 (2014); 41 Tex. Reg. 260, 262 (2016).

The pre-2020 rules were consistent with the statutory requirements in the Tax Code:

they did not condition the existence of a place of business on how, when, where, by

or from whom, or how often an order can be received, or what that order had to

consist of.14 See id.

All that changed in January 2020, when the Comptroller proposed

amendments to 34 Tex. Admin. Code § 3.334.15 See 45 Tex. Reg. 98, 98-115 (2020)

(App. Tab E). The amendments were adopted as final on May 22, 2020, but the

provisions of concern to the Coppell Plaintiffs did not become effective until October

1, 2021. 45 Tex. Reg. 3499, 3511 (2020) (App. Tab F). Before the effective date, the

Coppell Plaintiffs asked the district court to temporarily enjoin the amendments that

affected them. The parties then agreed to a temporary injunction prohibiting

enforcement of the rules challenged by all plaintiffs. That injunction remained in

14
There is a distinction between how many individual orders a location must receive to be
a place of business and what conditions attach to an individual order for it to be considered
received. This brief addresses the latter and argues that the statutory definition does not
allow the Comptroller to impose the limitations found in the current version of § 3.334.
15
In this brief, 34 Tex. Admin. Code § 3.334 is referred to as § 3.334.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 7
effect until entry of a final judgment in December 2024. (CR:121–23; 1338–39;

1340–45; 1745–46; 2797 (App. Tab A).)

The series of amendments16 that began in May 2020 ultimately resulted in the

current version of § 3.334 (adopted in July 2024), which provides for the first time

that a location is not a place of business for local sales tax purposes if it: (1) does not

have sales personnel; (2) is not where a determination is made that an order can be

accepted; or (3) get orders processed by computers connected to the Internet making

use of a shopping website or shopping software application.

Those limiting conditions reversed the Comptroller’s previous interpretation

of the words “receives” and “order” in Tax Code section 321.002(a)(3)(A) and thus

where consummation occurs as specified in Tax Code section 321.203. (App. Tab

D.) The changes effectively mean that only one location operated by a retailer can

get a buyer’s request to purchase taxable items and that, if a computer gets such a

request and “forwards” it, the request can never be an “order” “received” at a place

of business. In other words, the amendments rewrite the statutory definition of place

of business. The demonstrative attached at Appendix Tab J shows the words that

would have to be added to the statutory definition of place of business to make the

current version of § 3.334 consistent with the statute. (App. Tab J.) A quick glance

16
See 48 Tex. Reg. 391 (2023); 49 Tex. Reg. 53 (2024); 49 Tex. Reg. 4797 (2024) (App.
Tab I).

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 8
establishes that version is quite different from what the Legislature adopted 46 years

ago.

3. Internet Sales, Fulfillment Centers, and the Changes to § 3.334
The Comptroller’s changes to § 3.334 were made at least in part in response

to the rise of e-commerce. Public use of the Internet began long after the Legislature

defined “place of business” in 1979. (7RR:181.) The development of a way for

computers with different operating systems to communicate with each other and of

order-management software with the ability to confirm credit-card transactions

allowed retailers to engage in what will be described here as “Internet Sales.”

(7RR:193–94.) This type of taxable sale involves a purchaser using a website to

place an order that is almost instantaneously transmitted through the Internet with

the help of order-management software (what the Comptroller calls an “automated

shopping cart software program”) to a location that uses the orders to pull, pack, and

ship the requested item to the purchaser from on-site inventory. (CPEx.42:5–7;

7RR:180–84.)

By going to a website, a purchaser is thus virtually visiting an established

physical location operated by a retailer, indistinguishable in function from a retailer’s

brick-and-mortar store with a very large inventory on display. (CPEx.32:119–21;

7RR:180–81; 187–96.) Once the purchaser identifies an item from the inventory

accessed through the website and decides to purchase it, the purchaser enters a

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 9
credit-card (or debit-card) number, just as a buyer presents a credit card (or debit-

card) to a cashier or inserts it in a self-checkout device at a brick-and-mortar store.

(7RR:193–94; CPEx.32:119–21.) The only difference between Internet Sales and

purchases at a brick-and-mortar store that uses point-of-sale software17 is that, with

Internet Sales, the purchaser is virtually present at the location with inventory versus

being physically present at a brick-and-mortar location with inventory. The location

that the purchaser visits virtually in the case of Internet Sales is referred to as a

“fulfillment center.” 18 (7RR:178–80; 8RR:28–34.)

The request by a purchaser to be supplied a taxable item communicated to the

fulfillment center includes the purchaser’s name and address, a description of the

item or items being purchased, the quantity of items requested, and the price of the

item. (7RR:200–02.) The purchaser’s request is accessed and acknowledged by the

retailer’s employees at the fulfillment center who pick, pack, and arrange to ship the

requested item to the purchaser. (7RR:180; 8RR:28–29.) Typically, the purchaser’s

17
Point of Sale (POS) software serves as the digital “command center” for a business’s
sales, processing payment types, managing transactions, tracking inventory, and providing
sales data. See https://squareup.com/us/en/the-bottom-line/operating-your-business/what-
pos-system.
18
In § 3.334 the Comptroller describes fulfillment centers as “warehouses” or “fulfillment
warehouses.” But they are not warehouses under the Tax Code. The statutory definition of
a “warehouse” is a “person engaged in the business of storing goods for hire,” Tex. Bus. &
Com. Code § 7.102(13). Yet the Tax Code defines “storage” as not including “the keeping
of retaining of tangible personal for sale in the regular course of business.” Tex. Tax Code
§ 151.011(d)–(e)(emphasis added). Because fulfillment centers keep goods for sale in the
regular course of business they are not “storing” the goods, and they are not warehouses.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 10
credit-card (or debit-card) is charged only after the item is shipped. (7RR:193–94;

198.)

Fulfillment centers are, in other words, the 21st century’s version of brick-

and-mortar stores. Yet the changes to § 3.334 beginning in 2020 result in fulfillment

centers not being places of business because supposedly: (1) they do not have “sales

personnel”; (2) review and approval of the purchaser’s request to be supplied a

taxable item occurs elsewhere; and (3) the purchaser’s request is processed by

software running on computers connected to the Internet, which is used to continue

the almost instantaneous movement of the request to fulfillment centers

(“forwarded” in the words of the Comptroller). See §§ 3.334(a)(9); (a)(18);

(b)(1)(A); (b)(5); (c)(7). Stated more directly, the current, amended version of §

3.334 treats the orders that are a fundamental part of Internet Sales as not “received”

at fulfillment centers, meaning the locations are not places of business and thus no

taxable sales can be consummated there.

4. The Coppell Plaintiffs, Internet Sales, Fulfillment Centers, and Local
Sales Tax

The Coppell Plaintiffs have all promoted and supported fulfillment centers in

their cities. By way of example, Coppell actively encouraged and continues to

encourage fulfillment centers to come there. (See, e.g., 7RR:116–17.) In part, that

decision was a function of Coppell being near major transportation hubs and in part

because of its central location in a large and densely populated metropolitan area

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 11
allowing for efficient distribution of purchased retail goods. (See id.) That policy

decision also meant a commitment to provide and maintain costly infrastructure

necessary to deliver the services required to support fulfillment centers. (7RR:119–

20.)

The cost of that support has been offset by local sales tax fulfillment centers

generate. (7RR:123–24.) The fulfillment centers that operate in the Coppell

Plaintiffs’ communities are established locations of a retailer, each with tens of

thousands of square feet of space, hundreds of retailer employees, and inventory

worth millions of dollars consisting of thousands of different items for sale directly

to buyers. (7RR:121–23; 8RR:28–30.) The fulfillment centers rely, moreover,

exclusively on orders placed on websites linked by order-management software to

computers at the center. (CPEx.32:119–21.) They engage only in Internet Sales.

If the Comptroller’s 2024 amendments to § 3.334 are valid, all of the local

sales tax generated from those fulfillment centers, except for items delivered to

purchasers within the jurisdiction of the Coppell Plaintiffs where the fulfillment

centers are located, will no longer be sent to the Coppell Plaintiffs. (CPEx.18:18–

19.) Instead, it will be sent to the community to which the taxable item is delivered—

but if, and only if, that community has a local sales tax. (Id.) In other words, instead

of the Legislature’s long-preferred regime of “origin-sourcing” applying to taxable

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 12
sales from fulfillment centers, the Comptroller will impose “destination-sourcing” .

(See CPEx.39:9–11; 15; 27.)

The loss of local sales tax will be significant in amount and effect. The Coppell

Plaintiffs’ comments on the Comptroller’s proposed amendments to § 3.334

estimated that the combined local-sales-tax reduction at millions of dollars annually,

with Coppell alone losing as much as 60% of its total sales-tax revenue.

(CPEx.18:18–19.) The Coppell Plaintiffs’ losses will, theoretically, represent a gain

to the other 1700 local taxing entities. But because of the large number of other

taxing entities, the Coppell Plaintiffs’ substantial losses will result in no material

equalizing gain to any other single community. (CPEx.39:37; 56–57.) In fact, the

only study available to the Comptroller in connection with his proposed amendments

to § 3.334 was submitted by the Coppell Plaintiffs, and that study demonstrated that

Internet Sales have not resulted in any material shift in the pattern of local-sales-tax

collections compared with the period before the advent of Internet Sales. (See id. at

46–59.)

SUMMARY OF ARGUMENT
Section 3.334 contravenes the plain meanings of the words used in Tax Code

section 321.002(a)(3)(a) to define “place of business.” The text, structure, and

statutory history of the relevant tax code sections evince the Legislature’s intent to

adopt “origin sourcing” for determining what city is entitled to local-sales-tax

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 13
revenue. The words “receives” and “orders” have broad meanings that do not limit

how, when, where, by whom, or how often an order can be received or what it must

contain. Thus, all that is required for a location to be a “place of business” is that it

be an established location operated by the retailer that has the purpose of getting

requests from a purchaser to be supplied or delivered a taxable item or that gets at

least three requests from a purchaser to be supplied a taxable item in a calendar year.

The fulfillment centers in the Coppell Plaintiffs’ cities qualify as places of business

under the plain meaning of the statute.

But § 3.334 would effectively prevent fulfillment centers from being

considered “places of business.” In doing so, the Comptroller is attempting to freeze

retail commerce into a construct from the 1970s. But the Supreme Court has

repeatedly affirmed the opposite: that broad statutory terms are presumed to

encompass, not exclude, new technologies. But the current § 3.334 does more than

require that particular people be involved in the ordering process. It also directs that

for any order there can only be one place of business, where it is determined an order

can be accepted. And if that order is determined to be acceptable by computer

software, then its instantaneous transmission through the Internet to another location

(or “forwarding”) has not been received at that location. None of these limitations

are found in the statutory definition of place of business.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 14
The Comptroller does not contest that the provisions of § 3.334 that the

Coppell Plaintiffs are challenging are at odds with the common, ordinary meaning

of the words defining a “place of business.” The reasons he offered in the district

court for avoiding the plain meaning cannot survive scrutiny. “Receives” and “order”

are not terms of art. Nor does the phrase “for the purpose of receiving orders”

provide any basis to avoid the plain meaning. The Comptroller next relies on other

states’ approach to determining how to allocate local-sales-tax revenue. But other

states’ approaches to allocating local sales tax has no legal (or logical) bearing on

how the Texas Tax Code should be understood. The Comptroller’s reliance on the

absurdity doctrine is misplaced because the plain meanings of the words used to

define “place of business” do not lead to absurd results.

In rewriting by rule the statutory definition of “place of business,” the

Comptroller also overlooks the axioms that he must not: (1) add words to the Tax

Code; (2) ignore the absence of words omitted by Legislature; (3) ignore words that

the Legislature used in the Tax Code; (4) ignore the history of the disputed statute;

(5) ignore the purpose of the disputed statutory provision as shown by the statutory

text; or (6) reject his own previous positions about the meaning of the disputed

provision. This Court should therefore render judgment that § 3.334 is invalid.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 15
STANDARD OF REVIEW
In an appeal concerning a challenge to the validity of an administrative rule

under Texas Government Code section 2001.038, a trial court’s declaratory

judgments issued following a bench trial are reviewed de novo. See Tex. Mut. Ins.

Co. v. Vista Cmty. Med. Ctr., LLP, 275 S.W.3d 538, 548 (Tex. App.—Austin 2008,

pet. denied) (citing City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25–26

(Tex. 2003)). Moreover, administrative rules, which have the same force and effect

as statutes, are to be construed in the same manner as statutes. See id. (citing

Rodriguez v. Serv. Lloyds Ins. Co., 997 S.W.2d 248, 254 (Tex. 1999); Lewis v.

Jacksonville Bldg. & Loan Ass’n, 540 S.W.2d 307, 310 (Tex. 1976)). And, of course,

matters of statutory construction are reviewed de novo. See City of Boerne, 111

S.W.3d at 25.

ARGUMENT AND AUTHORITIES
1. The subsections of current § 3.334 that the Coppell Plaintiffs challenge
that collectively re-define “place of business” are facially invalid
because they contradict the statute they purport to implement.

An administrative rule adopted under the Texas Administrative Procedure

Act is invalid if:

(1) it contravenes specific statutory language;

(2) it runs counter to the general objectives of the statutory
provisions it is implementing; or

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 16
(3) it imposes additional burdens, conditions, or restrictions in
excess of or inconsistent with the statutory provisions it is
implementing.

Tex. State Bd. of Exam’rs of Marriage & Fam. Therapists v. Tex. Med. Ass’n, 511

S.W.3d 28, 33 (Tex. 2017).

Here, the parts of § 3.334 the Coppell Plaintiffs challenge contravene the plain

meanings of words used in section 321.002(a)(3)(A) to define “place of business.”

They also impose conditions beyond those allowed by the statutory language. As a

result, they run counter to the general objective of section 321.203, which is to

impose origin-sourcing. While the challenged parts of § 3.334 violate all three tests,

violation of one test is enough to demonstrate invalidity.

As discussed below, demonstrating that the challenged subsections of § 3.334

violate the Tax Code turns on: (1) the meanings of “receives,” “orders,” “receiving

orders,” and “orders are received” in the statutory definition of “place of business”

found in section 321.002(a)(3)(A); and (2) how those meanings relate to the statutory

directives in section 321.203 for determining where “consummation” of a sale

occurs.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 17
2. The limiting conditions adopted by the Comptroller in § 3.334 on how,
when, where, by and from whom, and how often an order can be
received contravene the plain meanings of “receives” and “order” found
in the statute the rules purport to implement.

A. The terms “receives” and “orders” by themselves and as used in
the phrases “receiving orders” and “orders are received” must be
given their plain meanings.

In re Texas Education Agency, provides the road-map for statutory

construction:

We apply the plain meaning of statutory language unless (1) the
Legislature has prescribed definitions, (2) the words have acquired a
technical or particular meaning, (3) a contrary intention is apparent
from the context, or (4) a plain-meaning construction leads to
nonsensical or absurd results.

619 S.W.3d 679, 687 (Tex. 2021) (orig. proceeding) (emphasis added). The Supreme

Court has cautioned that the “plain meaning” controls unless one of the four listed

principles compels a different meaning. Tex. Med. Ass’n, 511 S.W.3d at 34–38; KMS

Retail Rowlett, LP v. City of Rowlett, 593 S.W.3d 175, 183 (Tex. 2019).

B. The plain meanings of “receives” and “order” do not limit how,
when, where, by whom, or how often an order can be received or
what it must contain.

A “place of business” as defined in section 321.002(a)(3)(A) exists if: (1) it is

an established location; (2) it is operated by the retailer or its agent or employee; and

(3) it either has the purpose of receiving orders or it actually receives three orders in

a calendar year.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 18
What constitutes an established location operated by the retailer is not

disputed here. The Comptroller has suggested that the Coppell Plaintiffs believe a

computer or computer server by itself can be a place of business. Not so. The Coppell

Plaintiffs consider a computer or computer server to be a piece of equipment that

may be used at an established location operated by the retailer. The presence of a

computer or computer server may be a necessary condition for the existence of a

place of business, but it is not a sufficient condition.

The parties disagree about what “receives” and “orders” mean, and, therefore,

what “receiving orders” or “orders are received” mean. 19 The Comptroller does not

dispute that the plain meaning of “receiving” or its base “receive” means “to get,

accept, take, or acquire something,”20 and that an “order” in connection with a

taxable sale means “a request or commission to make or supply something.”21 In

response to comments challenging the proposed changes to § 3.334, the Comptroller

agreed that using the plain meanings of “receives” and “order” reasonably leads to

the conclusion that fulfillment centers receive orders:

The City of Coppell and others have advanced a contrary explanation
regarding fulfillment warehouses that has superficial appeal: a
warehouse cannot fulfill an order unless the warehouse has “received”
the order, and therefore a fulfillment warehouse is inherently a “place

19
For the rest of the brief the focus will be on the meanings of “receives” and “orders.”
What those words mean determines what any phrase containing those words means.
20
Receive, Webster’s New Universal Unabridged Dictionary (2d ed. 1983).
21
Order, Webster’s New Universal Unabridged Dictionary (2d ed. 1983).

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 19
of business.” In the abstract, this argument may seem like a reasonable
interpretation of the word “received.”

47 Tex. Reg. 6158, 6160 (2022) (App. Tab G).

The Legislature’s intent that the plain meanings control is demonstrated by

the following. There is no statutory definition of “receives” in connection with the

definition of “place of business.” Nor is there a definition of the word “order” as

used in the definition of “place of business.” Nor has the Legislature placed any

limiting conditions on how, when, or where an order is received or what it must

contain. If the Legislature does not expressly define the words used in a statutory

definition, or expressly condition their application, plain meaning controls. See

Harris Cnty. Appraisal Dist. v. Tex. Workforce Comm’n, 519 S.W.3d 113, 128 (Tex.

2017) (“In the absence of a statutory definition, we must ‘determine a term’s plain

or ordinary meaning,’ unless a contrary meaning is apparent from the statute’s

language.” (quoting Wal-Mart Stores, Inc. v. Forte, 497 S.W.3d 460, 471 (Tex.

2016)).

With that background in mind, the Coppell Plaintiffs submit that a “place of

business” is an established location operated by the retailer that has the purpose of

getting requests from a purchaser to be supplied or delivered a taxable item or that

gets at least three requests from a purchaser to be supplied a taxable item in a

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 20
calendar year.22 How such a request is gotten, when it is gotten, where else it is

gotten, how often it can be gotten, who must get it, and what the request must consist

of or contain are limitations not provided for by the plain—and broad—meaning of

the words.

C. The statutory histories of “place of business” and the directives on
“consummation” reinforce that the Legislature intended that the
plain meanings of “receives” and “order” controls their
interpretation.

(1) The creation of a statutory definition for place of business was
not intended to restrict receipt of an order to only one location
by limiting how, when, where, by or from whom, or how often
an order can be received or what it had to contain.
The history of the development of the statutory definition of “place of

business” can affect how it should be understood. See Brown v. City of Houston, 660

S.W.3d 749, 755 (Tex. 2023) (“Statutory history concerns how the law changed,

which can help clarify what the law means.”) (emphasis in original). Statutory

history is not to be confused with legislative history. See id. (quoting Antonin Scalia

& Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 167, 256

(2012)).

In 1967, when the Legislature decided to allow cities to impose a local sales

tax, it made clear that a taxable sale could only be consummated at a place of

22
The Comptroller agrees that an established location operated by a retailer, other than a
warehouse, storage yard, or manufacturing plant, can also exist even if it does not receive
three orders in a year so long as it has the “purpose of receiving orders.” § 3.334(a)(18).

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 21
business, but no statutory definition was provided for that phrase. 1967 Act, §

6(B)(1). The only directive on where consummation occurred was:

If the retailer has more than one place of business in the State, the place
or places at which retail sales, leases, and rentals are consummated shall
be the retailer's place or places where the purchaser or lessee takes
possession and removes from the retailer's premises the articles of
tangible personal property, or if the retailer delivers the tangible
personal property to a point designated by the purchaser or lessee, then
the sales, leases, or rentals are consummated at the retailer's place or
places of business from which tangible personal property is delivered
to the purchaser or lessee. 23

Id.

In the absence of a statutory definition for place of business, the Comptroller

issued rulings in 1967 and 1975 discussing the term.24 See Ruling No. 95-L.04 (Oct.

2, 1967), available at STAR 6710R0076A10 (the “1967 Ruling”); 25 Local Ruling

.004 (Dec. 31, 1975), available at STAR 7512R0502C04 (the “1975 Ruling”). The

1967 Ruling described a “retail establishment,” which holds goods for sale in the

regular course of business, as a place of business. The 1975 Ruling expanded that

guidance by including locations that take orders as part of the sales process. Both

23
Although not explicitly stated in the language of the 1967 Act, its clear implication was
that if a retailer had one place of business, all taxable sales were consummated at that
location.
24
It is unclear why the guidance was provided in the form of “rulings” instead of “rules.”
The “rulings” discussed what the Comptroller considered to be a place of business rather
than providing a formal definition.
25
STAR is the Comptroller’s State Tax Automated Research System, which is available at
https://star.comptroller.texas.gov/.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 22
rulings focused on places of business as locations that the retailer considers as

necessary for the completion of a taxable sale.

The 1975 Ruling was at issue in Bullock v. Dunigan Tool & Supply Co., 588

S.W.2d 633 (Tex. App.—Austin 1979, writ ref’d n.r.e.). The retailer, Dunigan,

claimed that it consummated the sale of oil field equipment at a truck yard located

where there was no local sales tax. See id. at 635. The yard was operated by a third-

party that did not own but temporarily stored some of Dunigan’s goods for pickup.26

The Comptroller argued that the truck yard was not a place of business and

consummation happened at a Dunigan sales office in a community with a local sales

tax where the order was taken. Id. at 635.

The district court agreed with Dunigan that consummation occurred at the

truck yard, and no local sales tax could be imposed. See id. On appeal the

Comptroller did not challenge the district court’s finding that the truck yard was a

place of business. He claimed, though, that consummation happened at the sales

office because that is where “paper segregation” (that is, acceptance of an order)

26
The facility Dunigan claimed was a place of business was a “bonded, unrelated [to
Dunigan] trucking yard facilit[y] where Dunigan leased storage space on a month-to-month
basis.” Glen A. Rosenbaum, Taxation, 33 S.W. L.J. 569, 582 (1979). “Dunigan did not keep
full-time personnel at the storage facilities, [although] the storage facilities were open
twenty-four hours a day, and Dunigan’s employees or representatives periodically entered
the premises to conduct inspections and inventories.” Id. The truck yard did not get the
request from the purchaser to be supplied a taxable item. See id. Instead, Dunigan notified
the truck yard to release the item to the purchaser. See id.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 23
occurred. 27 See id. The court of appeals rejected that claim. It noted that the statutory

directives on consummation did not include “paper segregation.” See id. at 636.

Rather, if “physical segregation” (that is, pick-up or delivery of the item) happened

at a place of business that is where consummation occurred. See id.

At the Comptroller’s urging, the Legislature reacted to the district court’s

decision,28 by adopting the following statutory definition for “place of business:”29

A. (1) For the purposes of the local sales and use tax, ‘place of business of
the retailer’ means an established outlet, office, or location operated by
the retailer, his agent, or employee for the purpose of receiving orders
for taxable items. The term ‘place of business of the retailer’ includes
any location at which three or more orders are received by the retailer
in a calendar year. A warehouse, storage yard, or manufacturing plant
may not be considered a 'place of business of the retailer' unless three
or more orders are received by the retailer in a calendar year at such
warehouse, storage yard, or manufacturing plant. 30

1979 Act, § 6(B)(1).

By mandating that the location had to be established and operated by the

retailer the Legislature ensured that a retailer could not claim that a facility in the

27
Apparently, the Comptroller was willing to concede that a taxable sale occurred at the
truck yard given that the factual finding that the truck yard was a place of business was not
appealed. In other words, the Comptroller agreed that the truck yard was part of the sales
process.
28
See DEx.27.
29
The definition adopted in 1979 now found in §321.002(a)(3)(A) has remained essentially
unchanged since then. Any legislative modifications have not been substantive.
30
As a result of the adoption of the statutory definition, the truck yard used by Dunigan
was no longer a place of business for purposes of local sale tax allocation because it was
not an established location of Dunigan’s and it was not operated by Dunigan. It could not
qualify as “place of business” even if it received an order.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 24
possession of and run independently by a third-party (such as the truck yard in

Dunigan) was a place of business of the retailer. That change severely constricted a

retailer’s ability to avoid local sales tax by positioning taxable items for pick-up,

delivery, or shipment in areas without a local sales tax. Additionally, by requiring

that the location have a purpose of receiving orders, or receive three orders in a

calendar year, the Legislature concurred with the Comptroller’s position that for a

location to be a place of business it needed to play a role in the retailer’s sales

process.

The Legislature could have added then, or at any time over the next 46 years,

limiting conditions on how, or when, or where, or by or from whom, or how often

an order is received at a location or what it must contain. But the Legislature did not

and has not. It could have added definitions for “receives,” “order,” or both. But it

did not and has not. In short, the statutory history is consistent with the Legislature

intending that the words used to define place of business would have their plain,

broad meanings. As a result, many locations operated by a retailer could receive an

order, regardless of its form or the means by which it is communicated. In any case,

the statutory directives on where consummation of a sale occurred, not the definition

of place of business itself, determined to which municipality the sale was attributed

for local-sales-tax purposes.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 25
In 2011 (and supplemented in 2013), the Legislature chose to be more specific

about which locations receiving an order were part of the sales process. See Acts

2011, 82nd Leg., R.S., ch. 942 (the “2011 Act”); Acts 2013, 83rd Leg., R.S., ch. 1361

(the “2013 Act”). The amendments added a limiting condition—a location acting on

behalf of a retailer through a contract and receiving an order needed to have more

than just some connection to the sales process. It needed to deliver significant

business services. The limiting condition specifies:

(B) An outlet, office, facility, or any location that contracts with a retail
or commercial business to process for that business invoices, purchase
orders, bills of lading, or other equivalent records onto which sales tax
is added, including an office operated for the purpose of buying and
selling taxable goods to be used or consumed by the retail or
commercial business, is not a "place of business of the retailer" if the
comptroller determines that the outlet, office, facility, or location
functions or exists to avoid the tax legally due under this chapter or
exists solely to rebate a portion of the tax imposed by this chapter to the
contracting business. An outlet, office, facility, or location does not
exist to avoid the tax legally due under this chapter or solely to rebate
a portion of the tax imposed by this chapter if the outlet, office, facility,
or location provides significant business services, beyond processing
invoices, to the contracting business, including logistics management,
purchasing, inventory control, or other vital business services.

Tex. Tax Code § 321.002(a)(3)(B) (App. Tab C).

The first part of the addition describes what are considered to be places of

business created to evade local sales thereby skewing the allocation process and

providing an economic advantage to certain retailers. It does so by defining when an

established location operated on behalf of a retailer through a contract does not have

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 26
a sufficiently direct connection to the completion of the sale of taxable items to be

considered a place of business. By saying what is not a place of business, it also says

a location that provides “significant business services” or “vital business services”

including logistics management, or purchasing, or inventory control has a sufficient

connection to the completion of the sales process to be a place of business.

By specifying that a location operated on behalf of a retailer that performs

only limited, albeit vital, business services could be a place of business, the

Legislature confirmed its understanding, consistent with the plain meanings of

“receives” and “order,” that the same order could be received at different locations.

A location providing only “logistics management,” or “purchasing inventory

control” on behalf of the retailer, which the Legislature identified as vital business

services (among others), would need to have the order passed on from the retailer.

Yet the Legislature still considered that location to be a place of business. And if a

location operated on behalf of the retailer was not the first location that received the

order, yet was a place of business as long as it provided a “vital business service,”

the same would be true for a location operated directly by a retailer.

In short, the statutory history of the definition of place of business supports

the conclusion that the Legislature was not concerned with how, or when, or where,

or by whom, or how often an order was received at a location or what it contained

for that location to be a place of business.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 27
(2) The 1979 and later statutory changes to where consummation
occurs confirm that the Legislature intended that the plain
meaning of “receives” and “order” do not limit how, when,
where, by or from whom, or how often an order can be received
or what it had to contain.
In addition to adopting a definition for place of business, the 1979

amendments provided additional directives on where consummation of a taxable sale

occurs. Those changes indirectly confirm that the Legislature intended that the plain,

yet broad, meanings of “receives” and “order” allowed more than one established

location operated by a retailer to receive an order.

One of the 1979 statutory changes to the consummation directives addressed

where consummation occurs when an order is initially received out of state, and the

taxable item sold is shipped or delivered from or picked up at a location that is not a

place of business of the retailer in Texas. See 1979 Act, § 6(B)(1)(d)(ii). In that

circumstance, consummation occurs at the location to which the item is shipped. In

other words, the change imposes “destination-sourcing” not “origin-sourcing” on

that taxable sale. One necessary implication of this statutory directive is that an order

can be received by more than one location. Otherwise, there is no reason to refer to

where an order is received initially. A second implication is that if the order is

initially received out of state, but it is also received at the retailer’s place of business

in Texas, and the item sold is shipped, delivered, or picked up there, the taxable sale

is consummated at that location in Texas for purposes of local sales tax. In other

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 28
words, this 1979 addition to the statutory consummation directives confirmed the

Legislature’s understanding that orders can be received at more than one location,

creating multiple place of business eligible to be where consummation occurs—

although consummation will happen at only one. A third implication is that unless

the Legislature has explicitly directed that consummation occurs where the taxable

item is shipped to (destination-sourcing) consummation occurs where the taxable

item is shipped from (origin-sourcing).

In 2009, the Legislature reinforced those implications by making a further

change to the statutory consummation directives in response to Combs v. City of

Webster. At issue was whether a sale was consummated (1) at the “brick-and-mortar”

store where the purchaser walked in and placed an order for furniture or (2) at the

warehouse that got (through the Internet) the purchaser’s confirmed request and

shipped the furniture to the purchaser. See 311 S.W.3d at 95. The retail store was in

Webster. Id. at 90. The warehouse from which the furniture was shipped was in

Grand Prairie. Id. The Comptroller had decided that Grand Prairie should receive the

local sales tax because the warehouse had received the order, and physical separation

happened there. Id. Webster sued, claiming the Comptroller was misapplying the

consummation rules because the brick-and-mortar store received the order, not the

warehouse, and Webster should have received the local sales tax. Id.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 29
In response, the Comptroller argued, in direct conflict with his current

position, that a warehouse could receive orders through an “Internet computer

system” that connected a purchaser with a retailer. Id. at 97. The Comptroller was

thus necessarily arguing that orders could be forwarded from one location (the brick-

and-mortar store in Webster) to another (the warehouse in Grand Prairie). See id.

The court of appeals agreed with the Comptroller’s position. See id. at 98–99.

In response to the litigation, and apparently concerned that the warehouse

location had less connection with the sale than the brick-and-mortar retail location

at which the purchaser appeared in-person to place an order, the Legislature amended

the statutory consummation directives as follows:

SECTION 2. Section 321.203, Tax Code, is amended by amending
Subsections (c) and (d) and adding Subsections (c-1), (c-2), and (c-3)
to read as follows:

(c) If a retailer has more than one place of business in this
state, each [a] sale of each [a] taxable item by the retailer
is consummated at the [retailer's] place of business of the
retailer in this state where the retailer first receives the
order, provided that the order is placed in person by the
purchaser or lessee of the taxable item at the place of
business of the retailer in this state where the retailer first
receives the order.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 30
2009 Act, § 5 (emphasis added).31

According to the Author’s/Sponsor’s Statement of Intent:

Current Texas law requires that the local sales tax on an item be sourced
to the place of business from where it was shipped, provided the
company has more than one place of business in this state. This has
caused some confusion with regard to local sales tax sourcing of certain
purchases. In some instances, a customer walks into a local retail outlet,
selects, and pays for merchandise that will be shipped to his or her
home, but the local sales tax is legally due to a warehouse or
distribution facility in another community.

As proposed, S.B. 1202 amends Chapters 321 and 323 of the Tax Code
to clarify the local sales tax sourcing laws and ensure that local sales
tax is allocated to the retail location where the customer makes his or
her purchase. S.B. 1202 allows business transactions and sales made
through non-traditional sales channels such as call centers and the
Internet to remain sourced to the warehouse or distribution center and
benefit the community that is supporting that business infrastructure.

(CPEx.45:930–31) (emphasis added).32

31
For the actions on and the final language of S.B. 1202, See:
https://capitol.texas.gov/BillLookup/Amendments.aspx?LegSess=81R&Bill=SB636
dealing with S.B. 636. Compare the language in House amendment 2 to S.B. 636, identified
in that link, to the version of S.B. 1202 passed by the Senate and found at
https://capitol.texas.gov/tlodocs/81R/billtext/pdf/SB01202E.pdf#navpanes=0. They are
identical. For procedural reasons, S.B.1202 could not be passed in the House as S.B. 1202
so it was added, with no changes, as House amendment number 2 to S.B. 636 then pending
in the House, which could be passed, and then sent back over to the Senate, which adopted
S.B. 636 with the addition of S.B. 1202 by the House. In short, everything that was said
about S.B. 1202 applies to the portion of S.B. 636 containing S.B. 1202.
32
There was also a “Statement of Legislative Intent” found at
https://capitol.texas.gov/BillLookup/Actions.aspx?LegSess=81R&Bill=SB1202 that
included the following about S.B. 1202: “It [S.B. 1202] does not impact other types of
transactions including catalog, Internet, 1-800 call centers, business to business invoicing,
purchase orders, etc., retain the same sourcing treatment that exists under current law.”

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 31
The Legislature thus modified the consummation directives based on a policy

disagreement with the Comptroller about which of two places of business (each

having received the same order) should receive local sales tax. The Legislature

decided that the location operated by the retailer where the order is first placed in-

person and confirmed (a brick-and-mortar store) makes a more significant

contribution to the transaction than the warehouse that the purchaser did not

personally visit and from which the taxable item is shipped, delivered, or picked up.

Therefore, the Legislature chose the brick-and-mortar store as the origin of the

taxable sale entitling the municipality in which it was located to receive the local

sales tax.

The need for those restrictions necessarily reflects the Legislature’s

understanding that, for local-sales-tax purposes, “orders” can be placed and received

other than in-person, that they can be forwarded, and most importantly for this case,

“orders” can be “received” at multiple locations. Otherwise, the Legislature would

have had no reason to include the limiting conditions “first received” and “in

person.” Moreover, and critically for the dispute here, the Author’s/Sponsor’s

Statement of Intent confirms the Legislature’s understanding and intention that if an

order is not received in-person, but instead is received through “non-traditional sales

channels” (such as an order placed on a website and transmitted over the Internet,

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 32
an Internet Sale) the taxable sale is consummated at the established location operated

by the retailer from which shipment or delivery to, or pickup by, the buyer occurs.

D. That the Legislature intended the plain meanings of “receives”
and “order” is reflected by the Comptroller’s acceptance of those
meanings for 46 years.

Until 2020, the Comptroller had never in a rule placed any conditions on how,

when, where, by or from whom, how often an order is received, or what it must

consist of. See 4 Tex. Reg. 3618, 3621 (1979); 34 Tex. Admin. Code § 3.374(a)(2)

(1986); 39 Tex. Reg. 9597, 9604 (2014); 41 Tex. Reg. 260, 262 (2016). And the pre-

2020 pronouncements generally tracked the words used in the statute to define a

place of business. See id. Consistently from 1979 until 2020, the Comptroller

considered a place of business either a retailer location with the purpose of selling

or such a location that “takes orders.” See id. Both were locations connected with

the sales process. Moreover, before 2020, the Comptroller offered no regulatory

definition, by rule or ruling, of “receives.” There still is no regulatory definition of

“order.” Although that regulatory acceptance of the plain meanings of the statutory

words is not conclusive, it supports the Coppell Plaintiffs’ argument about what the

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 33
Legislature intended. See Tex. Dep’t of Protective & Regul. Servs. v. Mega Child

Care, Inc., 145 S.W.3d 170, 176 (Tex. 2004). 33

Further, until 2020 the Comptroller also agreed that orders that are a

fundamental part of Internet Sales (orders placed on websites) could be received at

an established location operated by the retailer. (CR:1026–30; CPExs.1–7; CR:737–

38, 739–41, 859–917, 663–74, 687–709, 675–86, 742–53, 1021–22, 756–67.) And

consistent with that past acceptance, the May 2020 version of § 3.334 provided that

the new position on Internet Sales did not become effective for more than a year

after the rule was adopted. See 45 Tex. Reg. 3499, 3511 (2020) (App. Tab F). There

would have been no need to delay implementation if there was no change.

3. In § 3.334, the Comptroller has strung together intertwined regulatory
provisions that improperly add conditions contravening the plain
meaning of “receives” and “order” that result in the displacement of
origin-sourcing.
In 2020 the Comptroller set out to rewrite the statutory definition of place of

business through a series of four amendments to § 3.334. The final amendment,

effective July 4, 2024, adds language not found in versions of § 3.334 predating 2020

33
In the last three legislative sessions the Comptroller has supported bills that would have
amended Chapter 321 to make it consistent with the current version of § 3.334. That is, the
Comptroller seeks to have the Legislature impose “destination-sourcing” on Internet Sales.
None of the bills the Comptroller supported made it out of the House of Representatives.
(See CPEx.51:932–35); HB 4072, 87th Leg., R.S. (2021); (CPEx.52:936–43); HB 5089,
88th Leg., R.S. (2023); HB 134, 89th Leg., R.S. (2025), available at
https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB134. If the
statutory definition of place of business meant what the Comptroller insists in § 3.334 it
does, no change to the statutory definition would be needed.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 34
in the following subsections: (a)(9), (a)(18), (b)(1)(A), (b)(5) and (c)(7). See 49 Tex.

Reg. 4797, 4797–4808 (2024) (App. Tab I).

Subsection (a)(9) for the first time defines “fulfill” as not involving any steps

leading to the transfer of possession of a taxable item to a purchaser or the shipment

or delivery of a taxable item to a location designated by the purchaser.

Subsection (a)(18) for the first time introduces the concept that established

locations operated by a retailer should have sales personnel (an undefined term) and

that a computer server is not a place of business.

Subsection (b)(1)(A) for the first time requires that for certain established

locations operated by the retailer to be places of business [distribution centers,

manufacturing plants, storage yards, warehouses, or similar facilities] they (1) must

have sales personnel present that receive the orders, and (2) must not receive

forwarded orders (an undefined term).

Subsection (b)(5) for the first time dictates that (1) a “facility” not described

by subsection (b)(1)(A) without sales personnel is presumed to not be a “place of

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 35
business of the retailer” 34 and (2) a computer used in connection with an Internet

Sale is neither an established location nor a place of business. 35

Subsection (c)(7) for the first time says (1) that an order can be received only

once and only at the location where the information from the purchaser is received

and reviewed to determine whether the order can be accepted and (2) once that

acceptance determination is made whatever information is “forwarded” is not an

order.

As a result, a retailer that keeps taxable items to sell in the ordinary course of

its business at an established location it operates and relies entirely on Internet Sales,

such as a fulfillment center, does not have a place of business at that location. No

taxable sales can be consummated there. Instead, under the Comptroller’s amended

§ 3.334, sales of taxable items shipped from such locations are consummated at the

location to which the item is shipped or delivered.36 In other words, the Comptroller

has purported to impose “destination-sourcing” on such taxable sales without any

action by the Legislature authorizing the change.

34
There is nothing in § 3.334 that provides any guidance on how this “presumption” can
be overcome. It is effectively irrebuttable.
35
This limiting condition when combined with the others means a computer that “reviews”
an order for acceptability “receives” the order but is not still not a place of business and
the location that receives the order that has passed through that computer has received a
“forwarded” order, meaning that order cannot create a place of business.
36
The Comptroller has never identified a statutory basis for this conclusion. It appears to
be ipse dixit.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 36
Adding conditions to § 3.334 to single out Internet Sales and the fulfillment

centers that are integral to such sales violates a fundamental tenet of statutory

construction—administrative agencies no more than courts can add words to a

statute. The Legislature is presumed to have “included each word in the statue for a

purpose and that words not included were purposefully omitted.” ExxonMobil

Pipeline Co. v. Coleman, 512 S.W.3d 895, 899 (Tex. 2017); TGS-NOPEC

Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011) (same); Tex. Mut. Ins.

Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012) (same); Centerpoint Builders GP,

LLC v. Trussway, Ltd., 496 S.W.3d 33, 36 (Tex. 2016) (“We presume the Legislature

deliberately and purposefully selects words and phrases it enacts, as well as

deliberately and purposefully omits words and phrases it does not enact.”) (cleaned

up); In re Christus Santa Rosa Health Sys., 492 S.W.3d 276, 283 (Tex. 2016) (orig.

proceeding) (same). Not one of the limiting conditions on what is a place of business

imposed by the Comptroller in § 3.334 is found in the statutory definition of that

term. (See App. Tab J.)

4. The arguments advanced by the Comptroller fail to justify his effort to
limit the plain meanings of “receives” and “order.”
In the district court, the Comptroller argued that term of art, context, and avoiding

absurdity required rejection of the plain meanings of “receives” and “order.” As

explained in detail below, the Comptroller’s justifications fail.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 37
A. “Receives” and “order” by themselves or together are not “terms of
art,” with a meanings different than their plain meanings.

The Comptroller has asserted that because the Legislature has defined place

of business, the phrase “place of business” is a “term of art.” (CR:1822–23); 49 Tex.

Reg. 4797, 4798 (2024) (App. Tab I). There are four problems with that argument.

First, the phrase “place of business” is not a “term of art” simply because it

has been defined by the Legislature. Courts recognize that words can acquire

particular meanings by legislative definition. They can also have a particular

meaning by being applied in a specific way in some art, science, or trade in which

case courts “look to the particular craft in order to ascertain its proper significance.”

RJR Vapor Co., LLC v. Hegar, 681 S.W.3d 867, 881 (Tex. App.—Austin 2023, pet.

granted) (quoting Tex. Gov’t Code § 311.011(b)); Tex. Health Harris Methodist

Hosp. Fort Worth v. Featherly, 648 S.W.3d 556, 570 (Tex. App.—Fort Worth 2022,

pet. denied). In other words, if a statutory definition exists, courts do not look to

some art, science, or trade for what it means. They look to the statutory definition.

Second, the issue in this appeal is not what the phrase “place of business”

means, divorced from the words the Legislature chose to define it. Rather, at issue

is what the words in the statutory definition mean.

Third, the words “receives” and “order” are not terms of art. Nothing in the

record identifies a “given specialty” or any “particular trade, subject matter, or art”

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 38
with experts in that specialty that understand “receives” or “order” differently than

their plain meanings when used to describe sales transactions.

Fourth, the meanings of “receives” and “order” must be read in conjunction

with the purpose of the phrase “place of business” which is to help determine, in

connection with the statutory consummation directives, which city should receive

local sales tax from a taxable sale. The words “receives” and “order” only make a

location in a municipality eligible to receive local sales tax because it is a place of

business. The consummation directives determine whether that place of business

gets the local sales tax. The Legislature is the expert on how that purpose—who gets

the local sales tax—is to be achieved. If it intended the words “receives” or “order”

to limit the potential locations eligible to receive local sales tax, it would have given

them specialized meanings. It did not.

B. The phrase “for the purpose of receiving order” in the definition
of “place of business” does not evidence context relevant to the
meaning of that phrase.
According to the Comptroller, the phrase “for the purpose of receiving

orders,” which is found in the definition of place of business, provides “context” for

rejecting the plain meanings of “receives” and “order.” (See CR:2594–97.) The

Comptroller’s argument goes like this. Traditionally, sales offices have the purpose

of receiving orders, and traditionally, they had (and have) sales personnel to receive

those orders. Therefore, “for the purpose of receiving orders” suggests to the mind

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 39
of the ordinary reader locations that have sales personnel. See id. There are several

problems with this argument.

First, as the Comptroller has consistently recognized, an established location

operated by a retailer does not have to have the purpose of receiving orders to be a

place of business. (CR:2597); City of Webster, 311 S.W.3d at 96. If the location

receives three orders in a calendar year, it is a place of business. (See id.) Because

the purpose condition need not be satisfied for a place of business to exist, it

necessarily follows that sales personnel need not be present for a location to be a

place of business. And consistent with this conclusion, the Legislature provided that

a warehouse, storage yard, or manufacturing facility, none of which is commonly

understood as having sales personnel, can be places of business. All the Legislature

required is that they must receive three orders.

Second, even for locations that are places of business based on having a

“purpose of receiving orders,” a need for them to have sales personnel does not

follow logically. It is an example of the distributive fallacy, in which it is incorrectly

assumed that a group has all the properties of one of its members. Just because one

place of business with a “purpose of receiving orders” may have sales personnel

does not mean all such places of business must have sales personnel.

Third, even if the Comptroller were correct in his speculation about the images

that the words “for the purpose of receiving orders” would have called up in the

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 40
mind of the ordinary person in 1979—the record contains no evidence to support

this speculation—statutory interpretation today does not turn on such legislative

mindreading. It focuses instead on the meanings of the words the Legislature used.

And as discussed in Part 5, the approach is not different even if the meanings of the

words encompasses notions unthought of at the time the statute was enacted—such

as receipt of orders by computers running software rather than by “sales personnel.”

C. Other states’ understanding of “receives” is not “context.”

The Comptroller asserted in the district court that the word “receive” in

section 321.002(a)(3)(A) should be understood consistently with guidelines found

in the Streamlined Sales and Use Tax Agreement (the “Streamlined Agreement”).

See (7RR:93–101; CR:2594–95). He suggests, in other words, that the local-sales-

tax-practices in other states is relevant “context” for the interpretation of the Texas

Tax Code. So, he inserted section (c)(7) into § 3.334 verbatim from the Streamlined

Agreement, using 125 words to define the single word “receive.” See 49 Tex. Reg.

4797, 4801 (2024) (App. Tab I). In adopting the language from the Streamlined

Agreement, the Comptroller contradicted the plain but broad meanings of “receives”

and “order.” Contrary to those plain meanings, the Streamlined Agreement limits

receipt of orders to a single location and limits how, when, where, by or from whom,

or how often an order can be received.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 41
But the Legislature rejected becoming a member of the Streamlined

Agreement because the guidelines were based on “destination-sourcing” not “origin-

sourcing.” (CPEx.36:9–10.) The Coppell Plaintiffs are unaware of any Texas

decision that has considered “context” to include using how other states have

expressly defined a word. To the contrary, the Legislature’s rejection of the

Streamlined Agreement suggests that the Legislature was also rejecting the very

definition the Comptroller seeks to use to displace the plain meanings of the words

in the Texas definition of “place of business.”

Any doubt that the definition of “receives” as taken from the Streamlined

Agreement is of no use in understanding the meaning of a word used by the Texas

Legislature is laid to rest by the Supreme Court’s decision in Graphic Packaging

Corp. v. Hegar, 538 S.W.3d 89, 102, 104–05 (Tex. 2017). There, the court made

clear that, even when the state is a party to a multi-state agreement, it reserves its

right to administer its laws without reference to or consideration of what other states

have decided to do under that agreement. See id. at 102. If that rule applies to multi-

state agreements to which the state is a party, it applies more strongly when the state

has rejected becoming a party.

D. The plain meanings of “receives” and “order” do not create an
absurdity.

For an asserted absurdity to defeat plain meaning, the result of applying plain

meaning must be more than peculiar, odd, unfair, or illogical. Jaster v. Comet II

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 42
Constr., Inc., 438 S.W.3d 556, 574 (Tex. 2014) (citation omitted). Rather, the result

must be “unthinkable or unfathomable.” Rodriguez v. Safeco Ins. Co. of Indiana,

684 S.W.3d 789, 796 (Tex. 2024). The issue the Comptroller points to does not come

close to meeting those standards.

According to the Comptroller, if “receives” and “order” are given their plain

meanings in the definition of place of business, any established location operated by

the retailer that gets a purchaser’s request to be supplied a taxable item is a place of

business 37 and, in one limited situation addressed in section 321.203(d)(1) of the

statute, there is no way for the retailer or the Comptroller to determine where the

taxable sale is consummated. (CR:2596–97.) The only way to deal with the issue, as

far as the Comptroller is concerned, is to impose limiting conditions on the definition

of place of business to reduce to one, the established locations operated by a retailer

that qualify as a place of business, and, in turn limiting to one where consummation

happens. (See id.)

The Comptroller is wrong. He is disregarding both the statutory history and

the structure of Chapter 321. As already discussed, statutory history establishes that

the Legislature did not intend to cabin what is a place of business as has the

Comptroller in § 3.334. And the structure establishes that the definition of place of

37
As discussed earlier, not every established location operated by the retailer that receives
an order qualifies as a place of business.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 43
business, based on the plain meaning of the words in that definition, controls all the

sections that follow because the definitional section says that “In this chapter” (the

whole chapter) those definitions apply. That command necessarily includes the

consummation directives. Most tellingly, the plain but broad meaning of place of

business also necessarily applies to the requirement imposed in the 1979 Act, and

unchanged since, that each place of business must have a permit. See Tex. Tax Code

§ 231.303(a). In other words, to capture every retailer location involved in sales

activity, and thus all sales tax properly payable, the legislature defined “place of

business” capaciously, as any location with the purpose of or that does in fact receive

at least three orders.

The Comptroller rejects this sequencing and he would instead have (d)(1)

require that the plain meaning be limited in order to answer at which place of

business to which (d)(1) applies consummation happens. The Comptroller’s

assertion overlooks that the history and structure of section 321.203 provide an

answer without the need to make “receives” and “order” mean something other than

a request to be supplied a taxable item: their plain meanings. So the Comptroller has

things backward—the consummation directives cannot be read to limit the Chapter-

wide definition of place of business.

Those directives identify where the consummation of taxable sales occurs in

four different situations involving four different types of places of business. For a

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 44
retailer with a single place of business, all sales are consummated at that location.

See Tex. Tax Code § 321.203(b) (App. Tab D). For a retailer with multiple places of

business, consummation occurs where physical segregation (delivery or shipment

to, or pick-up by, the purchaser) occurs. See id. at §§ 321.203(c)–(c-1) (App. Tab

D). For a retailer with multiple places of business, but an order is placed in-person

by the purchaser, consummation occurs at the place of business that first receives

that order and not where physical segregation occurs. See id. If none of those

circumstances exist, consummation occurs at the place of business where the order

was received. See id. at § 321.203(d)(1) (App. Tab D).38

Subparagraphs (b), (c), and (c-1) in section 321.203 each describe conditions

for determining the location where a taxable sale is consummated that either have

nothing to do with receipt of a specific order (a single place of business on one hand

or where physical segregation occurs on the other) or cover an order made in a

distinctive way (where an in-person order is first placed). Those conditions allow

immediate identification of the exact place of business, out of all eligible places of

business, where consummation occurs. Subsection (d)(1) does not do that.

38
Section 321.203(d) was added in 1979 when the statutory definition of place of business
was adopted in response to Dunigan. Given that it was added to the statutory consummation
directives that recognized physical segregation, which was not deleted, it necessarily
described paper segregation, which the Comptroller argued in Dunigan is where
consummation occurs.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 45
But the Legislature, by a process of elimination, has made clear where

consummation occurs in the circumstance addressed by (d)(1). As recognized in

Dunigan, consummation of a taxable sale can occur where physical segregation

happens or where paper segregation occurs. At a single place of business, either or

both happen at the same location. Where an order is first placed in-person, paper

segregation happens at that location. Where a taxable good is shipped, delivered, or

picked up, physical segregation occurs at that location. Physical segregation cannot

happen in the circumstances covered by (d)(1) because by the terms of subsection

(d), it applies only if (b), (c), or (c-1) do not apply. That necessarily means that in

the (d)(1) situation, only paper segregation can determine where consummation

happens.

And “paper segregation” by its nature only occurs once and in one location,

which explains the use in (d)(1) of “the” order and “the” place of business. So, the

allegedly “absurd” problem facing the Comptroller is at most a purely technical and

easily manageable question: for taxable sales covered by (d)(1), where does “paper

segregation” occur? It is not “unfathomable” or “unthinkable” that the Legislature

would leave to the Comptroller to decide, as a practical matter, where “paper

segregation” occurs in the (d)(1) situation. There is neither need nor occasion for

policymaking by the Comptroller. Nor a need to overrule the plain meanings of

“receives” and “order” as used in the statutory definition of place of business. The

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 46
Legislature has decided where consummation occurs in the limited (d)(1) situation:

where paper separation happens. 39 The Comptroller simply needs to identify which

place of business that is factually, taking into account the varying kinds of sale

transactions conducted in today’s economy.

5. The Comptroller’s limiting conditions are based on an outdated sales
model – person to person – when the definition of place of business and
the consummation directives are broad enough to include new
approaches based on technological developments.

Why did the Comptroller wait until 2020 to add limiting conditions to the

plain meanings of “receives” and “order?” Based on the comments received to the

proposed amendments, it appears the new rule was a response to concerns that

Internet Sales were significantly diverting local sales tax from communities with

“main street” brick-and-mortar stores to communities with fulfillment centers. See

49 Tex. Reg. 2440, 2448 (2024) (App. Tab H). Apart from the fact that this concern

has no factual support, 40 the solution cannot be to rewrite the statutory definition of

place of business.

39
Significantly the Comptroller never identified in any of proposed amended rules
beginning in 2020 that the application of (d)(1) had presented problems in the past for the
agency or retailers. The purported need to issue rules making explicit how it applies, is
creating a solution in the absence of a problem
40
The only study in the administrative record on this issue demonstrates that fulfillment
centers in one community do not materially reduce the amount of local sales tax other
communities collect, and that if fulfillment centers are not places of business there would
be no material increase in the local sales tax allocated to communities with no or few
fulfillment centers. (CPEx.39:48–59.)

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 47
According to the Comptroller, if a fulfillment center ships taxable items to a

purchaser based solely on Internet Sales, the fulfillment center is not a place of

business. Yet as the Comptroller concedes, if three purchasers were to walk into the

fulfillment center and use a computer at the fulfillment center to place an order on a

website and the taxable item ordered was shipped from that fulfillment center, it

would then be a place of business not only for that order but for every Internet Sales

item shipped or delivered from or picked up at that location. In that circumstance

every sale is consummated at the fulfillment center. (CR:2597; 12RR:102–04.) And

likewise, as the Comptroller agrees, if a fulfillment center takes in three emailed or

faxed requests to be supplied a taxable item and that item is shipped or delivered

from or picked up at that location, then the sale of every Internet Sales item shipped

or delivered from or picked up at that location is consummated there. But if that

same location handles only Internet Sales, it is not a place of business, and no taxable

sale of any taxable item shipped or delivered from or picked up at that location is

consummated there. If the definition of place of business creates any absurdity, it is

the application of anything other than the plain meanings of “receives” and “order”

that produces these absurd results.

As explained, nothing in the definition of place of business supports such

distinctions. Rather, the plain and broad meanings of “receives” and “order” compel

the opposite result: the orders that are part of and fundamental to Internet Sales are

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 48
received at fulfillment centers and consummated there. The only plausible

explanation for the Comptroller refusing to recognize those facts is an unwillingness

to accept technological developments over the last 40 years in how people buy

things—the use of order management software (automated website ordering

software) that runs on computers connected via the Internet. The provisions of §

3.334 that the Coppell Plaintiffs challenge impose a person-to-person sales process

that did not exist even in 1979 (think sales by fax or mail order), and has continued

to evolve since, but only because what was done by actually visiting retail locations

is now often done virtually and more efficiently with greater choice and lower costs

through Internet Sales.

In Miles v. Texas Central Railroad & Infrastructure, Inc., the Supreme Court

noted:

We have long interpreted statutes … to embrace later-developed
technologies if the [statutory] language used is broad enough to
embrace a subsequently developed method.

647 S.W.3d 613, 623 (Tex. 2022). At issue in Miles was whether the phrase

“interurban electric railway company” was limited to a specific type of beefed-up

urban trolley or included a modern high-speed electrically powered passenger train.

See id. at 621. In agreeing that an “interurban electric railway company” described

an entity operating a high-speed electric passenger train the court concluded:

[H]igh-speed rail was unimaginable when the Legislature passed the
1907 statute at issue here. But if technology had accelerated such that

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 49
high-speed rail became available in 1908, no one would have thought
that the Legislature would need to pass another statute to accommodate
it. We agree with the dissent that courts must give a statutory provision
the ordinary meaning that it had at the time it was enacted. The 1907
statute’s text may have been capacious, but it was not unclear.

Id. at 623 (emphasis added) (internal citations omitted).

In the same way, the plain meanings of the words “receives” and “orders” are

broad but not unclear. Their reach is not limited to what images their use may have

brought to the mind of the ordinary person or the ordinary retailer or the ordinary

legislator in 1979. The Legislature is deemed to have understood the breadth of the

words used and that they would encompass future as well as then-current ways for

orders to be received. The teaching of Miles could not be more plain—words that

are capacious but clear include technological developments that were unknown at

the time the disputed statutory language was adopted. The Legislature could,

naturally, rewrite the definition of place of business to preclude locations that

received orders through non-traditional sales channels from being places of business.

It has not done so. And the Comptroller lacks authority to act in the Legislature’s

place.

Because the limiting conditions imposed by the amendments to § 3.334

challenged by the Coppell Plaintiffs simply reject technological advancements in the

sales process (Internet Sales), they contravene the statutory definition of place of

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 50
business, run counter to the general objectives of the definition, and impose

conditions not found in that definition. They are invalid.

CONCLUSION AND PRAYER
Subsections (a)(9), (a)(18), (b)(1)(A), (b)(5) and (c)(7) of § 3.334 violate the

statute they purport to implement. Specifically, they individually and in

combination, invalidly rewrite the statutory definition of “place of business.” And

in doing so they (1) contravene specific statutory language; (2) run counter to the

general objectives of the statutory provisions it is implementing; or (3) impose

additional burdens, conditions, or restrictions in excess of or inconsistent with the

stator definition of “place of business.” This Court should therefore render judgment

that the identified portions of § 3.334 are invalid. The Coppell Parties also request

general relief.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 51
Dated: September 26, 2025

Respectfully submitted,

HOLLAND & KNIGHT LLP

By: /s/ Richard B. Phillips, Jr.
James B. Harris
State Bar No. 09065400
james.harris@hklaw.com

Stephen F. Fink
State Bar No. 07013500
stephen.fink@hklaw.com

Richard B. Phillips, Jr.
State Bar No. 24032833
rich.phillips@hklaw.com
Reed C. Randel
State Bar No. 24075780
reed.randel@hklaw.com
Cole W. Browndorf
State Bar No. 24127229
cole.browndorf@hklaw.com

1722 Routh Street, Suite 1500
Dallas, Texas 75201
Phone: (214) 964-9500
Fax: (214) 964-9501

Counsel for Coppell Parties

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 52
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the typeface requirements of TEX. R. APP.
P. 9.4(e), because it has been prepared in Times New Roman font in 14-point for
text and 13-point for footnotes. This document also complies with the word-count
limitations of TEX. R. APP. P. 9.4(i), because it contains 13,001 words, excluding any
parts exempted by TEX. R. APP. P. 9.4(i)(1).

/s/ Richard B. Phillips, Jr.
Richard B. Phillips, Jr.

COPPELL PARTIES’ OPENING BRIEF AS APPELLANTS—PAGE 53
TAB
A
12/03/2024 11:08:06 AM
Velva L. Price
District Clerk
Travis County
D-1-GN-21-003198
CAUSE NO. D-1-GN-21-003198*
(Consolidated with D-1-GN-21-003203)

CITY OF COPPELL, TEXAS, § IN THE DISTRICT COURT OF
CITY OF HUMBLE, TEXAS, §
CITY OF DESOTO, TEXAS, §
CITY OF CARROLLTON, TEXAS, §
CITY OF FARMERS BRANCH, TEXAS, and §
CITY OF ROUND ROCK, TEXAS, §
§
Plaintiffs,
§ TRAVIS COUNTY, TEXAS
v. §
§
GLENN HEGAR, in his official capacity §
as Comptroller of Public Accounts of §
the State of Texas, §
§
Defendant. § 201ST JUDICIAL DISTRICT
§ (*Assigned to the 250th District)

FINAL JUDGMENT

On October 14–16, 2024, the Court heard the merits of these consolidated causes. Attorneys

James Harris and Reed Randel appeared for Plaintiffs City of Humble, Texas; City of Desoto, Texas;

City of Carroll, Texas; City of Coppell, Texas; and City of Farmers Branch, Texas (the Coppell

Plaintiffs). Attorneys Cindy Olsen Bourland and Bryan Dotson appeared for Plaintiff City of Round

Rock, Texas (the Round Rock Plaintiff). Attorneys Kyle Counce and Ray Langenberg appeared for

Defendant Comptroller of Public Accounts of the State of Texas (the Comptroller). The parties

announced ready and proceeded to trial.

After careful consideration of the evidence and arguments of counsel, the Court renders

judgment as follows:

FINAL
FI
FINNA
AL JUDGMENT
JJU
UDGM Page 1 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2797
The Court FINDS that Section 321.002(a)(3)(A) of the Tax Code requires a determination

of whether at least three orders were received by the retailer during the calendar year. Therefore,

the Court cannot prospectively declare Fulfillment Centers as places of business.

Accordingly, the Court FINDS that Coppell Plaintiffs’ request to declare Fulfillment Centers

receiving only Website Orders places of business under the 2016 version of 34 TAC § 3.334 should

be and is DENIED.

The Court FINDS that 34 TAC § 3.334(a)(9) contravenes existing statutes by adding a

definition at the agency level that the Legislature has not defined in Chapter 151 of the Texas Tax

Code and for which Sections 321.203 and 323.203 already provide a detailed statutory scheme for

determining where a sale of taxable item is “consummated.”

The Court FINDS that 34 TAC § 3.334(a)(18), (b)(5), and (c) contravene specific statutory

language set forth in Texas Tax Code sections 321.002(a)(3)(A), 321.203, and 323.203.

The Court FINDS that 34 TAC § 3.334(c) [(c)(1) and (c)(2) inclusive] contravenes the

statutory schemes for determining where a sale is consummated, under Sections 321.203 and

323.203.

The Court FURTHER FINDS that the Comptroller did not substantially comply with the

notice requirements under the APA.

The Court FURTHER FINDS that Defendant Comptroller did not substantially comply

with the “reasoned justification” requirement under the APA.

FINAL
FI
FINNA
AL JUDGMENT
JJU
UDGM Page 2 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2798
IT IS JUDICIALLY DECLARED that 34 TAC § 3.334 or its threatened application interferes

with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Coppell

Plaintiffs.

IT IS JUDICIALLY DECLARED that 34 TAC § 3.334 or its threatened application interferes

with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Round Rock

Plaintiff.

IT IS THEREFORE ORDERED that Defendant Comptroller of Public Accounts of the State

of Texas is hereby PERMANENTLY ENJOINED from enforcing 34 TAC § 3.334, subsections (a)(9),

(a)(18), (b)(5), and (c), effective July 4, 2024, and those subsections are hereby REMANDED to the

Comptroller of Public Accounts of the State of Texas for further consideration not inconsistent with

Chapters 151, 321, and 323 of the Texas Tax Code.

All other relief not expressly granted herein is DENIED. This judgment finally disposes of all

parties and all claims and is appealable.

Signed on this third day of December 2024,

___
__________
______
______
____________________________________
K ARIN C
KARIN CRRUM
RUM
U P
CRUMP
JUDGE PRESIDING
250th DISTRICT COURT

03/
3/26/
/26/
26 202
25 01:0
01:4
1:46
6

FINAL JUDGMENT Page 3 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2799
TAB
B
12/30/2024 04:16:17 PM
Velva L. Price
District Clerk
Travis County
D-1-GN-21-003198
CAUSE NO. D-1-GN-21-003198*
(Consolidated with D-1-GN-21-003203)

CITY OF COPPELL, TEXAS, § IN THE DISTRICT COURT OF
CITY OF HUMBLE, TEXAS, §
CITY OF DESOTO, TEXAS, §
CITY OF CARROLLTON, TEXAS, §
CITY OF FARMERS BRANCH, TEXAS, and §
CITY OF ROUND ROCK, TEXAS, §
§
Plaintiffs,
§ TRAVIS COUNTY, TEXAS
v. §
§
GLENN HEGAR, in his official capacity §
as Comptroller of Public Accounts of §
the State of Texas, §
§
Defendant. § 201ST JUDICIAL DISTRICT
§ $ssigned to the 250th District&RXUW

CONCLUSIONS OF LAW

On December 3, 2024, the Court issued its Final Judgment for this cause. The Coppell

Plaintiffs’ Request for Findings of Fact and Conclusions of Law was filed on December 23, 2024. On

December 30, 2024, the Coppell Plaintiffs informed the Court that they have “concluded that findings

of fact are unnecessary in this case [and] therefore withdraw that portion of the December 3, 2024

request for findings of fact.” Accordingly, the Court hereby issues the following Conclusions of Law:

1. 34 Texas Administrative Code (TAC) § 3.334(a)(9) contravenes existing statutes by

adding a definition at the agency level that the Legislature has not defined in Chapter 151 of the Texas

Tax Code and for which Sections 321.203 and 323.203 already provide a detailed statutory scheme for

determining where a sale of taxable item is “consummated.”

2.
2. 34 TAC § 3.334(a)(18), (b)(5), and (c) contravene specific statutory language set forth

Texas
iinn Teex Tax
xaass Tax Code sections 321.002(a)(3)(A), 321.203, and 323.203.
ax

CONCLUSIONS
CO
C ONC
NC L
LU
USION OF LAW
Cause No. D-1-GN-21-003198 (Consolidated)
2846
3. 34 TAC § 3.334(c) [(c)(1) and (c)(2) inclusive] contravenes the statutory schemes for

determining where a sale is consummated, under Sections 321.203 and 323.203.

4. 34 TAC § 3.334(b)(1)(A), when read in conjunction with its (b)(1)(B), is a descriptive

statement of those circumstances when a distribution center, manufacturing plant, storage yard,

warehouse, or similar facility “is a place of business of the seller” within the meaning of Texas Tax

Code section 321.002(a)(3)(A). $VVXFK, 34 TAC § 3.334(b)(1)(A) is a statement of qualification by

which such a location may be considered a place of business of the seller under Section

321.002(a)(3)(A).

5. The Comptroller did not substantially comply with the notice requirements under the

Administrative Procedure Act (APA).

6. The Comptroller did not substantially comply with the “reasoned justification”

requirement under the APA.

7. 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to

interfere with or impair, a legal right or privilege of the Coppell Plaintiffs.

8. 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to

interfere with or impair, a legal right or privilege of the Round Rock Plaintiff.

Signed on tKHWKday of December 2024

____________________________________
________________
__ ________
KARIN
KARIN CRUMP
N CR
CRUM
U
Judge Presiding, 250th District Court

03/
3/26/
/26/
26 202
25 01:0
01:4
1:47
7

CONCLUSIONS OF LAW
Cause No. D-1-GN-21-003198 (Consolidated)
2847
TAB
C
§ 321.002. Definitions, TX TAX § 321.002

Vernon's Texas Statutes and Codes Annotated
Tax Code (Refs & Annos)
Title 3. Local Taxation
Subtitle C. Local Sales and Use Taxes
Chapter 321. Municipal Sales and Use Tax Act (Refs & Annos)
Subchapter A. General Provisions

V.T.C.A., Tax Code § 321.002

§ 321.002. Definitions

Currentness

(a) In this chapter:

(1) “Additional municipal sales and use tax” means only the additional tax authorized by Section 321.101(b).

(2) “Municipality” includes any incorporated city, town, or village.

(3)(A) “Place of business of the retailer” means an established outlet, office, or location operated by the retailer or the retailer's
agent or employee for the purpose of receiving orders for taxable items and includes any location at which three or more
orders are received by the retailer during a calendar year. A warehouse, storage yard, or manufacturing plant is not a “place
of business of the retailer” unless at least three orders are received by the retailer during the calendar year at the warehouse,
storage yard, or manufacturing plant.

(B) An outlet, office, facility, or any location that contracts with a retail or commercial business to process for that business
invoices, purchase orders, bills of lading, or other equivalent records onto which sales tax is added, including an office
operated for the purpose of buying and selling taxable goods to be used or consumed by the retail or commercial business,
is not a “place of business of the retailer” if the comptroller determines that the outlet, office, facility, or location functions
or exists to avoid the tax legally due under this chapter or exists solely to rebate a portion of the tax imposed by this chapter
to the contracting business. An outlet, office, facility, or location does not exist to avoid the tax legally due under this
chapter or solely to rebate a portion of the tax imposed by this chapter if the outlet, office, facility, or location provides
significant business services, beyond processing invoices, to the contracting business, including logistics management,
purchasing, inventory control, or other vital business services.

(C) Notwithstanding any other provision of this subdivision, a kiosk is not a “place of business of the retailer.” In this
subdivision, “kiosk” means a small stand-alone area or structure that:

(i) is used solely to display merchandise or to submit orders for taxable items from a data entry device, or both;

(ii) is located entirely within a location that is a place of business of another retailer, such as a department store or
shopping mall; and

© 2025 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 321.002. Definitions, TX TAX § 321.002

(iii) at which taxable items are not available for immediate delivery to a customer.

(b) Words used in this chapter and defined by Chapter 151 have the meanings assigned by Chapter 151.

Credits
Added by Acts 1987, 70th Leg., ch. 191, § 1, eff. Sept. 1, 1987. Amended by Acts 2003, 78th Leg., ch. 1155, § 1, eff. Sept. 1,
2003; Acts 2009, 81st Leg., ch. 1360, § 4, eff. Sept. 1, 2009; Acts 2011, 82nd Leg., ch. 942 (H.B. 590), § 1, eff. Sept. 1, 2011;
Acts 2013, 83rd Leg., ch. 1361 (S.B. 1533), § 1, eff. Sept. 1, 2013.

V. T. C. A., Tax Code § 321.002, TX TAX § 321.002
Current through the end of the 2025 Regular, First Called and Chapters 2 through 4 of the Second Called Sessions of the 89th
Legislature.

End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.

© 2025 Thomson Reuters. No claim to original U.S. Government Works. 2
TAB
D
§ 321.203. Consummation of Sale, TX TAX § 321.203

Vernon's Texas Statutes and Codes Annotated
Tax Code (Refs & Annos)
Title 3. Local Taxation
Subtitle C. Local Sales and Use Taxes
Chapter 321. Municipal Sales and Use Tax Act (Refs & Annos)
Subchapter C. Computation of Taxes

V.T.C.A., Tax Code § 321.203

§ 321.203. Consummation of Sale

Currentness

(a) A sale of a taxable item occurs within the municipality in which the sale is consummated. A sale is consummated as provided
by this section regardless of the place where transfer of title or possession occurs.

(b) If a retailer has only one place of business in this state, all of the retailer's retail sales of taxable items are consummated at
that place of business except as provided by Subsection (e).

(c) If a retailer has more than one place of business in this state, each sale of each taxable item by the retailer is consummated
at the place of business of the retailer in this state where the retailer first receives the order, provided that the order is placed
in person by the purchaser or lessee of the taxable item at the place of business of the retailer in this state where the retailer
first receives the order.

(c-1) If the retailer has more than one place of business in this state and Subsection (c) does not apply, the sale is consummated
at the place of business of the retailer in this state:

(1) from which the retailer ships or delivers the item, if the retailer ships or delivers the item to a point designated by the
purchaser or lessee; or

(2) where the purchaser or lessee takes possession of and removes the item, if the purchaser or lessee takes possession of and
removes the item from a place of business of the retailer.

(c-2) Expired.

(c-3) Expired.

(c-4) Expired.

(c-5) Expired.

© 2025 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 321.203. Consummation of Sale, TX TAX § 321.203

(d) If the retailer has more than one place of business in this state and Subsections (c) and (c-1) do not apply, the sale is
consummated at:

(1) the place of business of the retailer in this state where the order is received; or

(2) if the order is not received at a place of business of the retailer, the place of business from which the retailer's agent or
employee who took the order operates.

(e) A sale of a taxable item is consummated at the location in this state to which the item is shipped or delivered or at which
possession is taken by the customer if transfer of possession of the item occurs at, or shipment or delivery of the item originates
from, a location in this state other than a place of business of the retailer and if:

(1) the retailer is an itinerant vendor who has no place of business in this state;

(2) the retailer's place of business where the purchase order is initially received or from which the retailer's agent or employee
who took the order operates is outside this state; or

(3) the purchaser places the order directly with the retailer's supplier and the item is shipped or delivered directly to the
purchaser by the supplier.

(e-1) Except as otherwise provided by Subsection (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), (m), or (n), a sale of a taxable item
made by a marketplace seller through a marketplace as provided by Section 151.0242 is consummated at the location in this
state to which the item is shipped or delivered or at which possession is taken by the purchaser.

(f) The sale of natural gas and electricity is consummated at the point of delivery to the consumer.

(g) The sale of mobile telecommunications services is consummated in accordance with Section 151.061.

(g-1) The sale of telecommunications services sold based on a price that is measured by individual calls is consummated at
the location where the call originates and terminates or the location where the call either originates or terminates and at which
the service address is also located.

(g-2) Except as provided by Subsection (g-3), the sale of telecommunications services sold on a basis other than on a call-by-
call basis is consummated at the location of the customer's place of primary use.

(g-3) A sale of post-paid calling services is consummated at the location of the origination point of the telecommunications
signal as first identified by the seller's telecommunications system or by information received by the seller from the seller's
service provider if the system used to transport the signal is not that of the seller.

© 2025 Thomson Reuters. No claim to original U.S. Government Works. 2
§ 321.203. Consummation of Sale, TX TAX § 321.203

(h) The sale of an amusement service is consummated in the municipality in which the performance or other delivery of the
service takes place.

(i) If a purchaser who has given a resale certificate makes any use of a taxable item that subjects the taxable item to the sales
tax under the provisions of Section 151.154, the use or other consumption of the taxable item that subjected the taxable item to
the tax is consummated at the place where the taxable item is stored or kept at the time of or just before the use or consumption.

(j) The sale of services delivered through a cable system is consummated at the point of delivery to the consumer.

(k) The sale of garbage or other solid waste collection or removal service is consummated at the location at which the garbage
or other solid waste is located when its collection or removal begins.

(l) Repealed by Acts 2007, 80th Leg., ch. 1266, § 15(4).

(m) If there is no place of business of the retailer because the comptroller determines that an outlet, office, facility, or location
contracts with a retail or commercial business to process for that business invoices or bills of lading and that the outlet, office,
facility, or location functions or exists to avoid the tax imposed by this chapter or to rebate a portion of the tax imposed by this
chapter to the contracting business, a sale is consummated at the place of business of the retailer from whom the outlet, office,
facility, or location purchased the taxable item for resale to the contracting business.

(n) A sale of a service described by Section 151.0047 to remodel, repair, or restore nonresidential real property is consummated
at the location of the job site.

Credits
Added by Acts 1987, 70th Leg., ch. 191, § 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, § 14.22(a), eff. Aug.
28, 1989; Acts 1989, 71st Leg., ch. 810, § 1, eff. Oct. 1, 1989; Acts 1991, 72nd Leg., ch. 705, § 26, eff. Sept. 1, 1991; Acts
2001, 77th Leg., ch. 370, § 2, eff. Aug. 1, 2002; Acts 2003, 78th Leg., ch. 209, § 55, eff. Oct. 1, 2003; Acts 2003, 78th Leg.,
ch. 1155, §§ 2, 3, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1310, § 115, eff. July 1, 2004; Acts 2005, 79th Leg., ch. 728, §
23.001(83), eff. Sept. 1, 2005; Acts 2007, 80th Leg., ch. 1266, §§ 11, 15(4), eff. Sept. 1, 2007; Acts 2009, 81st Leg., ch. 1360,
§ 5, eff. June 19, 2009; Acts 2013, 83rd Leg., ch. 1342 (S.B. 997), § 1, eff. June 14, 2013; Acts 2019, 86th Leg., ch. 182 (H.B.
1525), § 3, eff. Oct. 1, 2019; Acts 2021, 87th Leg., ch. 569 (S.B. 477), § 6, eff. Oct. 1, 2021.

V. T. C. A., Tax Code § 321.203, TX TAX § 321.203
Current through the end of the 2025 Regular, First Called and Chapters 2 through 4 of the Second Called Sessions of the 89th
Legislature.

End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.

© 2025 Thomson Reuters. No claim to original U.S. Government Works. 3
TAB
E
Volume 45 Number 1 January 3, 2020 Pages 1 - 234

D-1-GN-21-003198

TRIAL EXHIBIT

CP Ex-16
CP Ex-16-0001 of 0030
a section of the
Office of the Secretary of State
P.O. Box 12887
Austin, Texas 78711
(512) 463-5561
FAX (512) 463-5569

https://www.sos.texas.gov
register@sos.texas.gov

Texas Register, (ISSN 0362-4781, USPS 12-0090), is published weekly (52 times
per year) for $340.00 ($502.00 for first class mail delivery) by Matthew Bender &
Co., Inc., 3 Lear Jet Lane Suite 104, P. O. Box 1710, Latham, NY 12110.

Material in the Texas Register is the property of the State of Texas. However, it may
be copied, reproduced, or republished by any person without permission of the Texas
Register director, provided no such republication shall bear the legend Texas
Register or "Official" without the written permission of the director.

The Texas Register is published under the Government Code, Title 10, Chapter
2002. Periodicals Postage Paid at Easton, MD and at additional mailing offices.

POSTMASTER: Send address changes to the Texas Register, 4810 Williamsburg
Road, Unit 2, Hurlock, MD 21643.

Secretary of State - Ruth R. Hughs Editors
Liz Cordell
Director - Robert Sumners Eddie Feng
Belinda Kirk
Cecilia Mena
Editor-in-Chief - Jill S. Ledbetter Joy L. Morgan
Breanna Mutschler
Barbara Strickland

CP Ex-16-0002 of 0030
GOVERNOR 19 TAC §230.55.................................................................................65
Appointments.......................................................................................7 19 TAC §230.104, §230.105..............................................................65
Proclamation 41-3703..........................................................................8 TEXAS BOARD OF PROFESSIONAL ENGINEERS
AND LAND SURVEYORS
ATTORNEY GENERAL
Requests for Opinions........................................................................11 LICENSING
Requests for Opinions........................................................................11 22 TAC §133.29.................................................................................66
TEXAS STATE BOARD OF PHARMACY
EMERGENCY RULES
ADMINISTRATIVE PRACTICE AND PROCEDURES
TEXAS DEPARTMENT OF INSURANCE
22 TAC §281.7...................................................................................68
TRADE PRACTICES
22 TAC §281.9...................................................................................71
28 TAC §§21.4901 - 21.4904 ............................................................13
22 TAC §281.66.................................................................................72
PROPOSED RULES
22 TAC §281.69.................................................................................73
OFFICE OF THE GOVERNOR
22 TAC §281.70.................................................................................74
CRIMINAL JUSTICE DIVISION
PHARMACIES
1 TAC §§3.9000, 3.9005 - 3.9007, 3.9011, 3.9015, 3.9017, 3.9019,
3.9021, 3.9025 ...................................................................................17 22 TAC §291.1...................................................................................75

1 TAC §3.9010, §3.9013....................................................................24 22 TAC §291.3...................................................................................76
22 TAC §291.4...................................................................................79
TEXAS HEALTH AND HUMAN SERVICES
COMMISSION 22 TAC §291.14.................................................................................80
REIMBURSEMENT RATES 22 TAC §291.34.................................................................................81
1 TAC §355.8201...............................................................................25 PHARMACISTS
JOINT FINANCIAL REGULATORY AGENCIES 22 TAC §295.9...................................................................................91

PAYOFF STATEMENTS 22 TAC §295.13.................................................................................93
7 TAC §155.2.....................................................................................33 CONTROLLED SUBSTANCES
TEXAS DEPARTMENT OF LICENSING AND 22 TAC §315.3...................................................................................95
REGULATION 22 TAC §315.16.................................................................................97
BARBERS COMPTROLLER OF PUBLIC ACCOUNTS
16 TAC §§82.10, 82.20 - 82.22, 82.28, 82.52, 82.70, 82.72, 82.74, TAX ADMINISTRATION
82.77, 82.80, 82.120 ..........................................................................35
34 TAC §3.334...................................................................................98
COSMETOLOGISTS
TEXAS DEPARTMENT OF CRIMINAL JUSTICE
16 TAC §§83.10, 83.20 - 83.23, 83.25, 83.28, 83.52, 83.70, 83.72,
83.74, 83.77, 83.80, 83.120 ...............................................................42 COMMUNITY JUSTICE ASSISTANCE DIVISION
ADMINISTRATION
PODIATRIC MEDICINE PROGRAM
37 TAC §161.21...............................................................................115
16 TAC §§130.42, 130.44, 130.45.....................................................52
16 TAC §§130.53, 130.56, 130.58, 130.59........................................54
WITHDRAWN RULES
16 TAC §130.60.................................................................................57 TEXAS DEPARTMENT OF AGRICULTURE
16 TAC §130.72.................................................................................57 HEMP PROGRAM
STATE BOARD FOR EDUCATOR CERTIFICATION 4 TAC §§24.1 - 24.4 ........................................................................117
4 TAC §§24.5 - 24.7 ........................................................................117
PROFESSIONAL EDUCATOR PREPARATION AND
CERTIFICATION 4 TAC §§24.8 - 24.19 ......................................................................117
19 TAC §230.21.................................................................................60 4 TAC §§24.20 - 24.23 ....................................................................117
19 TAC §230.33, §230.36..................................................................63 4 TAC §§24.24 - 24.29 ....................................................................117

TABLE OF CONTENTS 45 TexReg 3

CP Ex-16-0003 of 0030
4 TAC §24.30, §24.31......................................................................118 REPORTING OPTION FOR CERTAIN OFFENSES;
4 TAC §§24.32 - 24.38 ....................................................................118 AMNESTY
4 TAC §§24.39 - 24.43 ....................................................................118 19 TAC §§3.1 - 3.20 ........................................................................150

4 TAC §§24.44 - 24.48 ....................................................................118 19 TAC §§3.11 - 3.15.......................................................................152

4 TAC §24.49, §24.50......................................................................118 TEXAS MEDICAL BOARD
CREDIT UNION DEPARTMENT LICENSURE
CHARTERING, OPERATIONS, MERGERS, 22 TAC §163.13...............................................................................153
LIQUIDATIONS USE OF EXPERTS
7 TAC §91.1003...............................................................................118 22 TAC §§182.1, 182.3, 182.5, 182.8..............................................153
ADOPTED RULES 22 TAC §§182.2, 182.4, 182.6, 182.7..............................................153
TEXAS DEPARTMENT OF AGRICULTURE TEXAS DEPARTMENT OF INSURANCE
QUARANTINES AND NOXIOUS AND INVASIVE GENERAL ADMINISTRATION
PLANTS 28 TAC §1.414.................................................................................154
4 TAC §§19.400 - 19.408 ................................................................119 CORPORATE AND FINANCIAL REGULATION
RAILROAD COMMISSION OF TEXAS 28 TAC §7.1001...............................................................................159
OIL AND GAS DIVISION RULE REVIEW
16 TAC §3.70...................................................................................119
Proposed Rule Reviews
PIPELINE SAFETY REGULATIONS Office of the Governor .....................................................................161
16 TAC §8.1, §8.5............................................................................124 State Board for Educator Certification.............................................161
16 TAC §§8.101, 8.110, 8.115, 8.125, 8.135 ...................................125 Texas State Board of Pharmacy .......................................................161
16 TAC §§8.201, 8.205, 8.206, 8.209, 8.210, 8.225, 8.230, 8.235, Texas Department of Criminal Justice.............................................162
8.240 ................................................................................................126
Adopted Rule Reviews
16 TAC §8.301, §8.315....................................................................126
Joint Financial Regulatory Agencies ...............................................162
LP-GAS SAFETY RULES
16 TAC §§9.1 - 9.18, 9.21, 9.22, 9.26 - 9.28, 9.35 - 9.38, 9.41, 9.51, TABLES AND GRAPHICS
9.52, 9.54 .........................................................................................131 .........................................................................................................163
16 TAC §§9.101 - 9.103, 9.107 - 9.110, 9.113 - 9.116, 9.126, 9.129 - IN ADDITION
9.132, 9.134 - 9.137, 9.140 - 9.143..................................................143
Texas State Affordable Housing Corporation
16 TAC §§9.201 - 9.204, 9.206, 9.208, 9.211, 9.212.......................144
Draft Annual Action Plan Available for Public Comment ..............217
16 TAC §§9.301 - 9.304, 9.306 - 9.308, 9.311, 9.313 .....................144
Office of Consumer Credit Commissioner
16 TAC §9.312.................................................................................145
Notice of Rate Ceilings....................................................................217
16 TAC §9.401, §9.403....................................................................145
COAL MINING REGULATIONS Credit Union Department
Application for a Merger or Consolidation......................................217
16 TAC §12.108...............................................................................146
Application to Expand Field of Membership...................................217
PUBLIC UTILITY COMMISSION OF TEXAS
Notice of Final Action Taken...........................................................217
PROCEDURAL RULES
Texas Commission on Environmental Quality
16 TAC §22.246...............................................................................147
Agreed Orders..................................................................................218
TEXAS HIGHER EDUCATION COORDINATING
BOARD Amended Notice of Application and Public Hearing for an Air Quality
Standard Permit for a Concrete Batch Plant With Enhanced Controls:
RULES APPLYING TO ALL PUBLIC AND PRIVATE Proposed Air Quality Registration Number 159167........................222
OR INDEPENDENT INSTITUTIONS OF HIGHER
Enforcement Orders .........................................................................222
EDUCATION IN TEXAS REGARDING ELECTRONIC

TABLE OF CONTENTS 45 TexReg 4

CP Ex-16-0004 of 0030
Enforcement Orders .........................................................................226 Notice of Hearing on Emergency Order ..........................................230
Notice of Public Meeting for a New Municipal Solid Waste Facility: Notice of Intent to Implement a Minor Rate Change Under 16 TAC
Registration Application No. 40305................................................229 §26.171 ............................................................................................231
Notice of Water Quality Application ...............................................229 South Plains Association of Governments
Department of State Health Services Llano Estacado Regional Water Planning Group - Region O Solicita-
tion of Nominations .........................................................................231
Designation of a Practice Serving a Medically Underserved Popula-
tion ...................................................................................................229 Notice of Solicitation for Nominations for Persons to Serve on the
Llano Estacado Regional Water Planning Group - Region O..........232
Texas Department of Insurance
Texas Department of Transportation
Company Licensing .........................................................................230
Dallas District Notice Affording an Opportunity for a Public Hear-
Public Utility Commission of Texas ing ....................................................................................................232
Notice of Application to Adjust High Cost Support Under 16 TAC
§26.407(h)........................................................................................230

TABLE OF CONTENTS 45 TexReg 5

CP Ex-16-0005 of 0030
CP Ex-16-0006 of 0030
Appointments Appointed to the OneStar National Service Commission, for a term to
expire March 15, 2022, Michael H. "Mike" Morath of Austin, Texas
Appointments for December 2, 2019
(Commissioner Morath is being reappointed).
Appointed to the Judicial Compensation Commission, for a term to ex-
Appointed to the OneStar National Service Commission, for a term to
pire February 1, 2023, Linda W. Kinney of Comfort, Texas (replacing
expire March 15, 2022, Girien R. Salazar of Houston, Texas (replacing
Frederick C. "Fred" Tate of Colleyville, who resigned).
Kathryn R. Timmerman of Austin, whose term expired).
Appointed as Commissioner of the Department of Family and Protec-
Appointed to the OneStar National Service Commission, for a term to
tive Services, for a term to expire August 31, 2021, Jaime D. Masters
expire March 15, 2022, Eugene J. "Gene" Seaman of Corpus Christi,
of Round Rock, Texas (replacing Henry L. "Hank" Whitman, Jr. of
Texas (Representative Seaman is being reappointed).
Floresville, who resigned).
Appointed to the OneStar National Service Commission, for a term
Appointed to the Product Development and Small Business Incubator
to expire March 15, 2022, Kathrine J. "Kate" Williamson of Midland,
Board, for a term to expire February 1, 2021, Kimberly M. Gramm of
Texas (Ms. Williamson is being reappointed).
Lubbock, Texas (replacing Kellilynn M. "Kelli" Frias, Ph.D. of Lub-
bock, who resigned). Appointments for December 5, 2019
Appointed to the Product Development and Small Business Incubator Designated as presiding officer of the Texas Council on Alzheimer's
Board, for a term to expire February 1, 2025, Jack J. "Jody" Goehring, Disease and Related Disorders, for a term to expire at the pleasure of the
IV of Austin, Texas (Mr. Goehring is being reappointed). Governor, Marc I. Diamond, M.D. of Dallas (Dr. Diamond is replacing
Rita Hortenstine of Dallas as presiding officer).
Appointed to the Product Development and Small Business Incubator
Board, for a term to expire February 1, 2025, David R. Margrave of Appointed to the Texas Council on Alzheimer's Disease and Related
San Antonio, Texas (Mr. Margrave is being reappointed). Disorders, for a term to expire August 31, 2025, Laura Fink Defina,
M.D. of Richardson, Texas (Dr. DeFina is being reappointed).
Appointed to the Product Development and Small Business Incubator
Board, for a term to expire February 1, 2025, Hayden Padgett of Plano, Appointed to the Texas Council on Alzheimer's Disease and Related
Texas (replacing Arun Agarwal of Dallas, whose term expired). Disorders, for a term to expire August 31, 2025, Angela Turner of Nor-
mangee, Texas (replacing Rita Hortenstine of Dallas, whose term ex-
Appointments for December 3, 2019
pired).
Appointed to the Crime Victims' Institute Advisory Council, for a
Appointed to the Commission on State Emergency Communications,
term to expire January 31, 2020, Matthew L. "Matt" Ferrara, Ph.D.
for a term to expire September 1, 2025, Clinton D. Sawyer of Amherst,
of Austin, Texas (replacing Richard L. "Rick" Reynolds of Austin,
Texas (Mayor Sawyer is being reappointed).
whose term expired).
Appointments for December 6, 2019
Appointed to the Crime Victims' Institute Advisory Council, for a term
to expire January 31, 2021, Janis K. "Jan" Langbein of Dallas, Texas Designated as president of the Red River Authority of Texas Board of
(replacing Ann Marie Matthews of Jourdanton, whose term expired). Directors, for a term to expire at the pleasure of the Governor. Todd
W. Boykin of Amarillo.
Appointed to the Texas Poet Laureate, State Musician and State Artists
Committee, for a term to expire October 1, 2021, Leah Gamble Martin Appointed to the Red River Authority of Texas Board of Directors, for
of Plano, Texas (replacing Carol A. Hollen of Mineola, whose term a term to expire August 11, 2023, Jerry Dan Davis of Wellington, Texas
expired). (replacing William W. "Wade" Porter of Canyon, who resigned).
Appointments for December 4, 2019 Appointed to the Red River Authority of Texas Board of Directors, for a
term to expire August 11, 2025, Mary Lou Bradley of Memphis, Texas
Appointed to the North Texas Tollway Authority Board of Directors,
(replacing Penny C. Carpenter of Silverton, whose term expired).
for a term to expire August 31, 2021, Frankie "Lynn" Gravley of
Gunter, Texas (Mr. Gravley is being reappointed). Appointed to the Red River Authority of Texas Board of Directors, for
a term to expire August 11, 2025, Zackary K. "Zack" Smith of Canyon,
Appointed to the OneStar National Service Commission, for a term to
Texas (Mr. Smith is being reappointed).
expire March 15, 2022, Daphne D. Brookins of Forest Hill, Texas (Ms.
Brookins is being reappointed). Appointed to the Red River Authority of Texas Board of Directors, for
a term to expire August 11, 2025, Stephen A. Thornhill of Denison,
Appointed to the OneStar National Service Commission, for a term to
Texas (Mr. Thornhill is being reappointed).
expire March 15, 2022, Annette G. Juba of Austin, Texas (Ms. Juba is
being reappointed). Designated as presiding officer of the Texas Commission on Law En-
forcement, for a term to expire at the pleasure of the Governor, Kim-

GOVERNOR January 3, 2020 45 TexReg 7

CP Ex-16-0007 of 0030
berley A. "Kim" Lemaux of Arlington (Chief Lemaux is replacing Joel Appointed to the Texas Workforce Investment Council, for a term to
W. Richardson of Canyon as presiding officer). expire September 1, 2025, Mark A. Dunn of Lufkin, Texas (Mr. Dunn
is being reappointed).
Appointed to the Texas Commission on Law Enforcement, for a term to
expire August 30, 2025, Patricia Garza Burruss of Dallas, Texas (Ms. Appointed to the Texas Workforce Investment Council, for a term to
Burruss is being reappointed). expire September 1, 2025, Thomas C. "Tom" Halbouty of Southlake,
Texas (Mr. Halbouty is being reappointed).
Appointed to the Texas Commission on Law Enforcement, for a term
to expire August 30, 2025, Michael W. "Mike" Griffis of Odessa, Texas Appointed to the Texas Workforce Investment Council, for a term to
(replacing Joel W. Richardson of Canyon, whose term expired). expire September 1, 2025, Richard M. Rhodes, Ph.D. of Austin, Texas
(Dr. Rhodes is being reappointed).
Appointed to the Texas Commission on Law Enforcement, for a term
to expire August 30, 2025, Jason D. Hester of Lago Vista, Texas (Major Appointed to the Texas Workforce Investment Council, for a term to
Hester is being reappointed). expire September 1, 2025, Brandon R. Willis of Beaumont, Texas (re-
placing Mark Barberena of Fort Worth, whose term expired).
Appointments for December 10, 2019
Appointments for December 16, 2019
Appointed to the Trinity River Authority Board of Directors, for a term
to expire March 15, 2023, Lisa A. Hembry of Dallas, Texas (replacing Appointed to the Executive Council of Physical Therapy and Occu-
Christina Melton Crain of Dallas, who resigned). pational Therapy Examiners, for a term to expire February 1, 2021,
Manoranjan "Mano" Mahadeva of Plano, Texas (replacing Arthur
Appointed to the Trinity River Authority Board of Directors, for a term
"Roger" Matson of Georgetown, whose term expired).
to expire March 15, 2025, Henry Borbolla, III of Fort Worth, Texas (Mr.
Borbolla is being reappointed). Greg Abbott, Governor
Appointed to the Trinity River Authority Board of Directors, for a term TRD-201904921
to expire March 15, 2025, Cary "Cole" Camp of Arlington, Texas (re-
placing Ana Laura Saucedo of Mesquite, whose term expired).
♦ ♦ ♦
Appointed to the Trinity River Authority Board of Directors, for a term Proclamation 41-3703
to expire March 15, 2025, Tommy G. "Tom" Fordyce of Huntsville, TO ALL TO WHOM THESE PRESENTS SHALL COME:
Texas (Mr. Fordyce is being reappointed).
I, GREG ABBOTT, Governor of the State of Texas, do hereby certify
Appointed to the Trinity River Authority Board of Directors, for a term that exceptional drought conditions pose a threat of imminent disaster
to expire March 15, 2025, David Blake Leonard of Liberty, Texas (Mr. in Bandera, Blanco, Burnet, Concho, Karnes, Kendall, Kinney, Llano,
Leonard is being reappointed). Maverick, Medina, Real, Uvalde, Val Verde, Zapata, and Zavala coun-
Appointed to the Trinity River Authority Board of Directors, for a term ties.
to expire March 15, 2025, Lewis H. McMahan of Dallas, Texas (replac- WHEREAS, significantly low rainfall and prolonged dry conditions
ing James Wyatt Neale of Dallas, whose term expired). continue to increase the threat of wildfire across these portions of the
Appointed to the Trinity River Authority Board of Directors, for a term state; and
to expire March 15, 2025, Amirali "Amir" Rupani of Dallas, Texas (Mr. WHEREAS, these drought conditions pose an imminent threat to pub-
Rupani is being reappointed). lic health, property, and the economy;
Appointed to the Trinity River Authority Board of Directors, for a term THEREFORE, in accordance with the authority vested in me by Sec-
to expire March 15, 2025, Carl "Dwayne" Somerville of Mexia, Texas tion 418.014 of the Texas Government Code, I do hereby declare a state
(Mr. Somerville is being reappointed). of disaster in the previously listed counties based on the existence of
Appointed to the Trinity River Authority Board of Directors, for a term such threat.
to expire March 15, 2025, Brenda K. Walker of Palestine, Texas (re- Pursuant to Section 418.017 of the code, I authorize the use of all avail-
placing Dudley K. Skyrme of Palestine, whose term expired). able resources of state government and of political subdivisions that are
Appointments for December 11, 2019 reasonably necessary to cope with this disaster.

Appointed to the Texas Workforce Investment Council, for a term to Pursuant to Section 418.016 of the code, any regulatory statute pre-
expire September 1, 2023, Jesse C. Gatewood of Corpus Christi, Texas scribing the procedures for conduct of state business or any order or
(replacing Mervin "Paul" Jones of Austin, whose term expired). rule of a state agency that would in any way prevent, hinder, or delay
necessary action in coping with this disaster shall be suspended upon
Appointed to the Texas Workforce Investment Council, for a term to written approval of the Office of the Governor. However, to the ex-
expire September 1, 2023, Eliu M. "Michael" Hinojosa, Ed.D. of Dal- tent that the enforcement of any state statute or administrative rule re-
las, Texas (replacing Carmen Olivas Graham of El Paso, whose term garding contracting or procurement would impede any state agency's
expired). emergency response that is necessary to protect life or property threat-
Appointed to the Texas Workforce Investment Council, for a term to ened by this declared disaster, I hereby authorize the suspension of such
expire September 1, 2023, John L. Martin of San Antonio, Texas (re- statutes and rules for the duration of this declared disaster.
placing Robert Hawkins of Bellmead, whose term expired). In accordance with the statutory requirements, copies of this proclama-
Appointed to the Texas Workforce Investment Council, for a term to tion shall be filed with the applicable authorities.
expire September 1, 2023, Richard C. "Rick" Rhodes of Austin, Texas IN TESTIMONY WHEREOF, I have hereunto signed my name and
(replacing Sharla E. Hotchkiss of Midland, whose term expired). have officially caused the Seal of State to be affixed at my office in the
City of Austin, Texas, this the 12th day of December, 2019.
Greg Abbott, Governor

45 TexReg 8 January 3, 2020 Texas Register

CP Ex-16-0008 of 0030
TRD-201904914 ♦ ♦ ♦

GOVERNOR January 3, 2020 45 TexReg 9

CP Ex-16-0009 of 0030
CP Ex-16-0010 of 0030
Requests for Opinions Requestor:
RQ-0318-KP The Honorable Heather Stebbins
Requestor: Kerr County Attorney
The Honorable Larry Taylor 700 Main Street Suite BA-103
Chair, Committee on Education Kerrville, Texas 78028
Texas State Senate Re: Whether a hearing on an application for court-ordered mental
health services conducted pursuant to section 574.031 of the Health
Post Office Box 12068
and Safety Code must be recorded by an official court reporter
Austin, Texas 78711-2068 (RQ-0321-KP)
Re: Matters related to the Texas Windstorm Insurance Association and Briefs requested by January 15, 2020
its compliance with House Bill 1900 and Senate Bill 615 (RQ-0318-
RQ-0322-KP
KP)
Requestor:
Briefs requested by January 10, 2020
Mr. Mike Novak
RQ-0319-KP
Executive Director
Requestor:
Texas Facilities Commission
The Honorable Lilli A. Hensley
Post Office Box 13047
Sterling County Attorney
Austin, Texas 78711-3047
Post Office Box 88
Re: Authority of the Texas Facilities Commission and the State Preser-
Sterling City, Texas 76951
vation Board in relation to a Bill of Rights monument authorized by
Re: Whether a county may call a bond election to fund the construction, House Concurrent Resolution 111, adopted by the Eightieth Legisla-
repair, improvement, and maintenance of city roads (RQ-0319-KP) ture (RQ-0322-KP)
Briefs requested by January 10, 2020 Briefs requested by January 15, 2020
RQ-0320-KP For further information, please access the website at www.texasattor-
neygeneral.gov or call the Opinion Committee at (512) 463-2110.
Requestor:
TRD-201904852
Mr. Steven C. McCraw
Ryan L. Bangert
Director Deputy Attorney General for Legal Counsel
Texas Department of Public Safety Office of the Attorney General
Filed: December 17, 2019
Post Office Box 4087
Austin, Texas 78773-0001
♦ ♦ ♦
Requests for Opinions
Re: Whether over-the-road buses traveling on interstate highways in
Texas are subject to the tandem axle weight limitations established in RQ-0323-KP
Transportation Code section 621.101(a)(2) (RQ‑0320‑KP)
Requestor:
Briefs requested by January 15, 2020
The Honorable Roberto Serna
RQ-0321-KP

ATTORNEY GENERAL January 3, 2020 45 TexReg 11

CP Ex-16-0011 of 0030
District Attorney For further information, please access the website at www.texasattor-
neygeneral.gov or call the Opinion Committee at (512) 463-2110.
293 Judicial District
rd

TRD-201904882
458 Madison Street
Ryan L. Bangert
Eagle Pass, Texas 78852 Deputy Attorney General for Legal Counsel
Re: Application of article III, section 53 of the Texas Constitution to Office of the Attorney General
invoices submitted to a county under an amended service contract for Filed: December 18, 2019
services performed prior to the amendment (RQ‑0323‑KP) ♦ ♦ ♦
Briefs requested by January 16, 2020

45 TexReg 12 January 3, 2020 Texas Register

CP Ex-16-0012 of 0030
Allison Vordenbaumen Benz, R.Ph., M.S. comptroller distinguishes orders through a computer or mobile
Executive Director device of the seller because the use of the Internet by sellers
Texas State Board of Pharmacy and purchasers to place orders has resulted in confusion as to
Earliest possible date of adoption: February 2, 2020 whether an order is placed in person or over the Internet. For
For further information, please call: (512) 305-8010
example, sellers use the Internet to place orders for items that
are not in the store. However, mobile devices have made it
♦ ♦ ♦ possible for purchasers to place online orders at any location,
including within a location of the seller. Subsequent paragraphs
TITLE 34. PUBLIC FINANCE are renumbered.
PART 1. COMPTROLLER OF PUBLIC The comptroller adds a definition for "marketplace provider" in
new subsection (a)(15) as defined in §3.286 of this title.
ACCOUNTS
The comptroller adds a definition for "order placed in person"
CHAPTER 3. TAX ADMINISTRATION in new subsection (a)(16). Orders placed in person are those
orders placed with the seller while the purchaser is physically
SUBCHAPTER O. STATE AND LOCAL SALES present at a seller's location and using a seller's system, com-
AND USE TAXES puter, or other device. As a seller may use the Internet, a phone,
or a catalog to make an order, the definition clarifies that an or-
34 TAC §3.334 der is still placed in person regardless of whether the seller uses
The Comptroller of Public Accounts proposes amendments to the Internet, a phone, or a catalog to make the order. Similarly,
§3.334, concerning local sales and use taxes. In the wake of as a purchaser may use a personal mobile device to make an
South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (June 21, 2018), order while physically present at a seller's location, the defini-
the amendments provide that remote sellers that are required to tion excludes Internet orders, which as defined are placed from
collect Texas use tax under §3.286 of this title (relating to Seller's a purchaser's device. Subsequent paragraphs are renumbered.
and Purchaser's Responsibilities) should collect local use tax The comptroller amends the definition of "place of business of
based on the destination location. The amendments also im- the seller - general definition" in renumbered subsection (a)(17)
plement the requirement that a seller located in Texas collects to specify that a website, software application, or other method
local use tax when the seller ships or delivers a taxable item into used to place an Internet order is not a place of business of the
a local jurisdiction where those use taxes exceed the local sales seller. Tax Code, §321.002(a)(3)(A) defines "place of business of
tax where the sale is consummated. The comptroller also imple- the retailer" as "an established outlet, office, or location operated
ments House Bill 1525 and House Bill 2153, 86th Legislature, by the retailer or the retailer's agent or employee for the purpose
2019. House Bill 1525 establishes local sales and use tax collec- of receiving orders for taxable items and includes any location at
tion responsibilities on marketplace providers. House Bill 2153 which three or more orders are received by the retailer during a
establishes a single local use tax rate that remote sellers may calendar year." A website, software application, or other method
elect to use. The amendments also clarify provisions concern- used to place an Internet order is not an established outlet, office,
ing fulfillment, temporary places of business of the seller, places or location operated by the seller and is therefore, excluded from
of business of the seller receiving more than three orders, trav- the definition. The comptroller reflects these changes throughout
eling salespersons, orders over the Internet, and orders placed the section.
in person.
The comptroller also amends the definition to delete repetitive
Throughout the section, the comptroller adds or amends rule ti- language and an example that provides that a home office at
tles. The comptroller also amends cross-references accordingly. which three or more items are sold through an online auction
The comptroller does not intend to make substantive changes website is a place of business of the seller. The comptroller
through these additions of and amendments to rule titles and deletes a reference to "administrative offices" because the comp-
through the amendments to cross-references. The comptroller troller determines that an administrative office does not meet the
also reorganizes this section for clarity and readability. definition of a place of business of the seller.
The comptroller amends the definition of "Comptroller's website" The comptroller also adds to the definition of "place of business
in subsection (a)(4) to provide the correct website address. of the seller - general definition" that an outlet, office, facility, or
The comptroller amends the definition of "engaged in business" any similar location that contracts with a business to process
in subsection (a)(7) to conform the reference to §3.286 of this certain orders or invoices is not a place of business of the seller if
title. the comptroller determines that these certain locations are for the
sole purpose to avoid tax due or to rebate tax to the contracting
The comptroller amends subsection (a)(9) to identify activities location. This change is made pursuant to the definition "place
that are not included in the definition of the term "fulfill". of business of the retailer" in Tax Code, §321.002(a)(3)(B).
The comptroller adds a definition for "Internet order" in new The comptroller adds a definition for "remote seller" in new sub-
subsection (a)(10) to distinguish between an order placed section (a)(19) as defined in §3.286 of this title. Subsequent
through the Internet as opposed to an order placed in person paragraphs are renumbered.
at a seller's location as contemplated in Tax Code, §321.203(c)
and §323.203(c). The comptroller has determined that orders The comptroller amends the definition of "temporary place of
placed on a website, through a software application, or other business of the seller" in renumbered subsection (a)(23) to clarify
method using the Internet constitute orders over the Internet. that a temporary place of business of the seller includes a sale
Orders placed by phone call using Voice over Internet Protocol outside the walls of a distribution center, manufacturing plant,
or a mobile device are not considered Internet orders. The storage yard, warehouse, or similar facility of the seller in a park-
ing lot or similar space sharing the same physical address as the

45 TexReg 98 January 3, 2020 Texas Register

CP Ex-16-0013 of 0030
facility. Sellers may hold sales to the public outside the walls of The comptroller explicitly provides in new subparagraph (A) that
their facilities on a temporary basis. The comptroller clarifies that orders taken by traveling salespersons are not placed in per-
these sales constitute temporary places of business of the seller. son at the seller's place of business in Texas. Traveling sales-
The comptroller makes these changes throughout the section. persons typically take orders at the customer's location and the
Subsequent paragraphs are renumbered. customer's location is not a place of business "operated by the
seller" as required by Tax Code, §321.002(a)(3)(A). See Comp-
The comptroller adds new subsection (b), restating the provision
troller's Decision No. 48,843 (2009) ("According to the plain
of former subsection (e) concerning place of business - special
meaning of the statutory definition, a site must be "operated by
definitions. The new subsection (b) is substantially the same as
the retailer" before it can be considered the retailer's place of
former subsection (e) but with changes to more closely reflect
business.").
the definition of "place of business of the retailer" in Tax Code,
§321.002(a)(3)(A). A seller does not receive orders at adminis- The comptroller adds new subparagraph (B) to include the pro-
trative offices that solely serve as the base of operations for a vision in former subsection (h)(3)(B) concerning orders received
traveling salesperson or that provide administrative support to a at a place of business of the seller in Texas and fulfilled at a lo-
traveling salesperson. Moreover, the mere fact that a salesper- cation that is not a place of business of the seller with changes.
son is assigned to work from, or work at, a distribution center,
In new clause (i), the comptroller does not incorporate the
manufacturing plant, storage yard, warehouse, or similar facility
phrase "through the Internet" found in former subsection
operated by a seller does not mean that a seller receives orders
(h)(3)(B). Clause (i) does not apply to orders over the Internet
at these locations. Therefore, these locations by themselves do
because Internet orders are not received at a place of business
not meet the definition of a place of business of the retailer under
of the seller in Texas. The comptroller also includes language
Tax Code, §321.002(a)(3)(A). The comptroller amends the sec-
concerning traveling salespersons in new clause (i).
tion to reflect these changes throughout. Therefore, the comp-
troller no longer includes administrative offices supporting travel- In new clause (ii), the comptroller addresses where orders taken
ing salespersons and distribution centers, manufacturing plants, by traveling salesperson are considered received. The comp-
storage yards, warehouses, or similar facilities operated by a troller clarifies that orders taken by traveling salespersons are
seller at which salespersons are assigned to work in the defini- not received by the seller at the purchaser's location because
tion of "place of business of the seller." the purchaser's location is not a place of business of the seller.
See Comptroller's Decision No. 48,843 (2009).
In new paragraph (1)(A), the comptroller clarifies that locations
operated by a seller must receive three or more orders in a calen- The comptroller adds new subparagraph (C) to restate the pro-
dar year from persons other than employees, independent con- vision in former subsection (h)(3)(C) concerning orders fulfilled
tractors and natural persons affiliated with the seller to be consid- at a place of business of the seller in Texas. The language is
ered a place of business of the seller in Texas. In new paragraph the same except for new language addressing traveling sales-
(3) the comptroller restates the provisions from former subsec- persons.
tion (e) relating to purchasing offices with minor changes for ease
The comptroller adds new subparagraph (D) restating the pro-
of readability.
vision in former subsection (h)(3)(D) concerning orders fulfilled
The comptroller adds new subsection (c) to include the existing within the state at a location that is not a place of business of the
provisions of former subsection (h) concerning local sales tax. seller. The language is the same as it appeared in former sub-
The new subsection (c) is similar to former subsection (h) but section (h)(3)(D), except for new language addressing traveling
with some changes. New paragraph (1) provides the general salespersons.
sales tax rules as applied to specific situations and combines
The comptroller adds new subparagraph (E) and includes the
the provisions related to the consummation of sale rule, as that
provision in former subsection (h)(3)(E) concerning orders re-
language appeared in former subsections (h)(1) and (h)(3).
ceived outside of the state and fulfilled outside of the state with
New subparagraph (A) restates the deleted language in former changes addressing traveling salespersons operating from a lo-
subsection (h)(3)(A) relating to the consummation of sale rule for cation outside of Texas and remote sellers.
orders placed in person at a seller's place of business in Texas.
In subparagraph (E) and throughout the section, the comptroller
The comptroller includes in subparagraph (A) orders placed at a
amends the language to implement the Wayfair decision. The
temporary place of business of the seller. The comptroller does
Wayfair decision clarified the substantial nexus requirement es-
not add the provisions found in former subsection (h)(6)(C) be-
tablished in the United States Supreme Court analysis of the Due
cause it repeats the general consummation of sale provisions
Process and Commerce Clauses of the United States Constitu-
applicable to temporary places of business.
tion. The Court stated that "{substantial} nexus is established
Additionally, throughout new paragraph (1), the comptroller in- when a taxpayer {or collector} 'avails itself of the substantial priv-
corporates the language found in former subsection (h)(4) con- ilege of carrying on business' in that jurisdiction." Wayfair, 138 S.
cerning traveling salespersons. Tax Code, §321.002(a)(3)(A) Ct. at 2099 (quoting Polar Tankers, Inc. v. City of Valdez, 557
does not support treating administrative offices or other locations U.S. 1, 11 (2009)). The Court also reiterated that "States may
that are not places of business of the seller that merely serve as a not impose undue burdens on interstate commerce."
location from which a traveling salesperson operates as a place
In light of the Wayfair decision, the comptroller provides in sub-
of business of the seller. The comptroller makes this change
paragraph (E) that a remote seller that is required to collect Texas
to conform the consummation of sales made by traveling sales-
use tax under §3.286(b)(2) must also collect local use tax based
persons to Tax Code, §321.203 and §323.203. The comptroller
on the location to which the item is shipped or delivered or at
does not incorporate the examples found in former subsection
which the purchaser of the item takes possession unless the re-
(h)(4) because the examples merely restate the consummation
mote seller elects to collect the single local use tax rate enacted
of sale rules.
in House Bill 2153. See Tax Code, §321.205(c) and §323.205(c).

PROPOSED RULES January 3, 2020 45 TexReg 99

CP Ex-16-0014 of 0030
The comptroller adds new subparagraph (F) restating the pro- a seller is engaged in business. See Tax Code, §§321.205,
vision in former subsection (h)(3)(F) concerning an exception 322.105, and 323.205.
for qualifying economic development agreements entered into
When a sale is consummated in Texas, a seller is engaged in
before January 1, 2009, pursuant to Tax Code, §321.203(c-4) -
business in this state through the presence of property or em-
(c-5) or §323.203(c-4) - (c-5) .
ployees in the state. See Tax Code, §§151.107, 321.203, and
The comptroller adds new paragraph (2) and includes the lan- 323.203. Therefore, the language that a seller be engaged in
guage in former subsection (h)(1) concerning local sales taxes business in a local jurisdiction for sales consummated in Texas
due and local use taxes due without any changes. The comptrol- is superfluous. Moreover, an engaged in business standard for
ler restates the language in former subsection (h)(2) concerning local use tax does not give effect to the Tax Code's require-
multiple special purpose district taxes and multiple transit author- ment that a seller collect local use tax that is due and creates
ity taxes in paragraph (3) without changes to the language. an opportunity for sellers to avoid collecting local use tax due.
See Tax Code §§151.103, 321.003, 321.205, 322.108, 323.003,
The comptroller adds new paragraph (4) to include the language
and 323.205. Therefore, the comptroller deletes the "engaged in
found in former subsection (h)(5) concerning drop shipments,
business" requirement for local use tax throughout the section.
but does not incorporate the examples found in former subsec-
tion (h)(5)(A). The comptroller adds new subparagraph (B) re- In new paragraph (2), the comptroller implements the Wayfair
stating the language found in former subsection (h)(5)(B) without decision by clarifying that the seller is responsible for collecting
changes. the local use tax due on the sale based upon the location in this
state to which the order is shipped or delivered or at which the
The comptroller adds new paragraph (5) to add the language
purchaser of the item takes possession.
found in former subsection (h)(6) concerning itinerant vendors
and vending machines without changes to the language. In new subparagraphs (B) and (C), the comptroller also explic-
itly states that the location of the seller in Texas does not affect
The comptroller adds new paragraph (6) to address the consum-
the determination of whether the seller is required to collect addi-
mation of sale for Internet orders. This subsection becomes ef-
tional local use tax due. In new clauses (i) and (ii), the comptrol-
fective April 1, 2020.
ler provides two examples to illustrate when a seller is required
In new subparagraph (A), the comptroller provides the general to collect additional local use taxes.
rule, with certain exceptions, that Internet orders are not received
The comptroller adds new subsection (e) to include the provi-
at a place business of the seller in Texas. A website, software
sions in former subsection (b), relating to the effects of other law,
application, or other method used to place an Internet order is
with minor non-substantive changes to the provisions as they ap-
excluded from the definition of place of business of the seller.
peared in former subsection (b).
Therefore, orders placed over the Internet are not received at a
place of business of the seller in Texas. The comptroller adds new subsection (f), to include the pro-
visions of former subsection (c), relating to tax rates without
In new subparagraph (B), the comptroller addresses orders
changing the provisions as they appeared in former subsection
placed using at the seller's device.
(c).
In new subparagraph (C), the comptroller addresses Internet or-
The comptroller adds new subsection (g) to include the provi-
ders fulfilled from a place of business of the seller in Texas.
sions of former subsection (d), relating to jurisdictional bound-
In new subparagraph (D), the comptroller addresses Internet or- aries, combined areas, and city tax imposed through strategic
ders fulfilled from a location in Texas that is not a place of busi- partnership agreements, with non-substantive changes made to
ness of the seller in Texas. the language on combined areas for ease of readability.
In new subparagraph (E), the comptroller addresses Internet or- The comptroller adds new subsection (h) to include the provi-
ders fulfilled from a location outside of the state. sions in former subsection (f) concerning places of business and
job sites crossed by local taxing jurisdiction boundaries with a
In new subparagraph (F), the comptroller provides a temporary
change to the title of the subsection to read places of business
exception from the provisions regarding Internet orders for eco-
of the seller. No other changes were made to those provisions.
nomic development agreements pursuant to Local Government
Code, Chapters 380 and 381 and entered into before Septem- The comptroller adds new subsection (i). Throughout new sub-
ber 1, 2019. section (i), the comptroller implements the Wayfair decision for
local use tax to address sales consummated in Texas and sales
The comptroller adds new subsection (d) to include the provi-
consummated outside of Texas, including sales by remote sell-
sions in former subsection (i), relating to use tax. The comp-
ers.
troller adds new paragraph (1), which includes the language in
former subsection (i)(1) concerning general local use tax rules In new paragraph (1), the comptroller adds the language found in
with non-substantive changes for ease of readability. former subsection (g)(1) with changes. The comptroller explicitly
states in paragraph (1) that the location of the seller in Texas
The comptroller adds new paragraph (2) to include the provisions
does not affect the determination of whether the seller is required
in former subsection (i)(2) concerning general use tax rules ap-
to collect additional local use tax due.
plied to specific situations with changes.
In new paragraph (2), the comptroller includes the language in
In light of the Wayfair decision, the comptroller gives effect to the
former subsection (g)(2) with changes. The comptroller makes
Tax Code's requirement that sellers engaged in business in the
a cross-reference to new subsection (i)(3) of the amendment,
state collect local use tax for sales consummated in Texas and
which implements House Bill 2153. The comptroller also clarifies
for sales consummated outside Texas based on the local tax-
that new subsection (i)(2) applies to sales not consummated in
ing jurisdictions in which a taxable item is first used, stored, or
Texas. The amendment provides that local use tax is based upon
consumed, regardless of the specific local jurisdiction in which

45 TexReg 100 January 3, 2020 Texas Register

CP Ex-16-0015 of 0030
the location in this state to which the item is shipped or delivered In new paragraph (4), the comptroller restates the language in
or at which the purchaser takes possession. deleted subsection (g)(4) concerning purchasers responsible for
accruing and remitting local taxes if the seller fails to collect with-
In new paragraph (3), the amendment addresses local use tax
out any changes.
for remote sellers and implements the single local use tax rate
for remote sellers enacted in House Bill 2153. In new paragraph (5), the comptroller restates the language in
deleted subsection (g)(5) concerning local tax due on the sales
New subparagraph (A)(i) provides that a remote seller is required
price of a taxable item without any changes.
to collect and remit using the combined rate of all applicable local
use taxes based on the location to which the item is shipped The comptroller adds new paragraph (6) to relieve a purchaser
or delivered or at which the purchaser takes possession. New of liability for additional use tax if the purchaser pays local use
subparagraph (A)(ii) provides that at the remote seller's election, tax using the single local use tax rate to an eligible remote seller
the remote seller may elect to use the single local use tax rate electing to use the single local use tax rate. Paragraph (6) also
published in the Texas Register. requires the purchaser to verify on the comptroller's website that
a remote seller has elected to use the single local use tax rate.
New subparagraph (B) addresses the single local use tax rate
Moreover, paragraph (6) provides that if a remote seller is not
when a remote seller stores tangible personal property in Texas
listed on the comptroller's website, the purchaser will be liable
to be sold on a marketplace. The comptroller recognizes that a
for additional use tax due.
remote seller selling tangible personal property on a marketplace
may not have control of where their tangible personal property The comptroller deletes existing subsection (b), relating to the
is stored. Therefore, to ease the burden on a remote seller, this effect of other law, as this information is contained in new sub-
provision allows the remote seller to elect the single local use tax section (e) with minor, non-substantive changes.
rate.
The comptroller deletes existing subsection (c) relating to tax
New subparagraph (C) addresses notice requirements a remote rates, as that information is contained in new subsection (f) with-
seller sends to the comptroller of its election and revocation of out change.
election to use the single local use tax rate. New clause (i) pro-
The comptroller deletes existing subsection (d) relating to ju-
vides that a remote seller must notify the comptroller of its elec-
risdictional boundaries, combined areas, and city tax imposed
tion to use the single local use tax rate on a form prescribed by
through strategic partnership agreements, as this information is
the comptroller or may notify the comptroller of the election on its
contained in new subsection (g) with non-substantive changes
use tax permit application form before being able to use the sin-
made to the provisions on combined areas for ease of readabil-
gle local use tax rate. New clause (i) also requires that a remote
ity.
seller use the single local use tax rate for all its sales of taxable
items until the remote seller revokes the election in writing to the The comptroller deletes existing subsection (e) relating to place
comptroller. New clause (ii) addresses the requirements for a of business - special definitions, as this information is contained
remote seller to revoke its election to collect the single local use in new subsection (b) with changes.
tax rate by filing a form prescribed by the comptroller by October
The comptroller deletes existing subsection (f) concerning
1 of the calendar year.
places of business and job sites crossed by local taxing juris-
New subparagraph (D)(i) provides the initial single local use tax diction boundaries, as this information is contained in to new
rate of 1.75%, which is in effect for the period beginning October subsection (h) with a change only to the title of the subsection
1, 2019, and ending December 31, 2019. Subparagraph (D)(ii) to read places of business of the seller.
provides the initial single local use tax rate of 1.75%, which is
The comptroller deletes subsection (g) concerning sellers' and
in effect for the period beginning January 1, 2020, and ending
purchasers' responsibilities for collecting or accruing local taxes,
December 31, 2020.
as those provisions, except for subsection (g)(3), which was
New subparagraph (E) provides that before the beginning of a deleted in its entirety, are contained in new subsection (i) with
calendar year, the comptroller will publish notice of the single changes.
local use tax rate that will be in effect for that calendar year in
The comptroller deletes existing subsection (h) concerning local
the Texas Register.
sales tax, as this information is contained in new subsection (c)
New subparagraph (F) provides the calculation for the single lo- with changes.
cal use tax rate.
The comptroller deletes existing subsection (i) concerning use
New subparagraph (G) provides that a purchaser may request tax, as this information is contained in new subsection (d) with
a refund based on local use taxes paid in a calendar year. The changes.
refund is for the difference between the single local use tax rate
The comptroller adds new subsection (k)(5) to implement House
paid by the purchaser and the amount the purchaser would have
Bill 1525, to address sales of taxable items through marketplace
paid based on the combined tax rate for all applicable local use
providers. Subsequent paragraphs are renumbered.
taxes. Non-permitted purchasers may request a refund directly
from the comptroller on an annual basis without having to meet The provisions related to remote sellers, single local use tax rate,
the requirements in §3.325(a)(1) of this title (relating to Refunds and marketplace providers take effect October 1, 2019.
and Payments Under Protest) and the statute of limitation under
Tom Currah, Chief Revenue Estimator, has determined that dur-
Tax Code, §111.104.
ing the first five years that the proposed amendment is in effect,
New subparagraph (H) addresses marketplace providers to pro- the amendment: will not create or eliminate a government pro-
vide that a marketplace provider may only use the combined tax gram; will not require the creation or elimination of employee
rate of all applicable local use taxes when computing the amount positions; will not require an increase or decrease in future leg-
of local use tax to collect and remit. islative appropriations to the agency; will not require an increase

PROPOSED RULES January 3, 2020 45 TexReg 101

CP Ex-16-0016 of 0030
or decrease in fees paid to the agency; will not increase or de- and use tax authorized under Tax Code, §324.021, the county landfill
crease the number of individuals subject to the rules' applicabil- and criminal detention center sales and use tax authorized under Tax
ity; and will not positively or adversely affect this state's economy. Code, §325.021, or the crime control and prevention district sales and
use tax authorized under Tax Code, §323.105.
Mr. Currah also has determined that for each year of the first
five years the rule is in effect, the proposed amendments would (6) Drop shipment--A transaction in which an order is re-
benefit the public by conforming the rule to current statutes. This ceived by a seller at one location, but the item purchased is shipped by
rule is proposed under Tax Code, Title 2, and does not require the seller from another location, or is shipped by the seller's third-party
a statement of fiscal implications for small businesses or rural supplier, directly to a location designated by the purchaser.
communities. The proposed amendments would have no signif-
(7) Engaged in business--This term has the meaning given
icant fiscal impact on the state government, units of local govern-
in §3.286 of this title (relating to Seller's and Purchaser's Responsibil-
ment, or individuals. There would be no anticipated significant
ities[, including Nexus, Permits, Returns and Reporting Periods, and
economic cost to the public.
Collection and Exemption Rules]).
Comments on the proposal may be submitted to Teresa G.
(8) Extraterritorial jurisdiction--An unincorporated area
Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin,
that is contiguous to the corporate boundaries of a city as defined in
Texas 78711-3528. Comments must be received no later than
Local Government Code, §42.021
30 days from the date of publication of the proposal in the Texas
Register. (9) Fulfill--To complete an order by transferring a taxable
item directly to a purchaser at a Texas location, or to ship or deliver a
The comptroller proposes this amendment under Tax Code,
taxable item to a location in Texas designated by the purchaser. The
§111.002 (Comptroller's Rules; Compliance; Forfeiture), which
term does not include tracking an order, determining shipping costs,
provides the comptroller with the authority to amend rules to
managing inventory, or other activities that do not involve the transfer,
reflect changes in the constitution or laws of the United States
shipment, or delivery of a taxable item to the purchaser or a location
and judicial interpretations thereof.
designated by the purchaser.
The amendments implement Tax Code, §§151.0595 (Single Lo-
(10) Internet order--An order placed on a website, software
cal Tax Rate for Remote Sellers), 321.203 (Consummation of
application, or other method using the Internet by a purchaser using a
Sale), and 323.203 (Consummation of Sale), and South Dakota
computer or mobile device that does not belong to the seller. Internet
v. Wayfair, Inc., 138 S. Ct. 2080 (June 21, 2018).
order does not include an order placed by phone call using Voice over
§3.334. Local Sales and Use Taxes. Internet Protocol or a mobile device.
(a) Definitions. The following words and terms, when used (11) [(10)] Itinerant vendor--A person who travels to vari-
in this section, shall have the following meanings, unless the context ous locations for the purpose of receiving orders and making sales of
clearly indicates otherwise. taxable items and who does not operate a place of business. For exam-
ple, a person who sells rugs from the back of a truck that the person
(1) Cable system--The system through which a cable ser-
drives to a different location each day is an itinerant vendor. A person
vice provider delivers cable television or bundled cable service, as
who sells items through vending machines is also an itinerant vendor.
those terms are defined in §3.313 of this title (relating to Cable Televi-
A salesperson that operates out of an office, place of business, or other
sion Service and Bundled Cable Service).
location that provides administrative support to the salesperson is not
(2) City--An incorporated city, municipality, town, or vil- an itinerant vendor.
lage.
(12) [(11)] Kiosk--A small stand-alone area or structure:
(3) City sales and use tax--The tax authorized under Tax
(A) that is used solely to display merchandise or to sub-
Code, §321.101(a), including the additional municipal sales and use
mit orders for taxable items from a data entry device, or both;
tax authorized under Tax Code, §321.101(b), the municipal sales and
use tax for street maintenance authorized under Tax Code, §327.003, (B) that is located entirely within a location that is a
the Type A Development Corporation sales and use tax authorized un- place of business of another seller, such as a department store or shop-
der Local Government Code, §504.251, the Type B Development Cor- ping mall; and
poration sales and use tax authorized under Local Government Code,
(C) at which taxable items are not available for imme-
§505.251, a sports and community venue project sales and use tax
diate delivery to a purchaser.
adopted by a city under Local Government Code, §334.081, and a mu-
nicipal development corporation sales and use tax adopted by a city un- (13) [(12)] Local taxes--Sales and use taxes imposed by
der Local Government Code, §379A.081. The term does not include any local taxing jurisdiction.
the fire control, prevention, and emergency medical services district
(14) [(13)] Local taxing jurisdiction--Any of the following:
sales and use tax authorized under Tax Code, §321.106, or the munic-
ipal crime control and prevention district sales and use tax authorized (A) a city that imposes sales and use tax as provided
under Tax Code, §321.108. under paragraph (3) of this subsection;
(4) Comptroller's website--The agency's website concern- (B) a county that imposes sales and use tax as provided
ing local taxes located at: https://comptroller.texas.gov/taxes/sales/ under paragraph (5) of this subsection;
[http://comptroller.texas.gov/taxinfo/local/].
(C) a special purpose district created under the Special
(5) County sales and use tax--The tax authorized under District Local Laws Code or other provisions of Texas law that is autho-
Tax Code, §323.101, including a sports and community venue project rized to impose sales and use tax by the Tax Code or other provisions
sales and use tax adopted by a county under Local Government Code, of Texas law and as governed by the provisions of Tax Code, Chapters
§334.081. The term does not include the county health services sales 321 or 323 and other provisions of Texas law; or

45 TexReg 102 January 3, 2020 Texas Register

CP Ex-16-0017 of 0030
(D) a transit authority that imposes sales and use tax as (20) [(16)] Seller--This term has the meaning given in
authorized by Transportation Code, Chapters, 451, 452, 453, 457, or §3.286 of this title and also refers to any agent or employee of the
460 and governed by the provisions of Tax Code, Chapter, 322. seller.
(15) Marketplace provider--This term has the meaning (21) [(17)] Special purpose district--A local governmental
given in §3.286 of this title. entity authorized by the Texas legislature for a specific purpose, such
as crime control, a local library, emergency services, county health ser-
(16) Order placed in person--An order placed by a pur-
vices, or a county landfill and criminal detention center.
chaser with the seller while physically present at the seller's place of
business on the system, computer, or other device of the seller, regard- (22) [(18)] Storage--This term has the meaning given in
less of whether the seller uses the Internet, a phone, or a catalog to make §3.346 of this title (relating to Use Tax).
the order. The term does not include Internet orders.
(23) [(19)] Temporary place of business of the seller--A lo-
(17) [(14)] Place of business of the seller - general defini- cation operated by a seller for a limited period of time for the purpose
tion--An established outlet, office, or location operated by a seller for of selling and receiving orders for taxable items and where the seller
the purpose of selling taxable items to those other than employees, in- has inventory available for immediate delivery to a purchaser. For ex-
dependent contractors, and natural persons affiliated with the seller and ample, a person who rents a booth at a weekend craft fair or art show
that receives three or more orders for taxable items during the calen- to sell and take orders for jewelry, or a person who maintains a facil-
dar year. Places of business of the seller include, but are not limited ity at a job site to rent tools and equipment to a contractor during the
to, call centers, showrooms, and clearance centers. [The term also in- construction of real property, has established a temporary place of busi-
cludes any location operated by a seller at which the seller receives ness. A temporary place of business of the seller includes a sale outside
three or more orders for taxable items during a calendar year. For ex- of a distribution center, manufacturing plant, storage yard, warehouse,
ample, a home office at which three or more items are sold through an or similar facility of the seller in a parking lot or similar space sharing
online auction website is a place of business.] A website, software ap- the same physical address as the facility but not within the walls of the
plication, or other method used to place an Internet order is not a place facility.
of business of the seller. Additional criteria for determining when a
(24) [(20)] Transit authority--A metropolitan rapid transit
location is a place of business of the seller are provided in subsection
authority (MTA), advanced transportation district (ATD), regional or
(b)[(e)] of this section for [administrative offices;] distribution centers,
subregional transportation authority (RTA), city transit department
manufacturing plants, storage yards, warehouses and similar facilities;
(CTD), county transit authority (CTA), regional mobility authority
kiosks; and purchasing offices. An outlet, office, facility, or any loca-
(RMA) or coordinated county transportation authority created under
tion that contracts with a retail or commercial business to process for
Transportation Code, Chapters 370, 451, 452, 453, 457, or 460.
that business invoices, purchase orders, bills of lading, or other equiva-
lent records onto which sales tax is added, including an office operated (25) [(21)] Traveling salesperson--A seller, or an agent or
for the purpose of buying and selling taxable goods to be used or con- employee of a seller, who visits potential purchasers in person to solicit
sumed by the retail or commercial business, is not a "place of business sales, and who does not carry inventory ready for immediate sale, but
of the retailer" if the comptroller determines that the outlet, office, fa- who may carry samples or perform demonstrations of items for sale.
cility, or location functions or exists to avoid the tax legally due under
(26) [(22)] Two percent cap--A reference to the general
this chapter or exists solely to rebate a portion of the tax imposed by
rule that, except as otherwise provided by Texas law and as explained
this chapter to the contracting business. An outlet, office, facility, or lo-
in this section, a seller cannot collect, and a purchaser is not obligated
cation does not exist to avoid the tax legally due under this chapter or
to pay, more than 2.0% of the sales price of a taxable item in total local
solely to rebate a portion of the tax imposed by this chapter if the out-
sales and use taxes for all local taxing jurisdictions
let, office, facility, or location provides significant business services,
beyond processing invoices, to the contracting business, including lo- (27) [(23)] Use--This term has the meaning given in §3.346
gistics management, purchasing, inventory control, or other vital busi- of this title.
ness services.
(28) [(24)] Use tax--A tax imposed on the storage, use or
(18) [(15)] Purchasing office--An outlet, office, facility, other consumption of a taxable item in this state.
or any location that contracts with a retail or commercial business to
(b) Place of business of the seller - special definitions. In addi-
process for that business invoices, purchase orders, bills of lading, or
tion to the general definition of the term "place of business of the seller"
other equivalent records onto which sales tax is added, including an
in subsection (a)(17) of this section, the following rules apply.
office operated for the purpose of buying and selling taxable goods to
be used or consumed by the retail or commercial business. (1) Distribution centers, manufacturing plants, storage
yards, warehouses, and similar facilities.
(19) Remote Seller--As defined in §3.286 of this title, re-
mote seller is a seller engaged in business in this state whose only ac- (A) A distribution center, manufacturing plant, storage
tivity in the state is: yard, warehouse, or similar facility operated by a seller at which the
seller receives three or more orders of taxable items during a calendar
(A) engaging in regular or systematic solicitation of
year from persons other than employees, independent contractors, and
sales of taxable items in this state by the distribution of catalogs,
natural persons affiliated with the seller.
periodicals, advertising flyers, or other advertising, by means of print,
radio, or television media, or by mail, telegraphy, telephone, computer (B) If a location that is a place of business of the seller,
data base, cable, optic, microwave, or other communication system such as a sales office, is in the same building as a distribution center,
for the purpose of effecting sales of taxable items; or manufacturing plant, storage yard, warehouse, or similar facility op-
erated by a seller, then the entire facility is a place of business of the
(B) soliciting orders for taxable items by mail or
seller.
through other media including the Internet or other media that may be
developed in the future. (2) Kiosks. A kiosk is not a place of business of the seller
for the purpose of determining where a sale is consummated for local

PROPOSED RULES January 3, 2020 45 TexReg 103

CP Ex-16-0018 of 0030
tax purposes. A seller who owns or operates a kiosk in Texas is, how- (B) Order received at a place of business of the seller in
ever, engaged in business in this state as provided in §3.286 of this title. Texas, fulfilled at a location that is not a place of business of the seller.
(3) Purchasing offices. (i) Except as provided in paragraph (6) of this sub-
section, when an order that is placed over the telephone, by any means
(A) A purchasing office is not a place of business of the
other than in person, or through a traveling salesperson is received by
seller if the purchasing office exists solely to rebate a portion of the
the seller at a place of business of the seller in Texas, and the seller ful-
local sales and use tax imposed by Tax Code, Chapter 321 or 323 to
fills the order at a location that is not a place of business of the seller in
a business with which it contracts; or if the purchasing office func-
Texas, such as a warehouse or distribution center, the sale is consum-
tions or exists to avoid the tax legally due under Tax Code, Chapter
mated at the place of business of the seller at which the order for the
321 or 323. A purchasing office does not exist solely to rebate a por-
taxable item is received.
tion of the local sales and use tax or to avoid the tax legally due under
Tax Code, Chapter 321 or 323 if the purchasing office provides signif- (ii) Orders taken by traveling salespersons operating
icant business services to the contracting business beyond processing out of a place of business of the seller in Texas are received by the
invoices, including logistics management, purchasing, inventory con- seller at the place of business of the seller in Texas from which the
trol, or other vital business services. traveling salesperson operates. Orders taken by traveling salespersons
that are not operating out of a place of business of the seller in Texas are
(B) In making a determination under subparagraph (A)
not received by the seller at a place of business of the seller in Texas.
of this paragraph, as to whether a purchasing office provides signif-
Orders taken by traveling salespersons are not received by the seller at
icant business services to the contracting business beyond processing
the purchaser's location.
invoices, the comptroller will compare the total value of the other busi-
ness services to the value of processing invoices. If the total value of (C) Order fulfilled at a place of business of the seller in
the other business services, including logistics management, purchas- Texas. When an order is placed in person at a location that is not a
ing, inventory control, or other vital business services, is less than the place of business of the seller in this state, such as a kiosk, when an
value of the service to process invoices, then the purchasing office will order is placed through a traveling salesperson, or when an order is
be presumed not to be a place of business of the seller. placed over the telephone, through the Internet, or by any means other
than in person, and the seller fulfills the order at a location that is a
(C) If the comptroller determines that a purchasing of-
place of business of the seller in Texas, the sale is consummated at the
fice is not a place of business of the seller, the sale of any taxable item
place of business of the seller where the order is fulfilled.
is deemed to be consummated at the place of business of the seller from
whom the purchasing office purchased the taxable item for resale and (D) Order fulfilled within the state at a location that is
local sales and use taxes are due according to the following rules. not a place of business of the seller. When an order is received by a
seller at any location other than a place of business of the seller in this
(i) When taxable items are purchased from a Texas
state or by a traveling salesperson that does not operate out of a place
seller, local sales taxes are due based on the location of the seller's place
of business of the seller in Texas, and the seller fulfills the order at a
of business where the sale is deemed to be consummated, as determined
location in Texas that is not a place of business of the seller, then the sale
in accordance with subsection (c) of this section.
is consummated at the location in Texas to which the order is shipped
(ii) When the sale of a taxable item is deemed to be or delivered, or at which the purchaser of the item takes possession.
consummated at a location outside of this state, local use tax is due
(E) Order received outside of the state, fulfilled outside
based on the location where the items are first stored, used or consumed
of the state. When an order is received by a seller at a location outside of
by the entity that contracted with the purchasing office in accordance
Texas, including orders received by a traveling salesperson operating
with subsection (d) of this section.
from a location outside of Texas or by a remote seller, and the order
(c) Local sales tax. Determining the local taxing jurisdictions is shipped or delivered into a local taxing jurisdiction from a location
to which sales tax is due; consummation of sale. outside of the state, the sale is not consummated at a location in Texas.
However, local use tax is due based upon the location in this state to
(1) General sales tax rules applied to specific situations.
which the item is shipped or delivered or at which the purchaser of
Except for the special rules applicable to remotes sellers in subsection
the item takes possession as provided in subsection (d) of this section.
(i)(3) of this section, direct payment permit purchases in subsection (j)
Except as provided in subsection (i)(3) of this section, a remote seller
of this section, and certain taxable items, including taxable items sold
required to collect state use tax under §3.286(b)(2) of this title must also
by a marketplace provider, as provided in subsection (k) of this section,
collect local use tax based on the location to which the item is shipped
each sale of a taxable item is consummated at the location indicated by
or delivered or at which the purchaser of the item takes possession.
the provisions of this subsection. The following rules, taken from Tax
Code, §321.203 and §323.203, apply to all sellers engaged in business (F) Exception for qualifying economic development
in this state, regardless of whether they have no place of business in agreements entered into before January 1, 2009, pursuant to Tax Code,
Texas, a single place of business in Texas, or multiple places of busi- §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This subparagraph is
ness in the state. effective until September 1, 2024. If applicable, the local sales tax due
on the sale of a taxable item is based on the location of the qualifying
(A) Order placed in person at a seller's place of business
warehouse, which is a place of business of the seller, from which the
in Texas. Except as described in subparagraph (F) of this paragraph
item is shipped or delivered or at which the purchaser of the item takes
and paragraph (6) of this subsection, for an order placed in person by
possession.
a purchaser for a taxable item at a seller's place of business in Texas,
including at a temporary place of business of the seller, the sale of that (2) Local sales taxes are due to each local taxing jurisdic-
item is consummated at that place of business of the seller, regardless tion in effect at the location where the sale is consummated. Local use
of the location where the order is fulfilled. Orders taken by traveling tax may also be due if the total amount of local sales taxes due does not
salespersons are not placed in person at the seller's place of business in reach the two percent cap, and the item purchased is shipped or deliv-
Texas. ered to a location in one or more different local taxing jurisdictions, as
provided in subsection (d) of this section.

45 TexReg 104 January 3, 2020 Texas Register

CP Ex-16-0019 of 0030
(3) Multiple special purpose district taxes, multiple transit (E) Internet order fulfilled from a location outside of the
authority sales taxes, or a combination of the two may apply to a single state. When an Internet order is shipped or delivered into a local taxing
transaction. If the sale of a taxable item is consummated at a location jurisdiction from a location outside of Texas, the sale is not consum-
within the boundaries of multiple special purpose districts or transit mated at a location in Texas. However, local use tax is due based upon
authorities, local sales tax is owed to each of the jurisdictions in effect the location in this state to which the item is shipped or delivered or at
at that location. For example, a place of business of the seller located in which the purchaser of the item takes possession as provided in sub-
the city of San Antonio is within the boundaries of both the San Antonio section (d) of this section.
Advanced Transportation District and the San Antonio Metropolitan
(F) Exception for certain economic development agree-
Transit Authority, and the seller is required to collect sales tax for both
ments. Subparagraphs (A) - (E) of this paragraph do not apply to sales
transit authorities. Similarly, a place of business of the seller in Flower
of taxable items for Internet orders made by a seller who has entered
Mound is located within the boundaries of two special purpose districts,
into an economic development agreement pursuant to Local Govern-
the Flower Mound Crime Control District and the Flower Mound Fire
ment Code, Chapters 380 and 381 with a local taxing jurisdiction before
Control District, and the seller is responsible for collecting sales tax for
September 1, 2019. This subparagraph is effective until December 31,
both special purpose districts.
2022.
(4) Drop shipments.
(d) Local use tax. The provisions addressing the imposition
(A) When an order for a taxable item is received at a of state use tax in §3.346 of this title also apply to the imposition of
seller's place of business in Texas, or by a traveling salesperson operat- local use tax. For example, consistent with §3.346(e) of this title, all
ing out of a place of business in this state, and the item is drop-shipped taxable items that are shipped or delivered to a location in this state that
directly to the purchaser from a third-party supplier, the sale is con- is within the boundaries of a local taxing jurisdiction are presumed to
summated at, and local sales tax is due based upon, the location of the have been purchased for use in that local taxing jurisdiction as well as
place of business of the seller where the order is received. presumed to have been purchased for use in the state.
(B) When an order for a taxable item is received by the (1) General rules.
seller at a location outside of Texas, or by a traveling salesperson oper-
(A) When local use taxes are due in addition to local
ating from a location outside of this state, and the item is drop-shipped
sales taxes as provided by subsection (c) of this section, all applicable
directly to the purchaser from a third-party supplier, the item is subject
use taxes must be collected or accrued in the following order until the
to use tax. See subsection (d) of this section concerning use tax.
two percent cap is reached: city, county, special purpose district, and
(5) Itinerant vendors; vending machines. transit authority. If more than one special purpose district use tax is due,
all such taxes are to be collected or accrued before any transit authority
(A) Itinerant vendors. Sales made by itinerant vendors
use tax is collected or accrued. See subparagraphs (D) and (E) of this
are consummated at, and itinerant vendors must collect sales tax based
paragraph.
upon, the location where the item is delivered or at which the purchaser
of the item takes possession. Itinerant vendors do not have any respon- (B) If a local use tax cannot be collected or accrued at
sibility to collect use tax. its full rate without exceeding the two percent cap, the seller cannot
collect it, or any portion of it, and the purchaser is not responsible for
(B) Vending machines. Sales of taxable items made
accruing it.
from a vending machine are consummated at the location of the vend-
ing machine. See §3.293 of this title (relating to Food; Food Prod- (C) If a seller collects a local sales tax on an item, or a
ucts; Meals; Food Service) for more information about vending ma- purchaser accrues a local sales tax on an item, a use tax for the same
chine sales. type of jurisdiction is not due on the same item. For example, after a
city sales tax has been collected or accrued for an item, no use tax is
(6) Internet orders. Subparagraphs (A) - (E) of this para-
due to that same or a different city on that item, but use tax may be due
graph become effective April 1, 2020.
to a county, special purpose district, or transit authority. Similarly, if
(A) General rule. Except as provided in this paragraph, one or more special purpose district sales taxes have been collected or
Internet orders are not received at a place of business of the seller in accrued for an item, no special purpose district use tax is due on that
Texas. item, and if one or more transit authority sales taxes have been collected
or accrued for an item, no transit authority use tax is due on that item.
(B) Orders placed using the seller's device. When a pur-
chaser places an order for a taxable item with a seller using the Internet (D) Collection or accrual of use tax for multiple special
on a computer or device of the seller at the seller's place of business in purpose districts. If more than one special purpose district use tax is in
Texas, the sale is consummated at the place of business where the order effect at the location where use of an item occurs, the special purpose
is placed, regardless of where the order is fulfilled. district taxes are due in the order of their effective dates, beginning
with the earliest effective date, until the two percent cap is met. The
(C) Internet order fulfilled from a place of business of
effective dates of all special purpose district taxes are available on the
the seller in Texas. When a seller fulfills an Internet order at a location
comptroller's website. However, if the collection or accrual of use tax
that is a place of business of the seller in Texas, the sale is consummated
for the district with the earliest effective date would exceed the two
at the place of business of the seller where the order is fulfilled.
percent cap, the tax for that district is not due and the seller or purchaser
(D) Internet order fulfilled from a location in Texas that should determine, following the criteria in subparagraphs (A) - (C) of
is not a place of business of the seller in Texas. When a seller fulfills this paragraph, whether use tax is due for the district that next became
an Internet order at a location in Texas that is not a place of business effective.
of the seller in Texas, the sale is consummated at the location in Texas
(i) If the competing special purpose district taxes be-
to which the order is shipped or delivered, or at which the purchaser of
came effective on the same date, the special purpose district taxes are
the item takes possession.
due in the order of the earliest date for which the election in which the

PROPOSED RULES January 3, 2020 45 TexReg 105

CP Ex-16-0020 of 0030
district residents authorized the imposition of sales and use tax by the local use taxes due, the purchaser is responsible for accruing such taxes
district was held. and remitting them directly to the comptroller.
(ii) If the elections to impose the local taxes were (C) Sale consummated in any local taxing jurisdictions
held on the same date, the special purpose district taxes are due in the imposing less than 2.0% in total local taxes - local sales taxes and use
order of the earliest date for which the enabling legislation under which taxes due. If a sale is consummated at a location in Texas where the
each district was created became effective. total local sales tax rate imposed by the taxing jurisdictions in effect at
that location does not equal 2.0% according to the provisions of sub-
(E) Collection or accrual of use tax for multiple transit
section (c) of this section, and the item is shipped or delivered to the
authorities. If more than one transit authority use tax is in effect at
purchaser at a location in this state that is inside the boundaries of a
the location where use of an item occurs, and the two percent cap has
different local taxing jurisdiction, additional local use tax may be due
not been met, the transit authority taxes are due in the order of their
based on the location to which the order is shipped or delivered or at
effective dates, beginning with the earliest effective date, until the two
which the purchaser of the item takes possession, subject to the two
percent cap is met. The effective dates of all transit authority taxes
percent cap. The seller is responsible for collecting any additional lo-
are available on the comptroller's website. However, if the collection
cal use taxes due on the sale, regardless of the location of the seller in
or accrual of use tax for the authority with the earliest effective date
Texas. See subsection (i) of this section. If the seller fails to collect the
would exceed the two percent cap, the tax for that authority is not due
additional local use taxes due, the purchaser is responsible for accruing
and the seller or purchaser should determine, following the criteria in
such taxes and remitting them directly to the comptroller.
subparagraphs (A) - (D) of this paragraph, whether use tax is due for
the authority that next became effective. (i) Example one - if an order is received in person at
a place of business of the seller, such that the sale is consummated at
(i) If the competing transit authorities became effec-
the location where the order is received as provided under subsection
tive on the same date, the transit authority taxes are due in the order of
(c)(1)(A) of this section, and the local sales tax due on the sale does
the earliest date for which the election in which the authority residents
not meet the two percent cap, additional local use taxes are due based
authorized the imposition of sales and use tax by the authority was held.
on the location to which the order is shipped or delivered or at which
(ii) If the elections to impose local taxes were held the purchaser of the item takes possession, subject to the provisions in
on the same date, the transit authority use taxes are due in the order of paragraph (1) of this subsection.
the earliest date for which the enabling legislation under which each
(ii) Example two - if a seller receives an order for a
authority was created became effective.
taxable item at a seller's place of business in Texas, and the seller ships
(2) General use tax rules applied to specific situations. The or delivers the item from an out-of-state location to a location in this
following fact patterns explain how local use tax is to be collected or state as designated by the purchaser, local sales tax is due based upon
accrued and remitted to the comptroller based on, and subject to, the the location of the place of business of the seller where the order is
general rules in paragraph (1) of this subsection. received. If the local sales tax due on the item does not meet the two
percent cap, use taxes, subject to the provisions in paragraph (1) of this
(A) Sale consummated outside the state, item delivered
subsection, are due based upon the location where the items are shipped
from outside the state or from a location in Texas that is not operated by
or delivered or at which the purchaser of the item takes possession.
the seller - local use tax due. Except as provided in subsection (i)(3) of
this section, if a sale is consummated outside of this state according to (e) Effect of other law.
the provisions of subsection (c) of this section, and the item purchased
(1) Tax Code, Title 2, Subtitles A (General Provisions) and
is either shipped or delivered to a location in this state as designated
B (Enforcement and Collection), Tax Code, Chapter 141 (Multistate
by the purchaser from a location outside of the state, or if the order
Tax Compact) and Tax Code, Chapter 151 (Limited Sales, Excise, and
is drop shipped directly to the purchaser from a third-party supplier,
Use Tax) apply to transactions involving local taxes. Related sections
local use tax is owed based upon the location in this state to which
of this title and comptroller rulings shall also apply with respect to local
the order is shipped or delivered or at which the purchaser of the item
taxes. This includes authorities such as court cases and federal law
takes possession. The seller is responsible for collecting the local use
that affect whether an item is taxable or is excluded or exempt from
tax due on the sale. If the seller does not collect the local use taxes due
taxation.
on the sale, the purchaser is responsible for accruing such taxes and
remitting them directly to the comptroller according to the provisions in (2) Permits, exemption certificates, and resale certificates
paragraph (1) of this subsection. For example, if an order for a taxable required by Tax Code, Chapter 151, shall also satisfy the requirements
item is received by a seller at a location outside of Texas, and the order for collecting and remitting local taxes, unless otherwise indicated by
is shipped to the purchaser from a location outside of the state, local this section or other sections of this title. For example, see subsection
use tax is due based upon the location to which the order is shipped or (n) of this section concerning prior contract exemptions.
delivered or at which the purchaser of the item takes possession.
(3) Any provisions in this section or other sections of this
(B) Sale consummated in Texas outside a local taxing title related to a seller's responsibilities for collecting and remitting lo-
jurisdiction, item delivered into one or more local taxing jurisdictions - cal taxes to the comptroller shall also apply to a purchaser if the seller
local use tax due. If a sale is consummated at a location in Texas that is does not collect local taxes that are due. The comptroller may proceed
outside of the boundaries of any local taxing jurisdiction according to against the seller or purchaser for the local tax owed by either.
the provisions of subsection (c) of this section, and the order is shipped
(f) Tax rates. Except as otherwise provided by law, no local
or delivered to the purchaser at a location in this state that is within the
governmental entity may adopt or increase a sales and use tax if, as a
boundaries of one or more local taxing jurisdictions, local use tax is
result of the adoption or increase of the tax, the combined rate of all
due based on the location to which the items are shipped or delivered
sales and use taxes imposed by local taxing jurisdictions having terri-
or at which the purchaser of the item takes possession. The seller is
tory in the local governmental entity would exceed 2.0% at any location
responsible for collecting the local use taxes due on the sale, regardless
within the boundaries of the local governmental entity's jurisdiction.
of the location of the seller in Texas. If the seller fails to collect any
The following are the local tax rates that may be adopted.

45 TexReg 106 January 3, 2020 Texas Register

CP Ex-16-0021 of 0030
(1) Cities. Cities may impose sales and use tax at a rate of are within the boundaries of the city for purposes of city sales and use
up to 2.0%. tax.
(2) Counties. Counties may impose sales and use tax at (B) Counties, transit authorities, and special purpose
rates ranging from 0.5% to 1.5%. districts may not enter into strategic partnership agreements. Sales
and use taxes imposed by those taxing jurisdictions do not apply in
(3) Special purpose districts. Special purpose districts may
the limited-purpose annexed area as part of a strategic partnership
impose sales and use tax at rates ranging from 0.125% to 2.0%.
agreement between a city and an authorized district. However, a
(4) Transit authorities. Transit authorities may impose county, special purpose district, or transit authority sales and use tax, or
sales and use tax at rates ranging from 0.25% to 1.0%. any combination of these three types of taxes, may apply at locations
included in a strategic partnership agreement between a city and an
(g) Jurisdictional boundaries, combined areas, and city tax im-
authorized district if the tax is imposed in that area by the applicable
posed through strategic partnership agreements.
jurisdiction as allowed under its own controlling authorities.
(1) Jurisdictional boundaries.
(C) Prior to September 1, 2011, the term "district" was
(A) City boundaries. City taxing jurisdictional bound- defined in Local Government Code, §43.0751 as a municipal utility
aries cannot overlap one another and a city cannot impose a sales and district or a water control and improvement district. The definition
use tax in an area that is already within the jurisdiction of another city. was amended effective September 1, 2011, to mean a conservation and
reclamation district operating under Water Code, Chapter 49.
(B) County boundaries. County tax applies to all loca-
tions within that county. (h) Places of business of the seller and job sites crossed by
local taxing jurisdiction boundaries.
(C) Special purpose district and transit authority bound-
aries. Special purpose districts and transit authorities may cross or (1) Places of business of the seller crossed by local taxing
share boundaries with other local taxing jurisdictions and may encom- jurisdiction boundaries. If a place of business of the seller is crossed by
pass, in whole or in part, other local taxing jurisdictions, including one or more local taxing jurisdiction boundaries so that a portion of the
cities and counties. A geographic location or address in this state may place of business of the seller is located within a taxing jurisdiction and
lie within the boundaries of more than one special purpose district or the remainder of the place of business of the seller lies outside of the
more than one transit authority. taxing jurisdiction, tax is due to the local taxing jurisdictions in which
the sales office is located. If there is no sales office, sales tax is due to
(D) Extraterritorial jurisdictions. Except as otherwise
the local taxing jurisdictions in which any cash registers are located.
provided by paragraph (3) of this subsection concerning strategic part-
nership agreements and subsection (l)(5) of this section concerning the (2) Job sites.
City of El Paso and Fort Bliss, city sales and use tax does not apply to
(A) Residential repair and remodeling; new construc-
taxable sales that are consummated outside the boundaries of the city,
tion of an improvement to realty. When a contractor is improving real
including sales made in a city's extraterritorial jurisdiction. However,
property under a separated contract, and the job site is crossed by the
an extraterritorial jurisdiction may lie within the boundaries of a spe-
boundaries of one or more local taxing jurisdictions, the local taxes due
cial purpose district, transit authority, county, or any combination of
on any separately stated charges for taxable items incorporated into the
the three, and the sales and use taxes for those jurisdictions would ap-
real property must be allocated to the local taxing jurisdictions based on
ply to those sales.
the total square footage of the real property improvement located within
(2) Combined areas. A combined area is an area where the each jurisdiction, including the square footage of any standalone struc-
boundaries of a city overlap the boundaries of one or more other local tures that are part of the construction, repair, or remodeling project.
taxing jurisdictions as a result of an annexation of additional territory For more information about tax due on materials used at residential
by the city, and where, as the result of the imposition of the city tax and new construction job sites, refer to §3.291 of this title (relating to
in the area in addition to the local taxes imposed by the existing tax- Contractors).
ing jurisdictions, the combined local tax rate would exceed 2.0%. The
(B) Nonresidential real property repair and improve-
comptroller shall make accommodations to maintain a 2.0% rate in any
ment. When taxable services are performed to repair, remodel, or
combined area by distributing the 2.0% tax revenue generated in these
restore nonresidential real property, including a pipeline, transmission
combined areas to the local taxing jurisdictions located in the combined
line, or parking lot, that is crossed by the boundaries of one or more
areas as provided in Tax Code, §321.102 or Health and Safety Code,
local taxing jurisdictions, the local taxes due on the taxable services,
§775.0754. Combined areas are identified on the comptroller's web-
including materials and any other charges connected to the services
site. Sellers engaged in transactions on which local sales or use taxes
performed, must be allocated among the local taxing jurisdictions
are due in a combined area, or persons who must self-accrue and re-
based upon the total mileage or square footage, as appropriate, of the
mit tax directly to the comptroller, must use the combined area local
repair, remodeling, or restoration project located in each jurisdiction.
code when reporting the tax rather than the codes for the individual
For more information about tax due on materials used at nonresidential
city, county, special purpose districts, or transit authorities that make
real property repair and remodeling job sites, refer to §3.357 of this
up the combined area.
title (relating to Nonresidential Real Property Repair, Remodeling,
(3) City tax imposed through strategic partnership agree- and Restoration; Real Property Maintenance).
ments.
(i) Sellers' and purchasers' responsibilities for collecting or ac-
(A) The governing bodies of a district, as defined in cruing local taxes.
Local Government Code, §43.0751, and a city may enter into a lim-
(1) Sale consummated in Texas; seller responsible for col-
ited-purpose annexation agreement known as a strategic partnership
lecting local sales taxes and applicable local use taxes. When a sale
agreement. Under this agreement, the city may impose sales and use
of a taxable item is consummated at a location in Texas as provided by
tax within all or part of the boundaries of a district. Areas within a dis-
subsection (c) of this section, the seller must collect each local sales tax
trict that are annexed for this limited purpose are treated as though they
in effect at the location. If the total rate of local sales tax due on the sale

PROPOSED RULES January 3, 2020 45 TexReg 107

CP Ex-16-0022 of 0030
does not reach the two percent cap, and the seller ships or delivers the tice of the single local use tax rate in the Texas Register that will be in
item into another local taxing jurisdiction, then the seller is required to effect for that calendar year.
collect additional local use taxes due, if any, based on the location to
(F) Calculating the single local use tax rate. The single
which the item is shipped or delivered or at which the purchaser of the
local use tax rate effective in a calendar year is equal to the estimated
item takes possession, regardless of the location of the seller in Texas.
average rate of local sales and use taxes imposed in this state during the
For more information regarding local use taxes, refer to subsection (d)
preceding state fiscal year. As soon as practicable after the end of a state
of this section.
fiscal year, the comptroller must determine the estimated average rate
(2) Out-of-state sale; seller engaged in business in Texas. of local sales and use taxes imposed in this state during the preceding
Except as provided in paragraph (3) of this subsection, when a sale is state fiscal year by:
not consummated in Texas, a seller who is engaged in business in this
(i) dividing the total amount of net local sales and
state is required to collect and remit local use taxes due, if any, on orders
use taxes remitted to the comptroller during the state fiscal year by the
of taxable items shipped or delivered at the direction of the purchaser
total amount of net state sales and use tax remitted to the comptroller
into a local taxing jurisdiction in this state based upon the location in
during the state fiscal year;
this state to which the item is shipped or delivered or at which the
purchaser of the item takes possession as provided in subsection (d) (ii) multiplying the amount computed under clause
of this section. (i) of this subparagraph by the rate provided in Tax Code, §151.051;
and
(3) Local use tax rate for remote sellers.
(iii) rounding the amount computed under clause (ii)
(A) A remote seller required to collect and remit one or
of this subparagraph to the nearest .0025.
more local use taxes in connection with a sale of a taxable item must
compute the amount using: (G) Direct refund. A purchaser may request a refund
based on local use taxes paid in a calendar year for the difference be-
(i) the combined tax rate of all applicable local use
tween the single local use tax rate paid by the purchaser and the amount
taxes based on the location to which the item is shipped or delivered or
the purchaser would have paid based on the combined tax rate for all
at which the purchaser of the item takes possession; or
applicable local use taxes. Notwithstanding the refund requirements
(ii) at the remote seller's election, the single local use under §3.325(a)(1) of this title (relating to Refunds and Payments Un-
tax rate published in the Texas Register. der Protest), a non-permitted purchaser may request a refund directly
from the comptroller for the tax paid in the previous calendar year, no
(B) A remote seller that is storing tangible personal
earlier than January 1 of the following calendar year within the statute
property in Texas to be used for fulfillment at a facility of a market-
of limitation under Tax Code, 111.104 (Refunds).
place provider that has certified that it will assume the rights and duties
of a seller with respect to the tangible personal property, as provided (H) Marketplace providers. Notwithstanding subpara-
for in §3.286 of this title, may elect the single local use tax rate under graph (A) of this paragraph, marketplace providers may not use the
subparagraph (A)(ii) of this paragraph. single local use tax rate and must compute the amount of local use tax
to collect and remit using the combined tax rate of all applicable local
(C) Notice to the comptroller of election and revocation
use taxes.
of election.
(4) Purchaser responsible for accruing and remitting local
(i) Before using the single local use tax rate, a re-
taxes if seller fails to collect.
mote seller must notify the comptroller of its election using a form pre-
scribed by the comptroller. A remote seller may also notify the comp- (A) If a seller does not collect the state sales tax, any
troller of the election on its use tax permit application form. The remote applicable local sales taxes, or both, on a sale of a taxable item that
seller must use the single local use tax rate for all of its sales of taxable is consummated in Texas, then the purchaser is responsible for filing
items until the election is revoked as provided in clause (ii) of this sub- a return and paying the tax. The local sales taxes due are based on
paragraph. the location in this state where the sale is consummated as provided in
subsection (c) of this section.
(ii) A remote seller may revoke its election by filing
a form prescribed by the comptroller. If the comptroller receives the (B) A purchaser who buys an item for use in Texas from
notice by October 1, the revocation will be effective January 1 of the a seller who does not collect the state use tax, any applicable local use
following year. If the comptroller receives the notice after October 1, taxes, or both, is responsible for filing a return and paying the tax. The
the revocation will be effective January 1 of the year after the follow- local use taxes due are based on the location where the item is first
ing year. For example, a remote seller must notify the comptroller by stored, used, or consumed by the purchaser.
October 1, 2020, for the revocation to be effective January 1, 2021. If
(C) For more information about how to report and pay
the comptroller receives the revocation on November 1, 2020, the re-
use tax directly to the comptroller, see §3.286 of this title.
vocation will be effective January 1, 2022.
(5) Local tax is due on the sales price of a taxable item, as
(D) Single local use tax rate.
defined in Tax Code, §151.007, in the report period in which the taxable
(i) The single local use tax rate in effect for the pe- item is purchased or the period in which the taxable item is first stored,
riod beginning October 1, 2019, and ending December 31, 2019, is used, or otherwise consumed in a local taxing jurisdiction.
1.75%.
(6) A purchaser is not liable for additional local use tax if
(ii) The single local use tax rate in effect for the pe- the purchaser pays local use tax using the rate elected by an eligible re-
riod beginning January 1, 2020, and ending December 31, 2020, is mote seller according to paragraph (3) of this subsection. The remote
1.75%. seller must be identified on the comptroller's website as electing to use
the single local use tax rate. A purchaser must verify that the remote
(E) Annual publication of single local use tax rate. Be-
seller is listed on the comptroller's website. If the remote seller is not
fore the beginning of a calendar year, the comptroller will publish no-

45 TexReg 108 January 3, 2020 Texas Register

CP Ex-16-0023 of 0030
listed on the comptroller's website, the purchaser will be liable for ad- an extraterritorial jurisdiction may lie within the boundaries of a spe-
ditional use tax due in accordance to paragraph (4) of this subsection. cial purpose district, transit authority, county, or any combination of
the three, and the sales and use taxes for those jurisdictions would ap-
[(b) Effect of other law.]
ply to those sales.]
[(1) Tax Code, Title 2, Subtitles A (General Provisions)
[(2) Combined areas. A combined area is an area where the
and B (Enforcement and Collection), Tax Code, Chapter 141 (Multi-
boundaries of a city overlap the boundaries of one or more other local
state Tax Compact) and Tax Code, Chapter 151 (Limited Sales, Excise,
taxing jurisdictions as a result of an annexation of additional territory
and Use Tax) apply to transactions involving local taxes. Related sec-
by the city, and where, as the result of the imposition of the city tax
tions of this title and comptroller rulings shall also apply with respect
in the area in addition to the local taxes imposed by the existing tax-
to local taxes. This includes authorities such as court cases and federal
ing jurisdictions, the combined local tax rate would exceed 2.0%. The
law that affect whether an item is taxable or is excluded or exempt from
comptroller shall make accommodations to maintain a 2.0% rate in any
taxation.]
combined area. Sellers engaged in transactions on which local sales or
[(2) Permits, exemption certificates, and resale certificates use taxes are due in a combined area, or persons who must self-accrue
required by Tax Code, Chapter 151, shall also satisfy the requirements and remit tax directly to the comptroller, must use the combined area
for collecting and remitting local taxes, unless otherwise indicated by local code when reporting the tax rather than the codes for the indi-
this section or other sections of this title. For example, see subsection vidual city, county, special purpose districts, or transit authorities that
(n) of this section concerning prior contract exemptions.] make up the combined area. The comptroller shall distribute the tax
revenue generated in these combined areas to the local taxing jurisdic-
[(3) Any provisions in this section or other sections of this
tions located in the combined areas as provided in Tax Code, §321.102
title related to a seller's responsibilities for collecting and remitting lo-
or Health and Safety Code, §775.0754. Combined areas are identified
cal taxes to the comptroller shall also apply to a purchaser if the seller
on the comptroller's website.]
does not collect local taxes that are due. The comptroller may proceed
against the seller or purchaser for the local tax owed by either.] [(3) City tax imposed through strategic partnership agree-
ments.]
[(c) Tax rates. Except as otherwise provided by law, no local
governmental entity may adopt or increase a sales and use tax if, as a re- [(A) The governing bodies of a district, as defined in
sult of the adoption or increase of the tax, the combined rate of all sales Local Government Code, §43.0751, and a city may enter into a lim-
and use taxes imposed by local taxing jurisdictions having territory in ited-purpose annexation agreement known as a strategic partnership
the local governmental entity would exceed 2.0% at any location within agreement. Under this agreement, the city may impose sales and use
the boundaries of the local governmental entity's jurisdiction. The fol- tax within all or part of the boundaries of a district. Areas within a dis-
lowing are the local tax rates that may be adopted.] trict that are annexed for this limited purpose are treated as though they
are within the boundaries of the city for purposes of city sales and use
[(1) Cities. Cities may impose sales and use tax at a rate of
tax.]
up to 2.0%.]
[(B) Counties, transit authorities, and special purpose
[(2) Counties. Counties may impose sales and use tax at
districts may not enter into strategic partnership agreements. Sales and
rates ranging from 0.5% to 1.5%.]
use taxes imposed by those taxing jurisdictions do not apply in the lim-
[(3) Special purpose districts. Special purpose districts ited-purpose annexed area as part of a strategic partnership agreement
may impose sales and use tax at rates ranging from 0.125% to 2.0%.] between a city and an authorized district. However, a county, special
purpose district, or transit authority sales and use tax, or any combina-
[(4) Transit authorities. Transit authorities may impose
tion of these three types of taxes, may apply at locations included in a
sales and use tax at rates ranging from 0.25% to 1.0%.]
strategic partnership agreement between a city and an authorized dis-
[(d) Jurisdictional boundaries, combined areas, and city tax trict if the tax is imposed in that area by the applicable jurisdiction as
imposed through strategic partnership agreements.] allowed under its own controlling authorities.]
[(1) Jurisdictional boundaries.] [(C) Prior to September 1, 2011, the term "district" was
defined in Local Government Code, §43.0751 as a municipal utility
[(A) City boundaries. City taxing jurisdictional bound-
district or a water control and improvement district. The definition
aries cannot overlap one another and a city cannot impose a sales and
was amended effective September 1, 2011, to mean a conservation and
use tax in an area that is already within the jurisdiction of another city.]
reclamation district operating under Water Code, Chapter 49.]
[(B) County boundaries. County tax applies to all loca-
[(e) Place of business - special definitions. In addition to the
tions within that county.]
general definition of the term "place of business" in subsection (a)(14)
[(C) Special purpose district and transit authority of this section, the following rules apply.]
boundaries. Special purpose districts and transit authorities may
[(1) Administrative offices supporting traveling salesper-
cross or share boundaries with other local taxing jurisdictions and
sons. Any outlet, office, or location operated by a seller that serves
may encompass, in whole or in part, other local taxing jurisdictions,
as a base of operations for a traveling salesperson or that provides ad-
including cities and counties. A geographic location or address in this
ministrative support to a traveling salesperson is a place of business.]
state may lie within the boundaries of more than one special purpose
district or more than one transit authority.] [(2) Distribution centers, manufacturing plants, storage
yards, warehouses, and similar facilities.]
[(D) Extraterritorial jurisdictions. Except as otherwise
provided by paragraph (3) of this subsection concerning strategic part- [(A) A distribution center, manufacturing plant, storage
nership agreements and subsection (l)(5) of this section concerning the yard, warehouse, or similar facility operated by a seller at which the
City of El Paso and Fort Bliss, city sales and use tax does not apply to seller receives three or more orders for taxable items during the calen-
taxable sales that are consummated outside the boundaries of the city, dar year is a place of business.]
including sales made in a city's extraterritorial jurisdiction. However,

PROPOSED RULES January 3, 2020 45 TexReg 109

CP Ex-16-0024 of 0030
[(B) If a salesperson who receives three or more orders sales office, sales tax is due to the local taxing jurisdictions in which
for taxable items within a calendar year is assigned to work from, or any cash registers are located.]
to work at, a distribution center, manufacturing plant, storage yard,
[(2) Job sites.]
warehouse, or similar facility operated by a seller, then the facility is a
place of business.] [(A) Residential repair and remodeling; new construc-
tion of an improvement to realty. When a contractor is improving real
[(C) If a location that is a place of business of the seller,
property under a separated contract, and the job site is crossed by the
such as a sales office, is in the same building as a distribution center,
boundaries of one or more local taxing jurisdictions, the local taxes due
manufacturing plant, storage yard, warehouse, or similar facility op-
on any separately stated charges for taxable items incorporated into the
erated by a seller, then the entire facility is a place of business of the
real property must be allocated to the local taxing jurisdictions based on
seller.]
the total square footage of the real property improvement located within
[(3) Kiosks. A kiosk is not a place of business for the pur- each jurisdiction, including the square footage of any standalone struc-
pose of determining where a sale is consummated for local tax pur- tures that are part of the construction, repair, or remodeling project.
poses. A seller who owns or operates a kiosk in Texas is, however, For more information about tax due on materials used at residential
engaged in business in this state as provided in §3.286 of this title.] and new construction job sites, refer to §3.291 of this title (relating to
Contractors).]
[(4) Purchasing offices.]
[(B) Nonresidential real property repair and improve-
[(A) A purchasing office is not a place of business if
ment. When taxable services are performed to repair, remodel, or re-
the purchasing office exists solely to rebate a portion of the local sales
store nonresidential real property, including a pipeline, transmission
and use tax imposed by Tax Code, Chapter 321 or 323 to a business
line, or parking lot, that is crossed by the boundaries of one or more
with which it contracts; or if the purchasing office functions or exists
local taxing jurisdictions, the local taxes due on the taxable services,
to avoid the tax legally due under Tax Code, Chapter 321 or 323. A
including materials and any other charges connected to the services per-
purchasing office does not exist solely to rebate a portion of the local
formed, must be allocated among the local taxing jurisdictions based
sales and use tax or to avoid the tax legally due under Tax Code, Chap-
upon the total mileage or square footage, as appropriate, of the repair,
ter 321 or 323 if the purchasing office provides significant business
remodeling, or restoration project located in each jurisdiction. For
services, beyond processing invoices, to the contracting business, in-
more information about tax due on materials used at nonresidential
cluding logistics management, purchasing, inventory control, or other
real property repair and remodeling job sites, refer to §3.357 of this ti-
vital business services.]
tle (relating to Nonresidential Real Property Repair, Remodeling, and
[(B) When the comptroller determines that a purchasing Restoration; Real Property Maintenance).]
office is not a place of business, the sale of any taxable item is deemed
[(g) Sellers' and purchasers' responsibilities for collecting or
to be consummated at the place of business of the seller from whom the
accruing local taxes.]
purchasing office purchased the taxable item for resale and local sales
and use taxes are due according to the following rules.] [(1) Sale consummated in Texas; seller responsible for col-
lecting local sales taxes and applicable local use taxes. When a sale of
[(i) When taxable items are purchased from a Texas
a taxable item is consummated at a location in Texas as provided by
seller, local sales taxes are due based on the location of the seller's place
subsection (h) of this section, the seller must collect each local sales
of business where the sale is deemed to be consummated, as determined
tax in effect at the location except as provided in paragraph (3) of this
in accordance with subsection (h) of this section.]
subsection. If the total rate of local sales tax due on the sale does not
[(ii) When the sale of a taxable item is deemed to reach the two percent cap, and the seller ships or delivers the item into
be consummated at a location outside of this state, local use tax is due another local taxing jurisdiction in which the seller is engaged in busi-
based on the location where the items are first stored, used or consumed ness, then the seller is required to collect additional local use taxes due,
by the entity that contracted with the purchasing office in accordance if any, based on the location to which the item is shipped or delivered.
with subsection (i) of this section.] For more information regarding local use taxes, refer to subsection (i)
of this section.]
[(C) In making a determination under subparagraph (A)
of this paragraph, as to whether a purchasing office provides significant [(2) Out-of-state sale; seller engaged in business in Texas.
business services to the contracting business, the comptroller will look A seller who is engaged in business in this state is required to collect
to the books and records of the purchasing office to determine whether and remit local use taxes due, if any, on orders of taxable items shipped
the total value of the business services provided to the contracting busi- or delivered at the direction of the purchaser into a local taxing juris-
ness equals or exceeds the total value of processing invoices. If the total diction in this state in which the seller is engaged in business.]
value of the business services provided, including logistics manage-
[(3) A seller is only required to collect local sales or use
ment, purchasing, inventory control, or other vital business services,
taxes for a local taxing jurisdiction in which the seller is engaged in
is less than the total value of the service to process invoices, then the
business.]
purchasing office will be presumed not to be a place of business of the
seller.] [(4) Purchaser responsible for accruing and remitting local
taxes if seller fails to collect.]
[(f) Places of business and job sites crossed by local taxing
jurisdiction boundaries.] [(A) If a seller does not collect the state sales tax, any
applicable local sales taxes, or both on a sale of a taxable item that
[(1) Places of business crossed by local taxing jurisdiction
is consummated in Texas, then the purchaser is responsible for filing
boundaries. If a place of business is crossed by one or more local tax-
a return and paying the tax. The local sales taxes due are based on
ing jurisdiction boundaries so that a portion of the place of business is
the location in this state where the sale is consummated as provided in
located within a taxing jurisdiction and the remainder of the place of
subsection (h) of this section.]
business lies outside of the taxing jurisdiction, tax is due to the local
taxing jurisdictions in which the sales office is located. If there is no

45 TexReg 110 January 3, 2020 Texas Register

CP Ex-16-0025 of 0030
[(B) A purchaser who buys an item for use in Texas other than in person, and the seller fulfills the order at a location that
from a seller who does not collect the state use tax, any applicable local is a place of business in Texas, the sale is consummated at the place of
use taxes, or both, is responsible for filing a return and paying the tax. business where the order is fulfilled.]
The local use taxes due are based on the location where the item is first
[(D) Order fulfilled within the state at a location that is
stored, used, or consumed by the purchaser.]
not a place of business. When an order is received by a seller at any
[(C) For more information about how to report and pay location other than a place of business of the seller in this state, and
use tax directly to the comptroller, see §3.286 of this title.] the seller fulfills the order at a location in Texas that is not a place of
business of the seller, then the sale is consummated at the location in
[(5) Local tax is due on the sales price of a taxable item, as
Texas to which the order is shipped or delivered, or the location where
defined in Tax Code, §151.007, in the report period in which the taxable
it is transferred to the purchaser.]
item is purchased or the period in which the taxable item is first stored,
used, or otherwise consumed in a local taxing jurisdiction.] [(E) Order received outside of the state, fulfilled outside
of the state. When an order is received by a seller at a location outside
[(h) Local sales tax. Determining the local taxing jurisdictions
of Texas, and the order is shipped or delivered into a local taxing juris-
to which sales tax is due; consummation of sale.]
diction from a location outside of the state, the sale is not consummated
[(1) General rule. Except for the special rules applicable to at a location in Texas. However, local use tax is due based upon the lo-
direct payment permit purchases and certain taxable items as provided cation in this state to which the item is shipped or delivered or at which
in subsections (j) and (k) of this section, each sale of a taxable item is possession of the item is taken by the purchaser as provided in subsec-
consummated at the location indicated by the provisions of this subsec- tion (i) of this section.]
tion. Local sales taxes are due to each local taxing jurisdiction in effect
[(F) Exception for qualifying economic development
at the location where the sale is consummated. Local use tax may also
agreements entered into before January 1, 2009, pursuant to Tax Code,
be due if the total amount of local sales taxes due does not reach the
§321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This subparagraph is
two percent cap, and the item purchased is shipped or delivered to a
effective until September 1, 2024. If applicable, the local sales tax due
location in one or more different local taxing jurisdictions, as provided
on the sale of a taxable item is based on the location of the qualifying
in subsection (i) of this section.]
warehouse, which is a place of business of the seller, from which the
[(2) Multiple special purpose district taxes, multiple tran- item is shipped or delivered or at which the purchaser takes possession
sit authority sales taxes, or a combination of the two may apply to a of the item.]
single transaction. If the sale of a taxable item is consummated at a
[(4) Orders received by traveling salespersons. Orders
location within the boundaries of multiple special purpose districts or
taken by traveling salespersons are received by the seller at the
transit authorities, local sales tax is owed to each of the jurisdictions in
administrative office or other place of business from which the trav-
effect at that location. For example, a place of business located in the
eling salesperson operates, and such sales are consummated at the
city of San Antonio is within the boundaries of both the San Antonio
location indicated in paragraph (3) of this subsection. For example,
Advanced Transportation District and the San Antonio Metropolitan
if a traveling salesperson who operates out of a place of business of
Transit Authority, and the seller is required to collect sales tax for both
a seller in Texas takes an order for a taxable item, and the order is
transit authorities. Similarly, a place of business in Flower Mound is lo-
fulfilled at a location that is not a place of business of the seller in this
cated within the boundaries of two special purpose districts, the Flower
state, the sale is consummated at the place of business from which
Mound Crime Control District and the Flower Mound Fire Control Dis-
the salesperson operates, in accordance with paragraph (3)(B) of this
trict, and the seller is responsible for collecting sales tax for both special
subsection. Similarly, if a traveling salesperson takes an order for a
purpose districts.]
taxable item, and the order is fulfilled at a place of business of the
[(3) Consummation of sale. The following rules, taken seller in this state, the sale is consummated at the location of the place
from Tax Code, §321.203 and §323.203, apply to all sellers engaged of business where the order is fulfilled, in accordance with paragraph
in business in this state, regardless of whether they have a place of (3)(C) of this subsection.]
business in Texas or multiple places of business in the state.]
[(5) Drop shipments.]
[(A) Order placed in person at a seller's place of busi-
[(A) When an order for a taxable item is received at a
ness in Texas. When a purchaser places an order for a taxable item in
seller's place of business in Texas, or by a traveling salesperson operat-
person at a seller's place of business in Texas, the sale of that item is
ing out of a place of business in this state, and the item is drop-shipped
consummated at that place of business, regardless of the location where
directly to the purchaser from a third-party supplier, the sale is consum-
the order is fulfilled, except in the limited circumstances described in
mated at, and local sales tax is due based upon, the location of the place
subparagraph (F) of this paragraph, concerning qualifying economic
of business where the order is received. When an order for a taxable
development agreements.]
item is received by a seller at one location, but shipped by the seller to
[(B) Order received at a place of business in Texas, ful- the purchaser from a different location, the sale is consummated at, and
filled at a location that is not a place of business. When an order that is local sales tax is due based upon, the location designated in paragraph
placed over the telephone, through the Internet, or by any means other (3) of this subsection. If the local sales taxes due based on the location
than in person is received by the seller at a place of business in Texas, of the seller's place of business at which the sale is consummated equal
and the seller fulfills the order at a location that is not a place of busi- less than 2.0%, additional local use tax may be due based upon the lo-
ness of the seller in Texas, such as a warehouse or distribution center, cation in this state to which the purchased item is shipped or delivered
the sale is consummated at the place of business at which the order for or at which possession of the item is taken by the purchaser as provided
the taxable item is received.] in subsection (i) of this section.]
[(C) Order fulfilled at a place of business in Texas. [(B) When an order for a taxable item is received by
When an order is placed in person at a location that is not a place of the seller at a location outside of Texas, or by a traveling salesperson
business of the seller in this state, such as a kiosk, or when an order operating from a location outside of this state, and the item is drop-
is placed over the telephone, through the Internet, or by any means shipped directly to the purchaser from a third-party supplier, the item

PROPOSED RULES January 3, 2020 45 TexReg 111

CP Ex-16-0026 of 0030
is subject to use tax. See subsection (i) of this section concerning use to a county, special purpose district, or transit authority. Similarly, if
tax.] one or more special purpose district sales taxes have been collected or
accrued for an item, no special purpose district use tax is due on that
[(6) Itinerant vendors; vending machines; temporary
item, and if one or more transit authority sales taxes have been collected
places of business.]
or accrued for an item, no transit authority use tax is due on that item.]
[(A) Itinerant vendors. Sales made by itinerant vendors
[(D) Collection or accrual of use tax for multiple special
are consummated at, and itinerant vendors must collect sales tax based
purpose districts. If more than one special purpose district use tax is in
upon, the location where the item is delivered or where the purchaser
effect at the location where use of an item occurs, the special purpose
takes possession of the item. Itinerant vendors do not have any respon-
district taxes are due in the order of their effective dates, beginning
sibility to collect use tax.]
with the earliest effective date, until the two percent cap is met. The
[(B) Vending machines. Sales of taxable items made effective dates of all special purpose district taxes are available on the
from a vending machine are consummated at the location of the vend- comptroller's website. However, if the collection or accrual of use tax
ing machine. See §3.293 of this title (relating to Food; Food Prod- for the district with the earliest effective date would exceed the two
ucts; Meals; Food Service) for more information about vending ma- percent cap, the tax for that district is not due and the seller or purchaser
chine sales.] should determine, following the criteria in subparagraphs (A) - (C) of
this paragraph, whether use tax is due for the district that next became
[(C) Temporary places of business.]
effective.]
[(i) Item transferred to purchaser at time of sale.
[(i) If the competing special purpose districts be-
When a seller operates a temporary place of business, and items
came effective on the same date, the special purpose district taxes are
purchased are transferred to the purchasers at the time of sale, the
due in the order of the earliest date for which the election in which the
sales are consummated at, and local sales tax is due based upon, the
district residents authorized the imposition of sales and use tax by the
location of the temporary place of business.]
district was held.]
[(ii) Order accepted at temporary place of business
[(ii) If the elections to impose the local taxes were
prior to June 19, 2009. If a seller received an order at a temporary place
held on the same date, the special purpose district taxes are due in the
of business prior to June 19, 2009, and the order was fulfilled at another
order of the earliest date for which the enabling legislation under which
place of business of the seller in this state, the sale was consummated
each district was created became effective.]
at, and local sales taxes are due based upon, the location of the place of
business where the order was fulfilled and not the temporary location [(E) Collection or accrual of use tax for multiple transit
where the order was received.] authorities. If more than one transit authority use tax is in effect at
the location where use of an item occurs, and the two percent cap has
[(iii) Order accepted at temporary place of business
not been met, the transit authority taxes are due in the order of their
on or after June 19, 2009. When a seller receives an order in person
effective dates, beginning with the earliest effective date, until the two
at a temporary place of business and the order is fulfilled at another
percent cap is met. The effective dates of all transit authority taxes
location, the sale is consummated at, and local sales taxes are due based
are available on the comptroller's website. However, if the collection
upon, the location of the temporary place of business where the order
or accrual of use tax for the authority with the earliest effective date
was received.]
would exceed the two percent cap, the tax for that authority is not due
[(i) Use tax. The provisions addressing the imposition of state and the seller or purchaser should determine, following the criteria in
use tax in §3.346 of this title also apply to the imposition of local use subparagraphs (A) - (D) of this paragraph, whether use tax is due for
tax. For example, consistent with §3.346(e) of this title, all taxable the authority that next became effective.]
items that are shipped or delivered to a location in this state that is
[(i) If the competing transit authorities became ef-
within the boundaries of a local taxing jurisdiction are presumed to
fective on the same date, the transit authority taxes are due in the order
have been purchased for use in that local taxing jurisdiction as well as
of the earliest date for which the election in which the authority res-
presumed to have been purchased for use in the state.]
idents authorized the imposition of sales and use tax by the authority
[(1) General rules.] was held.]
[(A) When local use taxes are due in addition to local [(ii) If the elections to impose local taxes were held
sales taxes as provided by subsection (h) of this section, all applicable on the same date, the transit authority use taxes are due in the order of
use taxes must be collected or accrued in the following order until the the earliest date for which the enabling legislation under which each
two percent cap is reached: city, county, special purpose district, and authority was created became effective.]
transit authority. If more than one special purpose district use tax is due,
[(2) General use tax rules applied to specific situations.
all such taxes are to be collected or accrued before any transit authority
The following fact patterns explain how local use tax is to be collected
use tax is collected or accrued. See subparagraphs (D) and (E) of this
or accrued and remitted to the comptroller based on, and subject to,
paragraph.]
the general rules in paragraph (1) of this subsection.]
[(B) If a local use tax cannot be collected or accrued at
[(A) Sale consummated outside the state, item deliv-
its full rate without exceeding the two percent cap, the seller cannot
ered from outside the state or from a location in Texas that is not oper-
collect it, or any portion of it, and the purchaser is not responsible for
ated by the seller - local use tax due. If a sale is consummated outside
accruing it.]
of this state according to the provisions of subsection (h) of this sec-
[(C) If a seller collects a local sales tax on an item, or a tion, and the item purchased is either shipped or delivered to a location
purchaser accrues a local sales tax on an item, a use tax for the same in this state as designated by the purchaser from a location outside of
type of jurisdiction is not due on the same item. For example, once a the state, or if the order is drop shipped directly to the purchaser from
city sales tax has been collected or accrued for an item, no use tax is a third-party supplier, local use tax is owed based upon the location in
due to that same or a different city on that item, but use tax may be due this state to which the order is shipped or delivered. If the seller is en-

45 TexReg 112 January 3, 2020 Texas Register

CP Ex-16-0027 of 0030
gaged in business in the local taxing jurisdiction into which the order where the taxable items are first used or otherwise consumed by the
is shipped or delivered, the seller is responsible for collecting the lo- permit holder.
cal use tax due on the sale. If the seller does not collect the local use
(2) If, in a local taxing jurisdiction, storage facilities con-
taxes due on the sale, the purchaser is responsible for accruing such
tain taxable items purchased under a direct payment exemption certifi-
taxes and remitting them directly to the comptroller according to the
cate and at the time of storage it is not known whether the taxable items
provisions in paragraph (1) of this subsection. For example, if an order
will be used in Texas, then the taxpayer may elect to report the use tax
for a taxable item is received by a seller at a location outside of Texas,
either when the taxable items are first stored in Texas or are first re-
and the order is shipped to the purchaser from a location outside of the
moved from inventory for use in Texas, as long as use tax is reported
state, local use tax is due based upon the location to which the order is
in a consistent manner. See also §3.288(i) of this title (relating to Direct
shipped or delivered.]
Payment Procedures and Qualifications) and §3.346(g) of this title.
[(B) Sale consummated in Texas outside a local taxing
(3) If local use tax is paid on stored items that are subse-
jurisdiction, item delivered into one or more local taxing jurisdictions -
quently removed from Texas before they are used, the tax may be re-
local use tax due. If a sale is consummated at a location in Texas that is
covered in accordance with the refund and credit provisions of §3.325
outside of the boundaries of any local taxing jurisdiction according to
of this title [(relating to Refunds and Payments Under Protest)] and
the provisions of subsection (h) of this section, and the order is shipped
§3.338 of this title (relating to Multistate Tax Credits and Allowance
or delivered to the purchaser at a location in this state that is within the
of Credit for Tax Paid to Suppliers).
boundaries of one or more local taxing jurisdictions, local use tax is due
based on the location to which the items are shipped or delivered. If the (k) Special rules for certain taxable goods and services. Sales
seller is engaged in business in the local taxing jurisdiction where the of the following taxable goods and services are consummated at, and
items are shipped or delivered, the seller is responsible for collecting local tax is due based upon, the location indicated in this subsection.
the local use taxes due. If the seller fails to collect any local use taxes
(1) Amusement services. Local tax is due based upon the
due, the purchaser is responsible for accruing such taxes and remitting
location where the performance or event occurs. For more information
them directly to the comptroller. For example, if a seller uses its own
on amusement services, refer to §3.298 of this title (relating to Amuse-
delivery vehicle to transport a taxable item from a place of business
ment Services).
that is outside the boundaries of a local taxing jurisdiction to a delivery
location designated by a purchaser that is inside the boundaries of a (2) Cable services. When a service provider uses a cable
local taxing jurisdiction, the seller is responsible for collecting the local system to provide cable television or bundled cable services to cus-
use taxes due based on the location to which the items are delivered.] tomers, local tax is due as provided for in §3.313 of this title. When
a service provider uses a satellite system to provide cable services to
[(C) Sale consummated in any local taxing jurisdictions
customers, no local tax is due on the service in accordance with the
imposing less than 2.0% in total local taxes - local sales taxes, and
Telecommunications Act of 1996, §602.
possibly use taxes, due. If a sale is consummated at a location in Texas
where the total local sales tax rate imposed by the taxing jurisdictions (3) Florists. Local sales tax is due on all taxable items sold
in effect at that location does not equal or exceed 2.0% according to by a florist based upon the location where the order is received, regard-
the provisions of subsection (h) of this section, and the item is shipped less of where or by whom delivery is made. Local use tax is not due on
or delivered to the purchaser at a location in this state that is inside the deliveries of taxable items sold by florists. For example, if the place of
boundaries of a different local taxing jurisdiction, additional local use business of the florist where an order is taken is not within the bound-
tax may be due based on the location to which the order is shipped or aries of any local taxing jurisdiction, no local sales tax is due on the
delivered, subject to the two percent cap. If the seller is engaged in item and no local use tax is due regardless of the location of delivery.
business in the local taxing jurisdiction into which the order is shipped If a Texas florist delivers an order in a local taxing jurisdiction at the
or delivered, the seller is responsible for collecting any additional local instruction of an unrelated florist, and if the unrelated florist did not
use taxes due. See subsection (g) of this section. If the seller fails to take the order within the boundaries of a local taxing jurisdiction, local
collect the additional local use taxes due, the purchaser is responsible use tax is not due on the delivery. For more information about florists'
for accruing such taxes and remitting them directly to the comptroller. sales and use tax obligations, refer to §3.307 of this title (relating to
For example, if an order is received in person at a place of business of Florists).
the seller, such that the sale is consummated at the location where the
(4) Landline telecommunications services. Local taxes due
order is received as provided under subsection (h)(3)(A) of this section,
on landline telecommunications services are based upon the location of
and the local sales tax due on the sale does not meet the two percent
the device from which the call or other transmission originates. If the
cap, additional local use taxes may be due based on the location to
seller cannot determine where the call or transmission originates, local
which the order is shipped or delivered, subject to the provisions in
taxes due are based on the address to which the service is billed. For
paragraph (1) of this subsection. Or, if a purchaser places an order for
more information, refer to §3.344 of this title (relating to Telecommu-
a taxable item at a seller's place of business in Texas, and the seller
nications Services).
ships or delivers the item from an out-of-state location to a location in
this state as designated by the purchaser, local sales tax is due based (5) Marketplace provider sales. Local taxes are due on
upon the location of the place of business where the order is received. sales of taxable items through a marketplace provider based on the lo-
If the local sales tax due on the item does not meet the two percent cap, cation in this state to which the item is shipped or delivered or at which
use tax, subject to the provisions in paragraph (1) of this subsection, is the purchaser takes possession. For more information, refer to §3.286
due based upon the location where the items are shipped or delivered.] of this title.
(j) Items purchased under a direct payment permit. (6) [(5)] Mobile telecommunications services. Local taxes
due on mobile telecommunications services are based upon the location
(1) When taxable items are purchased under a direct pay-
of the customer's place of primary use as defined in §3.344(a)(8) of this
ment permit, local use tax is due based upon the location where the
title, and local taxes are to be collected as indicated in §3.344(h) of this
permit holder first stores the taxable items, except that if the taxable
title.
items are not stored, then local use tax is due based upon the location

PROPOSED RULES January 3, 2020 45 TexReg 113

CP Ex-16-0028 of 0030
(7) [(6)] Motor vehicle parking and storage. Local taxes special purpose districts that impose tax on residential use of natural
are due based on the location of the space or facility where the vehicle gas and electricity and those districts eligible to impose the tax that do
is parked. For more information, refer to §3.315 of this title (relating not currently do so is available on the comptroller's website.
to Motor Vehicle Parking and Storage).
(2) Telecommunication services. Telecommunications ser-
(8) [(7)] Natural gas and electricity. Any local city and spe- vices are exempt from all local sales taxes unless the governing body
cial purpose taxes due are based upon the location where the natural of a city, county, transit authority, or special purpose district votes
gas or electricity is delivered to the purchaser. As explained in subsec- to impose sales tax on these services. However, since 1999, under
tion (l)(1) of this section, residential use of natural gas and electricity Tax Code, §322.109(d), transit authorities created under Transporta-
is exempt from all county sales and use taxes and all transit authority tion Code, Chapter 451 cannot repeal the exemption unless the repeal
sales and use taxes, most special purpose district sales and use taxes, is first approved by the governing body of each city that created the
and many city sales and use taxes. A list of the cities and special pur- local taxing jurisdiction. The local sales tax is limited to telecommuni-
pose districts that do impose, and those that are eligible to impose, lo- cations services occurring between locations within Texas. See §3.344
cal sales and use tax on residential use of natural gas and electricity of this title. The comptroller's website provides a list of local taxing
is available on the comptroller's website. For more information, also jurisdictions that impose tax on telecommunications services.
refer to §3.295 of this title (relating to Natural Gas and Electricity).
(3) Emergency services districts.
(9) [(8)] Nonresidential real property repair and remodel-
(A) Authority to exclude territory from imposition of
ing services. Local taxes are due on services to remodel, repair, or
emergency services district sales and use tax. Pursuant to the provi-
restore nonresidential real property based on the location of the job site
sions of Health and Safety Code, §775.0751(c-1), an emergency ser-
where the remodeling, repair, or restoration is performed. See also sub-
vices district wishing to enact a sales and use tax may exclude from the
section (h)(2)(B) [(f)(2)(B)] of this section and §3.357 of this title.
election called to authorize the tax any territory in the district where the
(10) [(9)] Residential real property repair and remodeling sales and use tax is then at 2.0%. The tax, if authorized by the voters
and new construction of a real property improvement performed under eligible to vote on the enactment of the tax, then applies only in the
a separated contract. When a contractor constructs a new improvement portions of the district included in the election. The tax does not apply
to realty pursuant to a separated contract or improves residential real to sales made in the excluded territories in the district and sellers in the
property pursuant to a separated contract, the sale is consummated at excluded territories should continue to collect local sales and use taxes
the job site at which the contractor incorporates taxable items into the for the local taxing jurisdictions in effect at the time of the election un-
customer's real property. See also subsection (h)(2)(A) [(f)(2)(A)] of der which the district sales and use tax was authorized as applicable.
this section and §3.291 of this title.
(B) Consolidation of districts resulting in sales tax
(11) [(10)] Waste collection services. Local taxes are due sub-districts. Pursuant to the provisions of Health and Safety Code,
on garbage or other solid waste collection or removal services based §775.018(f), if the territory of a district proposed under Health and
on the location at which the waste is collected or from which the waste Safety Code, Chapter 775 overlaps with the boundaries of another
is removed. For more information, refer to §3.356 of this title (relating district created under that chapter, the commissioners court of each
to Real Property Service). county and boards of the counties in which the districts are located may
choose to create a consolidated district in the overlapping territory. If
(l) Special exemptions and provisions applicable to individual
two districts that want to consolidate under Health and Safety Code,
jurisdictions.
§775.024 have different sales and use tax rates, the territory of the
(1) Residential use of natural gas and electricity. former districts located within the consolidated area will be designated
as sub-districts and the sales tax rate within each sub-district will
(A) Mandatory exemptions from local sales and use tax.
continue to be imposed at the rate the tax was imposed by the former
Residential use of natural gas and electricity is exempt from most lo-
district that each sub-district was part of prior to the consolidation.
cal sales and use taxes. Counties, transit authorities, and most special
purpose districts are not authorized to impose sales and use tax on the (4) East Aldine Management District.
residential use of natural gas and electricity. Pursuant to Tax Code,
(A) Special sales and use tax zones within district;
§321.105, any city that adopted a local sales and use tax effective Oc-
separate sales and use tax rate. As set out in Special District Local
tober 1, 1979, or later is prohibited from imposing tax on the residential
Laws Code, §3817.154(e) and (f), the East Aldine Management
use of natural gas and electricity. See §3.295 of this title.
District board may create special sales and use tax zones within the
(B) Imposition of tax allowed in certain cities. Cities boundaries of the District and, with voter approval, enact a special
that adopted local sales tax prior to October 1, 1979, may, in accor- sales and use tax rate in each zone that is different from the sales and
dance with the provisions in Tax Code, §321.105, choose to repeal the use tax rate imposed in the rest of the district.
exemption for residential use of natural gas and electricity. The comp-
(B) Exemptions from special zone sales and use tax.
troller's website provides a list of cities that impose tax on the residen-
The sale, production, distribution, lease, or rental of; and the use, stor-
tial use of natural gas and electricity, as well as a list of those cities that
age, or other consumption within a special sales and use tax zone of; a
do not currently impose the tax, but are eligible to do so.
taxable item sold, leased, or rented by the entities identified in clauses
(C) Effective January 1, 2010, a fire control, preven- (i) - (vi) of this subparagraph are exempt from the special zone sales
tion, and emergency medical services district organized under Local and use tax. State and all other applicable local taxes apply unless oth-
Government Code, Chapter 344 that imposes sales tax under Tax Code, erwise exempted by law. The special zone sales and use tax exemption
§321.106, or a crime control and prevention district organized under applies to:
Local Government Code, Chapter 363 that imposes sales tax under Tax
(i) a retail electric provider as defined by Utilities
Code, §321.108, that is located in all or part of a municipality that im-
Code, §31.002;
poses a tax on the residential use of natural gas and electricity as pro-
vided under Tax Code, §321.105 may impose tax on residential use of (ii) an electric utility or a power generation company
natural gas and electricity at locations within the district. A list of the as defined by Utilities Code, §31.002;

45 TexReg 114 January 3, 2020 Texas Register

CP Ex-16-0029 of 0030
(iii) a gas utility as defined by Utilities Code, (4) Three-year statute of limitations.
§101.003 or §121.001, or a person who owns pipelines used for
(A) The exemption in paragraph (1) of this subsection
transportation or sale of oil or gas or a product or constituent of oil or
and the partial exemption in paragraph (3) of this subsection have no
gas;
effect after three years from the date the adoption or increase of the tax
(iv) a person who owns pipelines used for the trans- takes effect in the local taxing jurisdiction.
portation or sale of carbon dioxide;
(B) The provisions of §3.319 of this title apply to this
(v) a telecommunications provider as defined by subsection to the extent they are consistent.
Utilities Code, §51.002; or
(C) Leases. Any renewal or exercise of an option to
(vi) a cable service provider or video service extend the time of a lease or rental contract under the exemptions pro-
provider as defined by Utilities Code, §66.002. vided by this subsection shall be deemed to be a new contract and no
exemption will apply.
(5) Imposition of city sales tax and transit tax on certain
military installations; El Paso and Fort Bliss. Pursuant to Tax Code, (5) Records. Persons claiming the exemption provided by
§321.1045 (Imposition of Sales and Use Tax in Certain Federal Military this subsection must maintain records which can be verified by the
Installations), for purposes of the local sales and use tax imposed under comptroller or the exemption will be lost.
Tax Code, Chapter 321, the city of El Paso includes the area within the
(6) Exemption certificate. An identification number is re-
boundaries of Fort Bliss to the extent it is in the city's extraterritorial
quired on the prior contract exemption certificates furnished to sellers.
jurisdiction. However, the El Paso transit authority does not include
The identification number should be the person's 11-digit Texas tax-
Fort Bliss. See Transportation Code, §453.051 concerning the Creation
payer number or federal employer's identification (FEI) number.
of Transit Departments.
The agency certifies that legal counsel has reviewed the pro-
(m) Restrictions on local sales tax rebates and other economic
posal and found it to be within the state agency's legal authority
incentives. Pursuant to Local Government Code, §501.161, Section 4A
to adopt.
and 4B development corporations may not offer to provide economic
incentives, such as local sales tax rebates authorized under Local Gov-
Filed with the Office of the Secretary of State on December 18,
ernment Code, Chapters 380 or 381, to persons whose business consists
primarily of purchasing taxable items using resale certificates and then 2019.
reselling those same items to a related party. A related party means a TRD-201904910
person or entity which owns at least 80% of the business enterprise to
William Hamner
which sales and use taxes would be rebated as part of an economic in-
centive. Special Counsel for Tax Administration
Comptroller of Public Accounts
(n) Prior contract exemptions. The provisions of §3.319 of this Earliest possible date of adoption: February 2, 2020
title (relating to Prior Contracts) concerning definitions and exclusions For further information, please call: (512) 475-2220
apply to prior contract exemptions.
(1) Certain contracts and bids exempt. No local taxes are
♦ ♦ ♦
due on the sale, use, storage, or other consumption in this state of tax- TITLE 37. PUBLIC SAFETY AND CORREC-
able items used:
TIONS
(A) for the performance of a written contract executed
prior to the effective date of any local tax if the contract may not be PART 6. TEXAS DEPARTMENT OF
modified because of the tax; or
CRIMINAL JUSTICE
(B) pursuant to the obligation of a bid or bids submitted
prior to the effective date of any local tax if the bid or bids and contract CHAPTER 161. COMMUNITY JUSTICE
entered into pursuant thereto are at a fixed price and not subject to
withdrawal, change, or modification because of the tax.
ASSISTANCE DIVISION ADMINISTRATION
(2) Annexations. Any annexation of territory into an exist- 37 TAC §161.21
ing local taxing jurisdiction is also a basis for claiming the exemption The Texas Board of Criminal Justice proposes amendments to
provided by this subsection. §161.21, concerning the Role of the Judicial Advisory Council.
(3) Local taxing jurisdiction rate increase; partial exemp- The amendments are proposed in conjunction with a proposed
tion for certain contracts and bids. When an existing local taxing ju- rule review of §161.21 as published in another section of the
risdiction raises its sales and use tax rate, the additional amount of tax Texas Register. The proposed amendments specify that func-
that would be due as a result of the rate increase is not due on the sale, tions of the Judicial Advisory Council include reviewing proposed
use, storage, or other consumption in this state of taxable items used: changes to Texas Department of Criminal Justice (TDCJ) Com-
munity Justice Assistance Division (CJAD) standards and mak-
(A) for the performance of a written contract executed ing recommendations to the TDCJ CJAD director. The proposed
prior to the effective date of the tax rate increase if the contract may amendments also make minor grammatical updates.
not be modified because of the tax; or
Jerry McGinty, Chief Financial Officer for the Texas Department
(B) pursuant to the obligation of a bid or bids submitted of Criminal Justice, has determined that for each year of the first
prior to the effective date of the tax rate increase if the bid or bids and five years the rule will be in effect, enforcing or administering
contract entered into pursuant thereto are at a fixed price and not subject the rule will not have foreseeable implications related to costs or
to withdrawal, change, or modification because of the tax. revenues for state or local government.

PROPOSED RULES January 3, 2020 45 TexReg 115

CP Ex-16-0030 of 0030
TAB
F
Volume 45 Number 21 May 22, 2020 Pages 3389 - 3544

D-1-GN-21-003198

TRIAL EXHIBIT

CP Ex-23
CP Ex-23-0001 of 0032
a section of the
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P.O. Box 12887
Austin, Texas 78711
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FAX (512) 463-5569

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Secretary of State - Ruth R. Hughs Editors
Liz Cordell
Director - Robert Sumners Eddie Feng
Belinda Kirk
Cecilia Mena
Editor-in-Chief - Jill S. Ledbetter Joy L. Morgan
Breanna Mutschler
Barbara Strickland

CP Ex-23-0002 of 0032
GOVERNOR CONTROL OF AIR POLLUTION FROM VISIBLE
Appointments.................................................................................3395 EMISSIONS AND PARTICULATE MATTER
Proclamation 41-3732....................................................................3395 30 TAC §111.209 ...........................................................................3425

Proclamation 41-3733....................................................................3396 COMPTROLLER OF PUBLIC ACCOUNTS
Proclamation 41-3734....................................................................3397 STATEWIDE PROCUREMENT AND SUPPORT
SERVICES
Proclamation 41-3735....................................................................3397
34 TAC §20.25...............................................................................3429
ATTORNEY GENERAL
34 TAC §20.81...............................................................................3433
Requests for Opinions....................................................................3399
WITHDRAWN RULES
Opinions.........................................................................................3399
TEXAS HISTORICAL COMMISSION
EMERGENCY RULES
HISTORIC SITES
DEPARTMENT OF STATE HEALTH SERVICES
13 TAC §16.3.................................................................................3435
STANDARD OF CARE
TEXAS MEDICAL BOARD
25 TAC §448.911 ...........................................................................3403
MEDICAL RECORDS
PROPOSED RULES
22 TAC §165.7...............................................................................3435
CREDIT UNION DEPARTMENT
STANDING DELEGATION ORDERS
CHARTERING, OPERATIONS, MERGERS,
22 TAC §§193.5, 193.13, 193.17, 193.21......................................3435
LIQUIDATIONS
7 TAC §91.708...............................................................................3405 TEXAS DEPARTMENT OF INSURANCE

STATE PRESERVATION BOARD PROPERTY AND CASUALTY INSURANCE
28 TAC §5.9502.............................................................................3435
RULES AND REGULATIONS OF THE BOARD
13 TAC §111.13 .............................................................................3406 TEXAS COMMISSION ON ENVIRONMENTAL
QUALITY
TEXAS DEPARTMENT OF LICENSING AND
REGULATION COAL COMBUSTION RESIDUALS WASTE
MANAGEMENT
MOTOR FUEL METERING AND QUALITY
30 TAC §352.291...........................................................................3435
16 TAC §§97.1 - 97.3 ....................................................................3412
30 TAC §352.1401.........................................................................3436
16 TAC §§97.20 - 97.28 ................................................................3414
ADOPTED RULES
16 TAC §§97.40 - 97.43 ................................................................3415
CREDIT UNION DEPARTMENT
16 TAC §§97.50 - 97.60 ................................................................3416
CHARTERING, OPERATIONS, MERGERS,
16 TAC §§97.70 - 97.74 ................................................................3417
LIQUIDATIONS
16 TAC §97.80...............................................................................3418
7 TAC §91.1003.............................................................................3437
TEXAS EDUCATION AGENCY 7 TAC §91.6001.............................................................................3437
PLANNING AND ACCOUNTABILITY 7 TAC §91.6003.............................................................................3437
19 TAC §97.1005...........................................................................3418 7 TAC §91.6004.............................................................................3438
BUDGETING, ACCOUNTING, AND AUDITING 7 TAC §91.6006.............................................................................3438
19 TAC §109.23.............................................................................3422 7 TAC §91.6010.............................................................................3438
TEXAS BOARD OF ARCHITECTURAL EXAMINERS 7 TAC §91.6014.............................................................................3438
REGISTERED INTERIOR DESIGNERS TEXAS EDUCATION AGENCY
22 TAC §5.183...............................................................................3423 STATE ADOPTION AND DISTRIBUTION OF
TEXAS COMMISSION ON ENVIRONMENTAL INSTRUCTIONAL MATERIALS
QUALITY 19 TAC §66.1403...........................................................................3439

TABLE OF CONTENTS 45 TexReg 3391

CP Ex-23-0003 of 0032
ASSESSMENT COMPTROLLER OF PUBLIC ACCOUNTS
19 TAC §101.1003.........................................................................3439 TAX ADMINISTRATION
STUDENT ATTENDANCE 34 TAC §3.334...............................................................................3499
19 TAC §129.1049.........................................................................3440 PROPERTY TAX ADMINISTRATION
TEXAS COMMISSION ON ENVIRONMENTAL 34 TAC §9.103...............................................................................3518
QUALITY 34 TAC §9.103...............................................................................3518
PUBLIC NOTICE
RULE REVIEW
30 TAC §39.651.............................................................................3441
Proposed Rule Reviews
GENERAL AIR QUALITY RULES Department of Information Resources...........................................3523
30 TAC §101.601...........................................................................3442
Texas Board of Physical Therapy Examiners ................................3523
APPLICATIONS PROCESSING
Adopted Rule Reviews
30 TAC §281.19.............................................................................3445
Department of Information Resources...........................................3523
WATER RIGHTS, PROCEDURAL Credit Union Department...............................................................3524
30 TAC §295.158...........................................................................3448
IN ADDITION
WATER RIGHTS, SUBSTANTIVE
Department of Aging and Disability Services
30 TAC §297.1...............................................................................3456
Correction of Error.........................................................................3525
30 TAC §§297.41 - 297.43 ............................................................3457
Office of the Attorney General
UNDERGROUND INJECTION CONTROL
Texas Health and Safety Code and Texas Water Code Settlement No-
30 TAC §§331.2, 331.7, 331.9.......................................................3461 tice..................................................................................................3525
30 TAC §331.131...........................................................................3461 State Bar of Texas
30 TAC §§331.262 - 331.267 ........................................................3461 Committee on Disciplinary Rules and Referenda Proposed Rule
UNDERGROUND INJECTION CONTROL Changes: Rule 13.05, Texas Rules of Disciplinary Procedure ......3525

30 TAC §331.19.............................................................................3462 Office of Consumer Credit Commissioner
COAL COMBUSTION RESIDUALS WASTE Notice of Rate Ceilings..................................................................3528
MANAGEMENT Court of Criminal Appeals
30 TAC §§352.1 - 352.6 ................................................................3492 Availability of Grant Funds ...........................................................3528
30 TAC §§352.101, 352.111, 352.121, 352.131, 352.141 .............3493 Texas Education Agency
30 TAC §§352.201, 352.211, 352.221, 352.231, 352.241, 352.251, Correction of Error.........................................................................3529
352.261, 352.271, 352.281, 352.301, 352.311...............................3493
Notice of Correction: Request for Applications (RFA) Concerning the
30 TAC §§352.401, 352.411, 352.421, 352.431, 352.441, 352.451, 2020-2021 School Action Fund - Implementation Grant Program 3529
352.461, 352.471, 352.481 ............................................................3494
Notice of Correction: Request for Applications (RFA) Concerning the
30 TAC §§352.601, 352.611, 352.621, 352.631, 352.641 .............3494 2020-2021 School Action Fund - Planning Grant Program...........3529
30 TAC §§352.701, 352.711, 352.721, 352.731, 352.741 .............3495 Texas Commission on Environmental Quality
30 TAC §§352.801, 352.811, 352.821, 352.831, 352.841, Agreed Orders................................................................................3529
352.851 ..........................................................................................3495
Amended Notice of Application and Public Hearing for an Air Quality
30 TAC §§352.901, 352.902, 352.911, 352.931, 352.941, 352.951, Standard Permit for a Concrete Batch Plant With Enhanced Controls:
352.961, 352.971, 352.981, 352.991 .............................................3496 Proposed Air Quality Registration Number 159751......................3532
30 TAC §352.1101, §352.1111 ......................................................3497 Amended Notice of Application and Public Hearing for an Air Quality
30 TAC §§352.1200, 352.1201, 352.1211, 352.1221, 352.1231, Standard Permit for a Concrete Batch Plant With Enhanced Controls:
352.1241 ........................................................................................3497 Proposed Air Quality Registration Number 159968......................3533
30 TAC §§352.1301, 352.1311, 352.1321 .....................................3498 Correction of Error.........................................................................3534
30 TAC §352.1421, §352.1431......................................................3499 Notice of Opportunity to Comment on a Shutdown/Default Order of an
Administrative Enforcement Action ..............................................3534

TABLE OF CONTENTS 45 TexReg 3392

CP Ex-23-0004 of 0032
Notice of Opportunity to Comment on Agreed Orders of Administra- List of Late Filers ..........................................................................3540
tive Enforcement Actions ..............................................................3535
General Land Office
Notice of Opportunity to Comment on Default Orders of Administra-
tive Enforcement Actions ..............................................................3536 Notice and Opportunity to Comment on the Coastal Management Pro-
gram Section 309 Assessment and Strategies Draft Report...........3540
Notice of Opportunity to Comment on Settlement of Environmental
Claims under the Texas Health and Safety Code...........................3536 Texas Department of Housing and Community Affairs
Notice of Public Hearing on Assessment of Administrative Penalties Notice and Confirmation of Virtual Public Hearings on the Draft 2021
and Requiring Certain Actions of SHRISHUBH, LLC Dba Super Food Low Income Home Energy Assistance Program State Plan ..........3541
Mart: SOAH Docket No. XXX-XX-XXXX; TCEQ Docket No. 2017- Texas State Library and Archives Commission
0898-PST-E ...................................................................................3537
Correction of Error.........................................................................3542
Notice of Public Hearing on Assessment of Administrative Penalties
and Requiring Certain Actions of Star Container Company Inc.: SOAH Panhandle Regional Planning Commission
Docket No. XXX-XX-XXXX; TCEQ Docket No. 2019-0679-IHW-E 3538 Legal Notice...................................................................................3542
Notice of Public Hearing on Proposed Revisions to 30 TAC Chapter
Texas Water Development Board
111 and to the State Implementation Plan......................................3538
Applications April 2020.................................................................3543
Notice of Water Quality Application .............................................3539
Second Amended Notice of Hearing (to Change Hearing Date and Lo- Workforce Solutions for the Heart of Texas
cation) Lealco, Inc.: SOAH Docket No. XXX-XX-XXXX; TCEQ Docket Request for Proposal (RFP #13200102) Operation and Management of
No. 2018-1759-MSW; Proposed Permit No. 2398 .......................3539 the Heart of Texas Workforce Center System................................3543
Texas Ethics Commission

TABLE OF CONTENTS 45 TexReg 3393

CP Ex-23-0005 of 0032
CP Ex-23-0006 of 0032
Appointments ♦ ♦ ♦
Appointments for May 11, 2020 Proclamation 41-3732
Appointed to the Crime Victims' Institute Advisory Council, for a term TO ALL TO WHOM THESE PRESENTS SHALL COME:
to expire January 31, 2021, James M. Mosley of Borger, Texas (replac-
ing Anahid E. "Ana" Estevez of Amarillo, whose term expired). WHEREAS, I, Greg Abbott, Governor of Texas, issued a disaster
proclamation on March 13, 2020, certifying under Section 418.014 of
Appointed to the Crime Victims' Institute Advisory Council, for a the Texas Government Code that the novel coronavirus (COVID-19)
term to expire January 31, 2022, Matthew L. "Matt" Ferrara, Ph.D. of poses an imminent threat of disaster for all counties in the State of
Austin, Texas (Dr. Ferrara is being reappointed). Texas; and
Appointed to the Crime Victims' Institute Advisory Council, for a term WHEREAS, on April 12, 2020, I issued a proclamation renewing the
to expire January 31, 2022, Michael S. "Shawn" Kennington of Pitts- disaster declaration for all counties in Texas; and
burg, Texas (Mr. Kennington is being reappointed).
WHEREAS, the Commissioner of the Texas Department of State
Appointed to the Crime Victims' Institute Advisory Council, for a term Health Services (DSHS), Dr. John Hellerstedt, has determined that
to expire January 31, 2022, Lindsay M. Kinzie of Fort Worth, Texas COVID-19 represents a public health disaster within the meaning of
(replacing Jeffrey L. "Jeff" Oldham of Austin, whose term expired). Chapter 81 of the Texas Health and Safety Code, and renewed that
Appointed to the Crime Victims' Institute Advisory Council, for a term determination on April 17, 2020; and
to expire January 31, 2022, Eugene P. "Gene" Pack of Houston, Texas WHEREAS, the Governor has issued executive orders and suspensions
(Mr. Pack is being reappointed). of Texas laws in response to COVID-19, aimed at protecting the health
Appointed to the Crime Victims' Institute Advisory Council, for a term and safety of Texans and ensuring an effective response to this disaster;
to expire January 31, 2022, Jeffery D. "JD" Robertson of Wimberley, and
Texas (Major Robertson is being reappointed). WHEREAS, Section 41.001(a)(2) of the Texas Election Code provides
Appointed to the Crime Victims' Institute Advisory Council, for a that a general or special election in this state shall be held on a uniform
term to expire January 31, 2022, Andrea Sparks of Austin, Texas (Ms. election date, and the next uniform election date is occurring on May
Sparks is being reappointed). 2, 2020; and

Appointed to the Crime Victims' Institute Advisory Council, for a term WHEREAS, on March 18, 2020, the Governor suspended Sections
to expire January 31, 2022, Hector L. Villarreal of Alice, Texas (Mr. 41.0052(a) and (b) of the Texas Election Code and Section 49.103 of
Villarreal is being reappointed). the Texas Water Code to the extent necessary to allow political subdi-
visions that would otherwise hold elections on May 2, 2020, to move
Appointed to the Governing Board of the Texas Indigent Defense their general and special elections for 2020 only to the next uniform
Commission, for a term to expire February 1, 2022, Valerie Covey of election date, occurring on November 3, 2020; and
Georgetown, Texas (Ms. Covey is being reappointed).
WHEREAS, on March 20, 2020, the Governor issued a proclamation
Appointed to the Governing Board of the Texas Indigent Defense Com- postponing the runoff primary election date to July 14, 2020, in re-
mission, for a term to expire February 1, 2022, Richard A. Evans of sponse to the COVID-19 disaster, and early voting by personal appear-
Bandera, Texas (Mr. Evans is being reappointed). ance for the runoff primary election begins on July 6, 2020, in accor-
Appointed to the Governing Board of the Texas Indigent Defense dance with Section 85.001(b) of the Texas Election Code; and
Commission, for a term to expire February 1, 2022, Mary K. "Missy" WHEREAS, Section 41.007(d) of the Texas Election Code provides
Medary of Corpus Christi, Texas (Ms. Medary is being reappointed). that no other election may be held on the date of a primary election;
Appointed as presiding officer of the Hidalgo County Regional Mobil- and
ity Authority, for a term to expire February 1, 2022, Samuel D. "David" WHEREAS, Section 41.008 of the Texas Election Code provides that
Deanda, Jr. of Mission, Texas (Mr. Deanda is being reappointed). an election held on a date not permitted is void; and
Appointed to the State Board for Educator Certification, for a term to WHEREAS, Section 85.001(a) of the Texas Election Code provides
expire February 1, 2025, Julia F. Moore of Pflugerville, Texas (replac- that the period for early voting by personal appearance begins on the
ing Laurie Kuper Bricker of Houston, whose term expired). 17th day before election day and continues through the fourth day be-
Appointed to the State Board for Educator Certification, for a term to fore election day; and
expire February 1, 2025, Wanda H. "Jean" Streepey of Dallas, Texas WHEREAS, Texas law provides that the Midland County Hospital Dis-
(replacing Jill H. Druesedow of Haskell, whose term expired). trict may hold an election on the question of whether to adopt, change
Greg Abbott, Governor the rate of, or abolish a program to sustain the district on a uniform
TRD-202001867

GOVERNOR May 22, 2020 45 TexReg 3395

CP Ex-23-0007 of 0032
election date as authorized by Section 41.001(a) of the Texas Election TO ALL TO WHOM THESE PRESENTS SHALL COME:
Code; and
WHEREAS, I, Greg Abbott, Governor of Texas, issued a disaster
WHEREAS, the Midland County Hospital District ordered a special proclamation on March 13, 2020, certifying under Section 418.014 of
election on the question of whether to adopt a program to sustain the the Texas Government Code that the novel coronavirus (COVID-19)
district, and such election was scheduled for May 2, 2020; and poses an imminent threat of disaster for all counties in the State of
Texas; and
WHEREAS, Section 41.0011 of the Texas Election Code provides that
a special election may be held as an emergency election before the ap- WHEREAS, on April 12, 2020, I issued a proclamation renewing the
propriate uniform election date if a political subdivision asks the Gov- disaster declaration for all counties in Texas; and
ernor for permission to do so and the Governor determines that an emer-
WHEREAS, the Commissioner of the Texas Department of State
gency exists; and
Health Services (DSHS), Dr. John Hellerstedt, has determined that
WHEREAS, the Midland County Hospital District desires to order a COVID-19 represents a public health disaster within the meaning of
special election as an emergency election on the question of whether Chapter 81 of the Texas Health and Safety Code, and renewed that
to adopt a program to sustain the district pursuant to Section 41.0011 determination on April 17, 2020; and
of the Texas Election Code because holding this election at a later date
WHEREAS, I have issued executive orders, proclamations, and sus-
would result in dire consequences for the community, including threat-
pensions of Texas laws in response to the COVID-19 disaster, aimed
ening the district's ability to provide adequate health care to patients in
at protecting the health and safety of Texans and ensuring an effective
response to the COVID-19 disaster; and
response to this disaster; and
WHEREAS, the Midland County Hospital District has asked the Gov-
WHEREAS, I issued a proclamation on March 16, 2020, ordering a
ernor for permission to hold an election on the question of whether to
special election on July 14, 2020, to fill the vacancy in Texas State
adopt a program to sustain the district prior to November 3, 2020; and
Senate District No. 14; and
WHEREAS, an emergency exists under Section 41.0011 of the Texas
WHEREAS, on March 20, 2020, I issued a proclamation postponing
Election Code due to the circumstances presented by the COVID-19
the runoff primary election date from May 26, 2020, to July 14, 2020;
disaster and because the Midland County Hospital District is not able
and
to wait until November 3, 2020, to hold a special election to adopt a
program to sustain the district; and WHEREAS, I also issued a proclamation suspending Sections
41.0052(a) and (b) of the Texas Election Code and Section 49.103
WHEREAS, pursuant to Section 418.016 of the Texas Government
of the Texas Water Code to the extent necessary to allow political
Code, the Governor has the express authority to suspend the provi-
subdivisions that would otherwise hold elections on May 2, 2020, to
sions of any regulatory statute prescribing the procedures for conduct
move their general and special elections for 2020 only to the next
of state business or the orders or rules of a state agency if strict com-
uniform election date, occurring on November 3, 2020; and
pliance with the provisions, orders, or rules would in any way prevent,
hinder, or delay necessary action in coping with a disaster. WHEREAS, I subsequently issued proclamations on April 2, April 6,
April 8, and May 8, 2020, authorizing certain political subdivisions to
NOW, THEREFORE, I, Greg Abbott, Governor of Texas, under the au-
call emergency special elections on July 14, 2020; and
thority vested in me by the Constitution and laws of the State of Texas,
do hereby suspend Sections 41.007(d) and 41.008 of the Texas Elec- WHEREAS, Texas law provides that eligible voters have a right to cast
tion Code to the extent necessary to allow the Midland County Hospi- a vote in person; and
tal District to order its special election to occur on July 14, 2020, as an
WHEREAS, as counties across Texas prepare for the upcoming elec-
emergency election on the question of whether to adopt a program to
tions on July 14, 2020, and establish procedures for eligible voters to
sustain the district pursuant to Section 41.0011(b) of the Texas Election
exercise their right to vote in person, it is necessary that election of-
Code. I further suspend Section 85.001(a) of the Texas Election Code
ficials implement health protocols to conduct elections safely and to
to the extent necessary to allow early voting by personal appearance for
protect election workers and voters; and
the special election to begin not earlier than Monday, July 6, 2020, and
to run concurrently with the early voting period for the runoff primary WHEREAS, in order to ensure that elections proceed efficiently and
election. safely when Texans go to the polls to cast a vote in person during early
voting or on election day, it is necessary to increase the number of days
The authority ordering the election under Section 3.004 of the Texas
in which polling locations will be open during the early voting period,
Election Code is the authority authorized to make the decision to post-
such that election officials can implement appropriate social distancing
pone its election in accordance with this proclamation.
and safe hygiene practices; and
Early voting by personal appearance shall begin on Monday, July 6,
WHEREAS, Section 85.001(a) of the Texas Election Code provides
2020, in accordance with Section 85.001(d) of the Texas Election Code
that the period for early voting by personal appearance begins 17 days
so that it runs concurrently with the early voting period for the runoff
before election day; and
primary election.
WHEREAS, Section 85.001(b) of the Texas Election Code provides
IN TESTIMONY WHEREOF, I have hereto signed my name and have
that the period for early voting for a runoff primary election begins 10
officially caused the Seal of State to be affixed at my office in the City
days before election day; and
of Austin, Texas, this the 8th day of May, 2020.
WHEREAS, in consultation with the Texas Secretary of State, it has
Greg Abbott, Governor
become apparent that strict compliance with the statutory requirements
TRD-202001872 relating to the duration of early voting contained in Sections 85.001(a)
and 85.001(b) of the Texas Election Code would prevent, hinder, or
♦ ♦ ♦ delay necessary action in coping with the COVID-19 disaster; and
Proclamation 41-3733

45 TexReg 3396 May 22, 2020 Texas Register

CP Ex-23-0008 of 0032
WHEREAS, pursuant to Section 418.016 of the Texas Government Pursuant to Section 418.016, any regulatory statute prescribing the pro-
Code, the Governor has the express authority to suspend the provi- cedures for conduct of state business or any order or rule of a state
sions of any regulatory statute prescribing the procedures for conduct agency that would in any way prevent, hinder, or delay necessary action
of state business or the orders or rules of a state agency if strict com- in coping with this disaster shall be suspended upon written approval
pliance with the provisions, orders, or rules would in any way prevent, of the Office of the Governor. However, to the extent that the enforce-
hinder, or delay necessary action in coping with a disaster. ment of any state statute or administrative rule regarding contracting
or procurement would impede any state agency's emergency response
NOW, THEREFORE, I, Greg Abbott, Governor of Texas, under the au-
that is necessary to cope with this declared disaster, I hereby suspend
thority vested in me by the Constitution and laws of the State of Texas,
such statutes and rules for the duration of this declared disaster for that
do hereby suspend Sections 85.001(a) and 85.001(b) of the Texas Elec-
limited purpose.
tion Code to the extent necessary to require that, for any election or-
dered or authorized to occur on July 14, 2020, early voting by personal In accordance with the statutory requirements, copies of this proclama-
appearance shall begin on Monday, June 29, 2020, and shall continue tion shall be filed with the applicable authorities.
through the fourth day before election day, excluding any legal state
IN TESTIMONY WHEREOF, I have hereunto signed my name and
or federal holidays. I further amend the proclamations issued on April
have officially caused the Seal of State to be affixed at my office in the
2, April 6, April 8, and May 8, 2020, authorizing emergency special
City of Austin, Texas, this the 12th day of May, 2020.
elections, and the proclamation issued on March 16, 2020, ordering a
special election to fill the vacancy in Texas State Senate District No. Greg Abbott, Governor
14, so as to require that for each of these elections to be held on July TRD-202001897
14, 2020, early voting by personal appearance shall begin on Monday,
June 29, 2020, in accordance with the above suspension. ♦ ♦ ♦
The Secretary of State shall take notice of this proclamation and shall Proclamation 41-3735
transmit a copy of this order immediately to every County Judge of this
state and all appropriate writs will be issued and all proper proceedings TO ALL TO WHOM THESE PRESENTS SHALL COME:
will be followed to the end that said elections may be held and their WHEREAS, I, Greg Abbott, Governor of the State of Texas, issued a
results proclaimed in accordance with law. disaster proclamation on August 23, 2017, certifying that Hurricane
IN TESTIMONY WHEREOF, I have hereto signed my name and have Harvey posed a threat of imminent disaster for Aransas, Austin, Bee,
officially caused the Seal of State to be affixed at my office in the City Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend,
of Austin, Texas, this the 11th day of May, 2020. Galveston, Goliad, Gonzales, Harris, Jackson, Jefferson, Jim Wells,
Karnes, Kleberg, Lavaca, Liberty, Live Oak, Matagorda, Nueces,
Greg Abbott, Governor Refugio, San Patricio, Victoria, Waller, Wharton, and Wilson counties;
TRD-202001882 and

♦ ♦ ♦ WHEREAS, the disaster proclamation of August 23, 2017, was subse-
quently amended on August 26, August 27, August 28, and September
Proclamation 41-3734 14 to add the following counties to the disaster proclamation: Angelina,
Atascosa, Bastrop, Bexar, Brazos, Burleson, Caldwell, Cameron, Co-
TO ALL TO WHOM THESE PRESENTS SHALL COME:
mal, Grimes, Guadalupe, Hardin, Jasper, Kerr, Lee, Leon, Madison,
WHEREAS, I, Greg Abbott, Governor of Texas, issued a disaster Milam, Montgomery, Newton, Orange, Polk, Sabine, San Augustine,
proclamation on March 13, 2020, certifying under Section 418.014 of San Jacinto, Trinity, Tyler, Walker, Washington, and Willacy; and
the Texas Government Code that the novel coronavirus (COVID-19)
WHEREAS, on September 20, 2017, and in each subsequent month
poses an imminent threat of disaster for all counties in the State of
effective through today, I issued proclamations renewing the disaster
Texas; and
declaration for all counties listed above; and
WHEREAS, the Commissioner of the Texas Department of State
WHEREAS, due to the catastrophic damage caused by Hurricane Har-
Health Services, Dr. John Hellerstedt, has determined that COVID-19
vey, a state of disaster continues to exist in those same counties;
represents a public health disaster within the meaning of Chapter 81
of the Texas Health and Safety Code; and NOW, THEREFORE, in accordance with the authority vested in me by
Section 418.014 of the Texas Government Code, I do hereby renew the
WHEREAS, I have issued executive orders and suspensions of Texas
disaster proclamation for the 60 counties listed above.
laws in response to COVID-19, aimed at protecting the health and
safety of Texans and ensuring an effective response to this disaster; Pursuant to Section 418.017 of the code, I authorize the use of all avail-
and able resources of state government and of political subdivisions that are
reasonably necessary to cope with this disaster.
WHEREAS, on April 12, 2020, I issued a proclamation renewing the
disaster declaration for all Texas counties; and Pursuant to Section 418.016 of the code, any regulatory statute pre-
scribing the procedures for conduct of state business or any order or
WHEREAS, a state of disaster continues to exist in all counties due to
rule of a state agency that would in any way prevent, hinder, or delay
COVID-19;
necessary action in coping with this disaster shall be suspended upon
NOW, THEREFORE, in accordance with the authority vested in me by written approval of the Office of the Governor. However, to the ex-
Section 418.014 of the Texas Government Code, I do hereby renew the tent that the enforcement of any state statute or administrative rule re-
disaster proclamation for all counties in Texas. garding contracting or procurement would impede any state agency's
emergency response that is necessary to protect life or property threat-
Pursuant to Section 418.017, I authorize the use of all available re-
ened by this declared disaster, I hereby authorize the suspension of such
sources of state government and of political subdivisions that are rea-
statutes and rules for the duration of this declared disaster.
sonably necessary to cope with this disaster.

GOVERNOR May 22, 2020 45 TexReg 3397

CP Ex-23-0009 of 0032
In accordance with the statutory requirements, copies of this proclama- Greg Abbott, Governor
tion shall be filed with the applicable authorities. TRD-202001896
IN TESTIMONY WHEREOF, I have hereunto signed my name and
have officially caused the Seal of State to be affixed at my office in the
♦ ♦ ♦
City of Austin, Texas, this the 12th day of May, 2020.

45 TexReg 3398 May 22, 2020 Texas Register

CP Ex-23-0010 of 0032
Requests for Opinions in excess of the probable maximum loss must be paid by assessments
on the Association's members. To the extent the Association purchased
RQ-0353-KP
reinsurance for the 2019 storm season prior to June 10, 2019, subsec-
Requestor: tion 2210.453(d) would not apply to such purchases.
Mr. Rakesh Pandey Section 2210.1052 of the Insurance Code requires the Association's
Board to provide notice to member insurers if an assessment may be
Montgomery County Auditor
imposed due to an ultimate loss estimate for an occurrence as deter-
501 North Thompson, Suite 205 mined by the chief financial officer or chief actuary. If the first oppor-
tunity for the Board to provide the requisite notice to member insurers
Conroe, Texas 77301
about an assessment is at a regularly-scheduled Board meeting, it is
Re: Calculation of the minimum salary of a county court at law judge unlikely a court would require the Board to call an emergency meeting
with twelve or more years of accrued service under section 25.0005(a) in addition to the regularly-scheduled meeting in order to provide the
of the Government Code (RQ-0353-KP) requisite notice.
Briefs requested by June 5, 2020 A grant of authority to three or more persons as a public body confers
the authority on a majority of the number of members fixed by statute.
For further information, please access the website at www.texasattor-
Vacancies on the Board do not impair the Board's ability to take action,
neygeneral.gov or call the Opinion Committee at (512) 463-2110.
so long as the Board satisfies the quorum requirement.
TRD-202001876
Opinion No. KP-0303
Lesley French
General Counsel The Honorable Clint T. Griffin
Office of the Attorney General Schleicher County Attorney
Filed: May 12, 2020
Post Office Box 506
♦ ♦ ♦ Eldorado, Texas 76936
Opinions
Re: Authority of a county sheriff to donate forfeiture funds under Code
Opinion No. KP-0302 of Criminal Procedure article 59.06 to a nonprofit entity providing of-
fice space for mental health services, drug counseling services, and ser-
The Honorable Larry Taylor
vices for the victims of domestic abuse (RQ-0317-KP)
Chair, Committee on Education
SUMMARY
Texas State Senate
Article 59.06, subdivision (d-2) of the Code of Criminal Procedure au-
Post Office Box 12068 thorizes a county sheriff to donate a portion of forfeiture funds to an
entity that assists in the provision of services specified in the article.
Austin, Texas 78711-2068
Pursuant to article III, subsection 52(a) of the Constitution, a donation
Re: Matters related to the Texas Windstorm Insurance Association and or other expenditure must satisfy a three-part test: (1) the predominant
its compliance with House Bill 1900 and Senate Bill 615 (RQ-0318- purpose of the expenditure is to serve a public purpose, (2) the expen-
KP) diture includes sufficient controls to ensure that the public purpose is
carried out, and (3) the public entity receives return benefit. A court
SUMMARY
would likely find that the sheriff of Schleicher County may donate civil
Section 2210.453 of the Insurance Code requires the Association to forfeiture funds to a nonprofit entity providing office space to entities
maintain total available loss funding in an amount not less than the providing one or more of the services specified in article 59.06, sub-
probable maximum loss for a catastrophe year with a probability of one division (d-2) of the Code of Criminal Procedure provided the sheriff
in 100. Pursuant to House Bill 1900, which became effective June 10, determines that the expenditure is statutorily authorized and comports
2019, any costs of the reinsurance or alternative financing mechanisms

ATTORNEY GENERAL May 22, 2020 45 TexReg 3399

CP Ex-23-0011 of 0032
with the three-part test under article III, subsection 52(a) of the Texas Section 371.005 of the Finance Code provides that the Legislature has
Constitution. exclusive authority regarding the operation of pawnshops. A local of-
ficial lacks authority to rewrite state law that the Legislature has ex-
Opinion No. KP-0304
pressly removed from local control. A court would likely find that the
The Honorable Matthew A. Mills portions of Dallas County's order purporting to regulate pawnshops by
limiting the fees those businesses can charge and changing the length
Hood County Attorney
of time they must hold pledged goods are invalid and unenforceable.
1200 West Pearl Street
After declaring a state of disaster in Texas due to COVID-19, the Gov-
Granbury, Texas 76048 ernor issued Executive Order GA-21, which "supersedes any conflict-
ing order issued by local officials in response to the COVID-19 disaster,
Re: Whether, when operating under a local disaster declaration, lo-
but only to the extent that such a local order restricts essential services
cal governments may commandeer private property under Government
or reopened services allowed" under the executive order. Operating a
Code section 418.108 (RQ-0342-KP)
pawnshop provides essential lending services. Thus, Executive Order
SUMMARY GA-21 prohibits a political subdivision from issuing a conflicting local
order that restricts the operation of pawnshops. Whether a local order
Section 418.108 of the Government Code authorizes the presiding of-
may limit the number of customers inside the premises of a pawnshop
ficer of the governing body of a political subdivision to declare a local
is a fact question. However, to the extent a pawnshop can operate un-
state of disaster and grants local authorities certain powers to respond
der DSHS guidelines and consistent CDC recommendations with more
to the disaster. Section 418.108 does not authorize a county judge, a
than one customer on the premises at a time, a local order that purports
mayor of a municipality, or any other local government official to com-
to limit the occupancy of the premises to only one customer at a time,
mandeer private property to respond to a disaster.
without regard to the size of the premises, conflicts with Executive Or-
Opinion No. KP-0305 der GA-21 and, therefore, is superseded.
The Honorable Briscoe Cain Opinion No. KP-0307
Chair, House Select Committee on Driver's License Issuance & Re- The Honorable Mayes Middleton
newal
Co-Chair, Joint Interim Committee to Study a Coastal Barrier System
Texas House of Representatives
Texas House of Representatives
Post Office Box 2910
Post Office Box 2910
Austin, Texas 78768-2910
Austin, Texas 78768-2910
Re: Extension of driver's license expiration dates due to COVID-19
Re: Procedures for conducting appraisal review board hearings during
and its effect on firearms purchases (RQ-0346-KP)
the COVID-19 disaster (RQ-0351-KP)
SUMMARY
SUMMARY
In the context of the COVID-19 pandemic and the declared state of
Subsection 41.41(a) of the Tax Code entitles a property owner to protest
disaster in Texas, the Governor suspended provisions of the driver's
the determination of the appraised value of the owner's property, in
license regulations regarding license expiration dates. A Texas driver's
addition to other adverse determinations made by a chief appraiser.
license that on its face lists an expiration date of March 13, 2020, or
Subsection 45.45(n) of the Tax Code gives property owners a right
later is not expired under the Governor's suspension of laws and related
to appear in person at a protest hearing. Subsection 41.45(o) of the
DPS guidance until 60 days after the DPS provides further public notice
Tax Code and title 34, subsection 9.805(d) of the Texas Administrative
that normal Driver's License operations have resumed.
Code do not allow appraisal review boards to require protest hearings
Treating the driver's license as if it has no expiration date or adding a be conducted by videoconference in lieu of in-person hearings when
period of 60 days to the expiration date shown on the face of the driver's requested by a property owner.
license are not advisable solutions for purposes of the ATF Form 4473
Subsection 41.461(a)(3) of the Tax Code requires a chief appraiser to
required in a transfer of firearms. The federal Bureau of Alcohol, To-
deliver a copy of the protest hearing procedures to property owners ini-
bacco, Firearms, and Explosives regulates and enforces federal laws
tiating a protest. The appraisal district does not satisfy this requirement
regarding such transfers, and any guidance provided by this office on
by only posting the protest procedures on the appraisal district website.
the issue is not binding on the ATF. We therefore leave it to the ATF to
determine the appropriateness of any entry on ATF Form 4473. Subsection 41.12(a) of the Tax Code requires an appraisal review
board, among other things, to approve the appraisal records by July
Opinion No. KP-0306
20. No later than the date it does so, the board must also deliver
The Honorable Dan Flynn written notice to a property owner of any change in the records
ordered by the board pursuant to subsection 41.11(a) that will result
Chair, House Committee on Defense & Veterans' Affairs
in an increase in the tax liability of the property owner. The board's
Texas House of Representatives failure to deliver notice to a property owner required by section 41.11
nullifies the change in the records to the extent the change is applicable
Post Office Box 2910
to that property owner. However, the nullification is limited to that
Austin, Texas 78768-2910 subsection and does not apply to all failures to give notice required by
the Property Tax Code.
Re: Authority of a county judge to issue emergency orders regulating
the business of pawnshops during a declared disaster (RQ-0347-KP) Opinion No. KP-0308
SUMMARY The Honorable Dade Phelan

45 TexReg 3400 May 22, 2020 Texas Register

CP Ex-23-0012 of 0032
Chair, Committee on State Affairs to the provision of essential services. Executive Order GA-21 super-
sedes any conflicting order issued by local officials in response to the
Texas House of Representatives
COVID-19 disaster to the extent that such a local order restricts es-
Post Office Box 2910 sential services, such as obtaining residential housing. GA-21 there-
fore prohibits a local governmental entity, acting under the authority of
Austin, Texas 78768-2910
its emergency powers, from issuing an order that limits occupancy of
Re: Whether a local governmental entity under an emergency declara- housing based on length of the occupancy's term.
tion has the authority to prevent an owner of a second home from occu-
For further information, please access the website at www.texasattor-
pying that property or limiting occupancy of housing based on length
neygeneral.gov or call the Opinion Committee at (512) 463-2110.
of the occupancy's term (RQ-0352-KP)
TRD-202001875
SUMMARY
Lesley French
The Texas and United States Constitutions prohibit government action General Counsel
that unlawfully discriminates on the basis of residence. They also en- Office of the Attorney General
sure citizens receive due process and that the government does not act Filed: May 12, 2020
arbitrarily. To the extent a local ordinance restricting access to or lim-
iting occupancy of private property exceeds these boundaries, it is un- ♦ ♦ ♦
constitutional.
In addition, the Governor declared a state of disaster in Texas due to
COVID-19 on March 13, 2020, and issued executive orders related

ATTORNEY GENERAL May 22, 2020 45 TexReg 3401

CP Ex-23-0013 of 0032
(a) The commission adopts by reference 40 Code of Federal solid waste and municipal hazardous waste and to adopt rules
Regulations §257.107 (Publicly accessible Internet site requirements) consistent with the general intent and purposes of the THSC;
as amended through the April 17, 2015, issue of the Federal Register and THSC, §361.090, which allows the commission to adopt
(80 FR 21301), subject to the additions and modifications in this sec- rules to control the collection, handling, storage, processing,
tion. and disposal of industrial solid waste to protect the property
of others, public property and rights-of-way, groundwater, and
(b) The website required by subsection (a) of this section must
other rights requiring protection.
be a publicly accessible website.
The adopted new rules implement THSC, §§361.017, 361.024,
(c) The owner or operator shall post on the publicly accessible
and 361.090.
website, upon submittal to or receipt from the executive director or
the chief clerk for the active life of the coal combustion residuals unit The agency certifies that legal counsel has reviewed the adop-
through the completion of the post-closure care period: tion and found it to be a valid exercise of the agency's legal au-
thority.
(1) a complete copy of the current issued effective registra-
tion;
Filed with the Office of the Secretary of State on May 8, 2020.
(2) a complete copy of all applications submitted under this TRD-202001826
chapter, including any revisions;
Robert Martinez
(3) a copy of public notice the owner or operator is required Director, Environmental Law Division
to publish under this chapter; Texas Commission on Environmental Quality
(4) a copy of a draft registration prepared by the executive Effective date: May 28, 2020
director; Proposal publication date: December 13, 2019
For further information, please call: (512) 239-6087
(5) a copy of the compliance summary prepared by the ex-
ecutive director; and ♦ ♦ ♦
(6) a copy of any other document regarding and/or summa- TITLE 34. PUBLIC FINANCE
rizing the executive director's review of or initial decision on an appli-
cation submitted under this chapter. PART 1. COMPTROLLER OF PUBLIC
(d) The owner or operator must notify the United States Envi- ACCOUNTS
ronmental Protection Agency and the executive director, in a manner
prescribed by each agency, within 14 days of any changes to the URL CHAPTER 3. TAX ADMINISTRATION
for the publicly accessible website.
SUBCHAPTER O. STATE AND LOCAL SALES
The agency certifies that legal counsel has reviewed the adop-
tion and found it to be a valid exercise of the agency's legal au- AND USE TAXES
thority. 34 TAC §3.334
Filed with the Office of the Secretary of State on May 8, 2020. The Comptroller of Public Accounts adopts amendments to
§3.334, concerning local sales and use taxes, with changes to
TRD-202001825
the proposed text as published in the January 3, 2020, issue of
Robert Martinez the Texas Register (45 TexReg 98). The rule will be republished.
Director, Environmental Law Division
Texas Commission on Environmental Quality In the wake of South Dakota v. Wayfair, Inc., 138 S. Ct. 2080
Effective date: May 28, 2020
(June 21, 2018), the amendments provide that remote sellers
that are required to collect Texas use tax under §3.286 of this title
Proposal publication date: December 13, 2019
(relating to Seller's and Purchaser's Responsibilities) should col-
For further information, please call: (512) 239-6087 lect local use tax based on the destination location. The amend-
♦ ♦ ♦ ments also implement the requirement that a seller located in
Texas collects local use tax when the seller ships or delivers a
SUBCHAPTER L. APPENDICES taxable item into a local jurisdiction where those use taxes ex-
ceed the local sales tax where the sale is consummated.
30 TAC §352.1421, §352.1431
The comptroller also implements House Bill 1525 and House Bill
Statutory Authority 2153, 86th Legislature, 2019. House Bill 1525 establishes lo-
The new rules are adopted under Texas Water Code (TWC), cal sales and use tax collection responsibilities on marketplace
§5.102, which provides the commission the power to perform providers. House Bill 2153 establishes a single local use tax rate
any acts necessary and convenient to the exercise of its juris- that remote sellers may elect to use.
diction and powers as provided by the TWC and other laws; The amendments also provide additional guidance on determin-
TWC, §5.103, which provides the commission with the authority ing whether an order is received at a place of business of the
to adopt any rules necessary to carry out its powers and duties seller, and clarify the rules for determining the consummation of
under the TWC and other laws of this state; TWC, §5.105, sales.
which authorizes the commission to establish and approve all
general policy of the commission by rule; Texas Health and Throughout the section, the comptroller makes non-substantive
Safety Code (THSC), Solid Waste Disposal Act, §361.017 and changes by adding or amending rule titles and cross-references.
§361.024, which authorize the commission to regulate industrial

ADOPTED RULES May 22, 2020 45 TexReg 3499

CP Ex-23-0014 of 0032
The comptroller also reorganizes this section for clarity and read- The commenters were: Cathy Bennett, on behalf of the City of
ability. Ivanhoe; Steve Presley, on behalf of the City of Palestine; D.
Dale Fowler, on behalf of the Victoria Economic Development
The comptroller received requests to extend the comment pe-
Corporation; Scott Cain, on behalf of the City of Cleburne; Texas
riod from the Round Rock Chamber of Commerce; the City of
State Representative Travis Clardy; Texas State Representa-
Coppell; the City of San Marcos; the City of Humble; the City of
tive Oscar Longoria; Texas State Representative Ken King; Polo
Frisco; the City of Irving; Jennifer May, on behalf of the City of
Narvaez, on behalf of the City of Los Fresnos; Bob F. Brown
Sugar Land; James Harris, on behalf of members of the Coalition
and Keith Wright, on behalf of the City of Lufkin; Keith Patridge,
for Appropriate Sales Tax Law Enactment ("CASTLE") (the cities
on behalf of the McAllen Economic Development Corporation;
of Coppell, Farmers Branch, Humble, Grand Prairie, Lancaster,
Texas State Representative Keith Bell; Jerry Phillips and Frankie
San Marcos, Kilgore, and Lewisville); Robert Camareno, on be-
Davis, on behalf of the City of Kermit; Jose G. Solis, Rick Sali-
half of the City of New Braunfels; Chuck Bailey; Texas State Sen-
nas, Tony Chavez, Albert Cavazos, Maggie Quilantan, and Ave-
ators Charles Schwertner, MD, Donna Campbell, MD, Nathan
lardo Mireles, on behalf of the City of Lyford; Jeff Underwood, on
Johnson, Kirk Watson, Larry Taylor, and Brandon Creighton; and
behalf of the City of Alton; Steve Peña, on behalf of the City of
Texas State Representatives James Talarico and John H. Bucy,
Alton Development Corporation; Robert Salinas, on behalf of the
III.
City of Alamo; Texas State Senator Charles Perry; Texas State
The comptroller extended the 30-day public comment period an- Senator Eddie Lucio, Jr.; Texas State Representative Armando
other 60 days, for a total of 90 days. "Mando" Martinez; Patrick McNulty, on behalf of the City of South
Padre Island; Marie McDermott, on behalf of the Economic De-
The comptroller also received requests to hold a public hearing
velopment Corporation of Weslaco; Texas State Representative
under Government Code, §2001.029(b)(2) (Public Comment),
Sergio Muñoz, Jr.; Brenda Enriquez, on behalf of the Greater
from Senators Schwertner, MD, Campbell, MD, Johnson, Wat-
Mission Chamber of Commerce; David Suarez, on behalf of the
son, Taylor, and Creighton; Representatives Talarico and Bucy;
City of Weslaco; Texas State Representative Trent Ashby; Rox-
and the cities of Sugar Land, San Marcos, Humble, New Braun-
anne M. Ray, on behalf of the South Padre Island Chamber of
fels, Round Rock, and Coppell. The comptroller held a public
Commerce; Darla Lapeyre, on behalf of the South Padre Is-
hearing on February 4, 2020. Additionally, the City of Coppell,
land Economic Development Corporation; Texas State Senator
the City of Round Rock, Ms. May and Mr. Camareno also re-
Robert L. Nichols; Texas State Senator Peter Flores; Texas State
quested a second public hearing, which the comptroller denied
Senator Lois Kolkhorst; Texas State Representative Kyle Kacal;
because all parties received additional time until April 3, 2020,
Texas State Senator Juan "Chuy" Hinojosa; Mario Lozoya and
to review and provide comments on the amendments.
Graham Sevier-Shultz, on behalf of the Greater Brownsville In-
The cities of Sugar Land and Grand Prairie inquired about ad- centives Corporation; Texas State Representative Geanie Mor-
ditional time to comment because of the COVID-19 pandemic. rison; Texas State Representative Ernest J. Bailes, IV; Texas
John Kroll, HMWK, LLC; Stephen Sheets, on behalf of the City State Senator Dawn Buckingham; Texas State Representative
of Round Rock; Mr. Harris; and Jeff Moseley commented that Cody Harris; Richard Newton, on behalf of the City of Colleyville;
the timing of the implementation of the rule will exacerbate the Texas State Representative Ben Leman; Andrew Smith, on be-
cities' fiscal and budgetary issues due to the current COVID-19 half of the City of Hillsboro; Brad Pingel, on behalf of the City
pandemic. The comptroller denied this request because inter- of Pampa; Michael Dyson, on behalf of the City of Rollingwood;
ested parties had notice of these amendments prior to the pan- City Council for the City of Rowlett; Noe Ronnie Larralde, on be-
demic, and the comptroller had already granted an extension to half of the Edinburg Chamber of Commerce; Sergio Contreras,
provide comments. Interested parties also had additional op- on behalf of the Rio Grande Valley Partnership; Susette McNeel,
portunities to provide comments during the public hearing and on behalf of GeoInvoice, Inc.; Eddie Treviño, Jr., on behalf of
an interim hearing before the Texas House of Representatives, the Texas Border Coalition; Benjamin Gomez, on behalf of the
Committee on Ways and Means on February 5, 2020 (the Ways City of San Benito; Texas State Representative Eddie Lucio, III;
and Means hearing). Texas State Representative R.D. "Bobby" Guerra; Daniel Silva,
on behalf of the Mission Economic Development Corporation;
During the public comment period, the comptroller received com-
Kenneth Jones, Jr., on behalf of the Lower Rio Grande Valley
ments in writing and orally.
Development Council; Rose Benavidez, on behalf of the Starr
The City of San Marcos commented that it did not have time County Industrial Foundation; Dalinda Guillen, on behalf of the
to conduct a thorough review of the businesses that will be im- Rio Grande City Economic Development Corporation; and Tina
pacted by the proposed changes, and requested the comptroller O'Jibway, on behalf of Texas State Senator Robert Nichols.
postpone adopting the changes at least for two years, if not in-
John Kennedy commented on behalf of the Texas Taxpayers and
definitely. The comptroller denies this request.
Research Association that the association has some members
The comptroller received support from multiple city mayors, local who support the amendment as proposed; however, it also has
economic development corporations, and state legislators. Gen- members for which the amendment creates additional confusion
erally, the commenters supported the provisions concerning the and compliance costs.
sourcing of sales of Internet orders, which will ensure that cities
The comptroller amends the definition of "Comptroller's website"
receive their fair share of local sales and use tax revenues. The
in subsection (a)(4) to provide the correct website address.
commenters stated that a large majority of Texas cities and rural
communities are losing revenue they need to provide services to The comptroller amends the definition of "engaged in business"
their taxpayers that make Internet purchases. Commenters also in subsection (a)(7) to conform the reference to §3.286 of this
stated that the proposed rule as a whole reflects the legislature's title.
intent in passing House Bill 1525.
The comptroller amends subsection (a)(9) to identify activities
that are not included in the definition of the term "fulfill." Mr.

45 TexReg 3500 May 22, 2020 Texas Register

CP Ex-23-0015 of 0032
Sheets and Cindy Olson Bourland, on behalf of the City of Round David Edmonson, on behalf of TechNet, and Mr. Pannell com-
Rock, commented that change to the definition is not a clarifica- mented that rather than choosing specific points in the sales
tion because the words "fulfill" and "fulfillment" do not appear in process and giving them more weight than others (thus creating
Chapter 321 and that sales are taxed where they are "consum- loopholes for sellers and purchasers to use to their advantage),
mated," not "fulfilled." Mr. Sheets proposed to add a new sen- an alternative approach might be the creation of a composite of
tence to the definition stating that "except for sales under sec- selling activities test similar to the one used by the state of Illinois
tion (b)(1)(C), where a sale is consummated does not depend to help identify the local sales tax that is most appropriate.
on where a sale is fulfilled."
The comptroller declines to make this revision because the cre-
Ms. May commented that the definition of "fulfill" is clear for ation of a composite of selling activities test is not within the
tangible personal property, but it is unclear how it applies to in- comptroller's rulemaking authority. A composite of selling ac-
tangible items such as access to research on online platforms. tivities test would require a legislative change because it is not
She requested further clarification in the section for how services supported by Tax Code, Chapters 321 and 323.
such as information services are fulfilled.
Additionally, in response to these comments, the comptroller is
The comptroller declines to make the suggested changes. The deleting the proposed definition of "Internet order" and the pro-
definition gives effect to Tax Code, §321.203 (Consummation of visions for consummation of sales for Internet orders.
Sale) and the comptroller will consider addressing consumma-
The comptroller amends the definition of "itinerant vendor" in
tion of certain services at a later date.
subsection (a)(10) to clarify that an itinerant vendor is a seller
The proposed rule added a definition for "Internet order" in who does not have a place of business in the state as provided in
new subsection (a)(10) to distinguish between an order placed Tax Code, §321.203(e)(1). The comptroller also removes the ex-
through the Internet as opposed to an order placed in person ample of an itinerant vendor concerning a person who sells rugs
at a seller's location as contemplated in Tax Code, §321.203(c) because it is no longer necessary. The comptroller also clarifies
and §323.203(c). The comptroller received comments regarding that a salesperson operating out of a place of business is not
this definition. Commenters stated that the definition of "Internet an itinerant vendor. The comptroller deletes from the definition
order" will create confusion and requested that the comptroller's "office" or "other location that provides administrative support to
office make revisions to clearly define what constitutes an the salesperson" because those do not meet the definition of a
"Internet order." place of business of the seller in Tax Code, §321.002(a)(3)(A)
(Definitions).
During the Ways and Means hearing, Texas State Represen-
tative Erin Zwiener requested clarification regarding orders re- The comptroller adds a definition for "marketplace provider" in
ceived over cellular phones. Mr. Kennedy made similar com- new subsection (a)(14) as defined in §3.286 of this title.
ments and requested clarification on the treatment of email or-
The comptroller adds a definition for "order placed in person"
ders. Ms. Olson Bourland and Bob Scott requested clarifications
in new subsection (a)(15). Orders placed in person are those
on Voice over Internet Protocol (VoIP) and whether that consti-
orders placed with the seller while the purchaser is physically
tutes an Internet order.
present at a seller's place of business, regardless of how the
Mr. Kennedy also requested that the comptroller define the term seller subsequently enters the order. Subsequent paragraphs
"order" to clarify when an order is received. Brian Pannell, on are renumbered.
behalf of Dell Technologies, made similar comments and also
Mr. Kroll proposed defining the term as "an order placed by a
requested clarification concerning purchase orders.
purchaser with the seller while physically present at the seller's
Mr. Sheets commented that the comptroller should define the place of business." The comptroller agrees to make the revision
word "Internet" as found in Tax Code, §151.00393 (Internet), for clarity.
which provides that the Internet is used to "communicate infor-
The comptroller amends the definition of "place of business of
mation." He commented that the concept of an "Internet order"
the seller - general definition" in renumbered subsection (a)(16).
does not appear in Chapter 321 of the Tax Code and that it is
Tax Code, §321.002(a)(3)(A) defines "place of business of the
nothing more than one of many tools for communicating infor-
retailer" as "an established outlet, office, or location operated by
mation, no different than the US Postal Service and telephone
the retailer or the retailer's agent or employee for the purpose
land lines. Mr. Kroll and Mr. Harris echoed these comments.
of receiving orders for taxable items and includes any location
Mr. Sheets proposed a revised Internet order definition.
at which three or more orders are received by the retailer during
Both, Mr. Camareno and Mr. Kroll, commented that the amend- a calendar year." The reference to the retailer's "agent or em-
ment is unclear whether an Internet order can cease to be an ployee" indicates that sales personnel must be at the site, and
Internet order. Mr. Camareno commented that there are times this requirement has been added to the definition.
when an Internet order involves human interaction to fulfill an
In addition, the amended definition clarifies that the term does
order, and other times when it is automated. Additionally, Mr.
not include a computer server, an Internet protocol address, a
Kroll; Craig Morgan, on behalf of the City of Round Rock; Mr.
domain name, a website, or a software application. Many sell-
Camareno; Mr. Kennedy; Kyle Kasner; and Karen Hunt, on be-
ers house their computer servers at a co-location facility or rent
half of the City of Coppell, requested that the amendment be re-
computer server space at a managed hosting site. But an ordi-
vised to adequately address business-to-business transactions
nary person would not consider the physical locations of these
through the Internet because those orders are fundamentally dif-
computer servers to be places of business of the seller. Simi-
ferent from business-to-consumer transactions. Mr. Kroll stated
larly, an ordinary person would not perceive an Internet protocol
that the definition also causes issues when businesses lease
address, a domain name, or a website as an "established outlet,
computers from a seller because under the property tax rules,
office, or location" so as to constitute a place of business. The
the seller retains ownership of the leased computer.
comptroller reflects these changes throughout the section.

ADOPTED RULES May 22, 2020 45 TexReg 3501

CP Ex-23-0016 of 0032
The comptroller also deletes the reference to call centers, show- Former subsection (e)(1) addressed administrative offices sup-
rooms, and clearance centers because those facilities are places porting traveling salespersons, and former subsection (e)(2) ad-
of business of the seller only if sales personnel of the seller re- dressed distribution centers, manufacturing plants, and other fa-
ceive three or more orders during a calendar year at those fa- cilities. In new subsection (b), the comptroller no longer includes
cilities. The amendment deletes the former example regarding administrative offices supporting a traveling salesperson, and
a home office at which items are sold through an online auction distribution centers, manufacturing plants, storage yards, ware-
website because the example is addressed by new language re- houses, or similar facilities operated by a seller at which sales-
garding orders received through a shopping website. The comp- persons are assigned to work in the determination of "place of
troller also amends the definition to delete repetitive language. business of the seller." A seller does not receive orders at ad-
The comptroller deletes a reference to "administrative offices" ministrative offices that solely serve as the base of operations
because the comptroller determines that an administrative office for a salesperson, or that provide administrative support to a
does not meet the definition of a place of business of the seller salesperson. Moreover, the mere fact that a salesperson is as-
under Tax Code, §321.002(a)(3)(A). signed to work from, or work at, a distribution center, manufac-
turing plant, storage yard, warehouse, or similar facility oper-
The comptroller also adds to the definition of "place of busi-
ated by a seller does not mean that a seller receives orders at
ness of the seller - general definition" that an outlet, office, fa-
these locations. These locations by themselves do not meet the
cility, or any similar location that contracts with a business to
definition of a place of business of the retailer under Tax Code,
process certain orders or invoices is not a place of business of
§321.002(a)(3)(A). The comptroller amends the section to reflect
the seller if the comptroller determines that these certain loca-
these changes throughout.
tions are for the sole purpose of avoiding tax due or of rebating
tax to the contracting location. This change is made pursuant to Brady Olsen, Tom Hart, and Andrew Fortune, on behalf of the
the definition of "place of business of the retailer" in Tax Code, City of Grand Prairie, and Mr. Voelker commented that their
§321.002(a)(3)(B). cities anticipate losses of sales tax revenues. Mr. Olsen, Mr.
Hart, and Mr. Fortune commented the amendment will nega-
Paul Voelker, on behalf of the City of Richardson; George Kele-
tively impact their city's Local Government Code, Chapter 380
men, on behalf of the Texas Retailers Association; and Mr. Har-
agreements (Chapter 380 agreements) due to removing travel-
ris expressed concerns with the definition of a place of business.
ing salesperson from the definition of a place of business.
Specifically, Mr. Harris stated that the definition is not consistent
with the statute or the decision in Combs v. City of Webster, Mr. Kasner commented that business-to-business warehouses
311 S.W.3d 85 (Tex. App. Austin 2009, pet. denied). He also and distribution centers often rely heavily on traveling salesper-
stated that it contradicts the statutory definition. Mr. Harris and sons who are based at those locations. Mr. Kasner requested
Mr. Kelemen requested that the comptroller revise the definition that the comptroller define "sales office" and contrast it to an
to restate the statutory language. Mr. Voelker requested that "administrative office" that supports traveling salespersons. Mr.
no revisions be made to the current definition. Rudy Durham, on Kroll made a similar request.
behalf of the City of Lewisville, commented that the place of busi-
The comptroller declines to reinsert the omitted provisions be-
ness definition needs to be updated to keep up with changes in
cause subsection (b) gives effect to Tax Code, §321.002(a)(3)(A)
technology. The comptroller declines to make the requested re-
that requires administrative offices and sales offices to indepen-
visions because the amended definition gives effect to the statu-
dently meet the statutory definition of a place of business. How-
tory language.
ever, new paragraph (4), discussed below, will allow a transition
The comptroller adds a definition for "remote seller" in new sub- period for these facilities until September 30, 2021.
section (a)(18) as defined in §3.286 of this title. Subsequent
In new paragraph (1)(A), the comptroller clarifies that locations
paragraphs are renumbered.
must be operated by a seller for the purpose of receiving orders
The comptroller amends the definition of "temporary place of and receive three or more orders in a calendar year from per-
business of the seller" in renumbered subsection (a)(22) to clarify sons other than employees, independent contractors, and natu-
that a temporary place of business of the seller includes a sale ral persons affiliated with the seller to be considered a place of
outside the walls of a distribution center, manufacturing plant, business of the seller in Texas. In new paragraph (3), the comp-
storage yard, warehouse, or similar facility of the seller in a park- troller restates the provisions from former subsection (e) relating
ing lot or similar space sharing the same physical address as the to purchasing offices with minor changes for ease of readability.
facility. Sellers may hold sales to the public outside the walls of
Mr. Kroll commented that the language "other than employees,
their facilities on a temporary basis. The comptroller clarifies that
independent contractors, and natural persons affiliated with the
these sales constitute temporary places of business of the seller.
seller" contradicts the language in Senate Bill 1533, 83rd Leg-
The comptroller makes these changes throughout the section.
islature, 2013, as that statute did not impose a related persons
Subsequent paragraphs are renumbered.
test and that bill does not support the new language regarding
The comptroller deletes the definition of "traveling salesperson" purchasing offices in paragraph (3). Ms. May requested clarity
in subsection (a)(21) because the comptroller will treat traveling related to a traveling salesperson working on a campus (group of
salespersons as seller's agents or employees as referenced business buildings that house sales persons, call centers, fulfill-
in Tax Code, §321.002(a)(3)(A). Subsequent paragraphs are ment warehouses, and administrative offices) but not in the same
renumbered. building as a place of business. She recommended changing
the word "building" to "campus" to avoid confusion. The comp-
The comptroller adds new subsection (b), determining the place
troller declines to make these suggested changes because the
of business of a seller. Subsection (b) revises and expands the
clarification gives effect to the statute's definition of a place of
provisions of former subsection (e) concerning place of business
business.
- special definitions.

45 TexReg 3502 May 22, 2020 Texas Register

CP Ex-23-0017 of 0032
The comptroller adds new paragraph (4) for orders received by Websites may use dynamic IP addresses that are assigned by
sales personnel who are not at a place of business of the seller, the network upon connection and that change over time. The
and new paragraph (5) for orders not received by sales person- public IP address of a website may simply be routing orders to
nel. The comptroller makes these changes in response to com- different, private IP addresses. Load balancers may change the
menters' requests for guidance on how to treat orders received IP addresses that communicate with customers. Conversely,
by telephone, including VoIP and cellular phone, facsimile, and multiple web sites may be hosted at a single IP address.
email.
The computer server receiving an order placed through a
In the past, orders were typically received at fixed locations, such shopping website may belong to the seller or it may belong to a
as orders received in person at the seller's facility, orders re- third party. The computer server may be situated on the seller's
ceived by mail order to the seller's facility, and orders received premises, it may be situated at a co-location facility operated
through landline telephone calls to the seller's facility. Some or- by a third party, or it may be situated at a web hosting facility
ders were received by traveling salespersons, and former para- operated by a third party. The computer server may be one
graph (4) applied Tax Code, §321.203(d)(2) to these orders so of multiple servers that serve the same website from different
that the orders were consummated "at the place of business from physical addresses as part of a cloud distribution network. The
which the retailer's agent or employee who took the order oper- computer server may route the order to multiple other servers
ates," even though the order may have been actually received by for load balancing purposes. Conversely, a single computer
the traveling salesperson at a different location. With the expan- server may serve multiple websites. Also, the seller may or may
sion of modern telecommunication techniques, it has become not know the physical address of the server receiving the order.
more commonplace for sales personnel who are not traveling The best way to treat these orders consistently and coherently
salespersons to receive orders when they are not at the seller's is to treat them uniformly as being received at locations that are
place of business, such as orders received by cellular telephone not places of business of the seller.
and by email. Accordingly, new paragraph (4) expands the ap-
Because the former rule did not explicitly address orders not re-
plication of Tax Code, §321.203(d)(2) to these orders so that an
ceived by sales personnel, the comptroller is applying paragraph
order received by a salesperson who is not at a place of business
(5) prospectively to orders received after September 30, 2021.
of the seller in Texas will be treated as being received at the loca-
tion from which the salesperson operates. This treatment will re- The comptroller adds new subsection (c) to incorporate and re-
sult in a more uniform application of the consummation statutes organize many of the provisions of former subsection (h) con-
and will facilitate the ability of taxpayers and auditors to deter- cerning consummation of a sale. It reorganizes the general con-
mine the location where an order is received. summation rules stated in former paragraph (3) and applies the
general consummation rules to specific situations that were pre-
Paragraph (4) clarifies that the order will be treated as being re-
viously addressed in other paragraphs of former subsection (h).
ceived at a place of business only if the location out of which the
salesperson operates independently meets the requirement for Subsection (c), like former paragraph (3) that it replaces, does
being a place of business of the seller. In addition, to transition not differentiate based on the number of places of business of
from the former rule to the current rule, the comptroller will tem- the seller in the state. Subsection (c) states that the consumma-
porarily expand the definition of "place of business of the seller" tion principles of the subsection apply to all sellers, regardless of
for these orders to include an outlet, office, or location operated whether they have no place of business, a single place of busi-
by the seller that serves as a base of operations or that provides ness, or multiple places of businesses in the state.
administrative support to the salesperson, until September 30,
Mr. Sheets commented that the rule should include a special pro-
2021.
vision for sellers with a single place of business in Texas based
New paragraph (5) addresses orders not received by sales per- on Tax Code, §321.203(b). The comment stated that "all taxable
sonnel, such as orders received through a shopping website or sales of the retailer are consummated at the one place of busi-
shopping software application. The comptroller cannot apply the ness."
consummation principals of Tax Code, §321.203(d)(2) to these
Tax Code, §321.203(b) describes the consummation principles
types of orders because that provision is limited to orders re-
for a seller that has only one place of business in the state. But
ceived by an "agent or employee."
those principles are consistent with the treatment of other sellers
Instead, these orders will be treated as being received at loca- and do not require special treatment in the rule.
tions that are not places of business of the seller. This treat-
Tax Code, §321.203 as a whole establishes a hierarchy among
ment is consistent with the concept that a "place of business"
places of business involved in a transaction. If an order is ful-
requires the presence of personnel to receive the order. Com-
filled from a place of business of the seller in Texas, the sale
puter servers, Internet protocol addresses, and automated tele-
is consummated at that location even if the order is received at
phone ordering systems would not ordinarily be called "places of
another place of business in Texas (except for orders received
business" of the seller. The comptroller has concluded that the
in person). Conversely, an order is consummated at the place
legislature could not have intended that the receipt of an order
of business of the seller in Texas where it is received only if the
by an automated mechanical device would make the device an
order was not fulfilled from a place of business in Texas (except
"established outlet, office or location operated by the retailer."
for orders received in person). Adopted subsection (c) reflects
Also, this treatment of orders not received by sales personnel is this hierarchy.
required to promote uniformity and ease of administration for tax-
The statutory provision in Tax Code, §321.203(b), for a seller
payers and auditors. Website orders can be received at multiple
with a single place of business in Texas, is a recognition that the
physical addresses -- any locations that have Internet access. A
hierarchy is not required in that circumstance. The outcome will
website order is sent to an Internet protocol ("IP") address. An
be the same regardless of whether the order is received, fulfilled,
IP address is the address of the device receiving the order, such
or received and fulfilled from that place of business, and regard-
as a computer server. An IP address is not a physical address.

ADOPTED RULES May 22, 2020 45 TexReg 3503

CP Ex-23-0018 of 0032
less of whether the order is placed at that location in person - the The comptroller declines to make this revision because para-
sale will be consummated at that place of business. graph (3) merely restates the language in former subsection
(h)(3)(F), which was adopted in 2014. This subsection im-
Tax Code, §321.203(b) cannot be interpreted to mean that all
plements Senate Bill 997, 83rd Legislature, 2013 (codified at
sales are consummated at the seller's single place of business
Tax Code, §321.203(c-4) and (c-5)). Moreover, Tax Code,
in Texas, even if that place of business did not receive the order,
§321.203(c-5) explicitly provides an expiration date of Septem-
did not fulfill the order, and did not serve as the location where
ber 1, 2024.
the order was delivered to the customer. To consummate a sale
and to impose local sales tax in a jurisdiction that had nothing to The comptroller deletes former subsection (h)(4) concerning
do with a transaction would be an absurd and possibly unconsti- traveling salespersons. The place of business of a traveling
tutional reading of the statute. salesperson is determined under subsection (b)(4) - orders
received by sales personnel who are not at a place of business
Mr. Harris commented that the proposed subsection (c)(1) was
of the seller when they receive the order.
inconsistent with Chapter 321 because Chapter 321 explicitly
ties consummation of sales to the place of business where or- The comptroller adds new paragraph (4) and includes the lan-
ders are "received," not where they are "placed." He commented guage in former subsection (h)(1) concerning local sales taxes
that to the extent that the amendment relies on placement to de- due and local use taxes due without any changes. The comptrol-
termine where a sale is consummated, the section contradicts ler restates the language in former subsection (h)(2) concerning
Chapter 321. He requests that any reference to placement of multiple special purpose district taxes and multiple transit author-
orders, other than orders placed in person or orders placed with ity taxes in paragraph (5) without changes to the language.
a retailer's supplier, should be deleted.
The comptroller deletes the language found in former subsec-
The comptroller agrees that other than orders placed in person, tion (h)(5) concerning drop shipments because these provisions
the consummation of sales is tied to the place of business where are redundant and the general consummation rules cover these
the order is received, if not fulfilled by a place of business of the types of orders.
seller in Texas. The comptroller makes revisions to clarify and
The comptroller adds new paragraph (6) to add the language
clear up any confusion by the use of the term "placed."
found in former subsection (h)(6) concerning itinerant vendors
New paragraph (1) provides the consummation of sale rules for and vending machines without changes to the language.
orders received at a place of business of the seller in Texas.
The proposed rule contained a special provision in subsection
New subparagraph (A) provides the consummation of sale rules (c)(6) for Internet orders. The adopted rule deletes this provi-
for orders placed in person, and includes a reference to orders sion. However, the comments regarding the proposed rule for
placed at a temporary place of business of the seller, in lieu of Internet orders may have some relevance to subsection (b)(5),
the provision found in former subparagraph (h)(6)(C) regarding discussed above, regarding orders not received by sales per-
temporary places of business. Subparagraph (B) provides the sonnel. Accordingly, the comptroller has considered these com-
consummation of sale rules for orders not placed in person. ments and summarizes them below.
New paragraph (2) provides the consummation of sale rules for The comptroller received comments concerning Internet orders
orders not received at a place of business of the seller in Texas. from Mr. Camareno; the Board of Directors for the Coppell
New subparagraph (A) provides the consummation rule for an Chamber of Commerce; Mr. Edmonson; Steven Taplits, on
order fulfilled at a place of the seller in Texas. New subparagraph behalf of Bed Bath & Beyond; Mr. Voelker; Mr. Kasner; Mr.
(B) provides the consummation rule for an order not fulfilled from Olsen; Mr. Hart; Mr. Morgan; Mr. Sheets; Ms. Olson Bourland;
a place of business of the seller in Texas. Jerry Stratton; Jenna Armstrong, on behalf of the Lake Houston
Area Chamber of Commerce; Jack Roberts; G. Brint Ryan,
In light of the Wayfair decision, the comptroller provides in clause
on behalf of Ryan LLC; Doug Duffie, Doug Duffie, LLC; Adina
(ii) that a remote seller that is required to collect Texas use tax
Christian, on behalf of her client; Mr. Kelemen; Mr. Moseley;
under §3.286(b)(2) must also collect local use tax based on the
Ms. May; Jane Hughson, on behalf of the City of San Marcos;
location to which the item is shipped or delivered or at which the
David Howard; Linda Howard; Mr. Moore; Mr. Harris; Mr. Kroll;
purchaser of the item takes possession unless the remote seller
Mr. Pannell; Dan Butcher, Clark Hill Strasburger; Ms. Hunt; Ja-
elects to collect the single local use tax rate enacted in House
son Ball, on behalf of the Round Rock Chamber of Commerce;
Bill 2153. See Tax Code, §321.205(c) (Use Tax: Municipality in
Michael Rollins, on behalf of the Austin Chamber of Commerce;
which Use Occurs) and §323.205(c) (Use Tax: County in which
Chris Hillman, on behalf of the City of Irving; Gary Thomas,
Use Occurs).
on behalf of the Dallas Area Rapid Transit; the Honorable US
New paragraph (3) restates the provision in former subsection Representative John Carter, on behalf of Round Rock and many
(h)(3)(F) concerning an exception for qualifying economic devel- other communities; Mr. Durham; Joshua Selleck, on behalf of
opment agreements entered into before January 1, 2009, pur- the City of Kilgore; Kristi Carlson, on behalf of Best Buy Co.,
suant to Tax Code, §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5) Inc.; John Torigian, on behalf of HD Supply; TJ Gilmore and
(Consummation of Sale). David Erb, on behalf of the City of Lewisville; Michael Land, on
behalf of the City of Coppell; Michael Meek, on behalf of the
Jeffrey Moore, Brown & Hofmeister L.L.P, commented that para-
Greater New Braunfels Chamber of Commerce; Mr. Kennedy;
graph (3) runs afoul of Article I, Section 16 of the Constitution of
John Christian, on behalf of Ryan LLC; Mr. Harris; Heather
the State of Texas (Bills of Attainder; Ex Post Facto or Retroac-
Hurlbert, on behalf of the City of San Marcos; Mr. Scott; Jared
tive Laws; Impairing Obligation of Contracts). Mr. Moore sug-
Werner, on behalf of the City of New Braunfels; Mr. Fortune;
gests that the comptroller revise the effective date of the provi-
and Kenneth Welch.
sion until the end of the existing term of the agreement.
Mr. Kelemen; Ms. Hunt; Mr. Land; the Board of Directors for the
Coppell Chamber of Commerce; Mr. Camareno; Representa-

45 TexReg 3504 May 22, 2020 Texas Register

CP Ex-23-0019 of 0032
tive Zwiener; Representative Talarico; Mr. Morgan; Mr. Sheets; Mr. Kroll, Mr. Scott, Ms. Hurlbert, and Representative Murphy
Ms. Olson Bourland; Mr. Voelker; Mr. Durham; Mr. Gilmore; Mr. commented that cities without Chapter 380 agreements will have
Ball; Mr. Olsen; Mr. Hart; Mr. Fortune; Ms. Hurlbert; Ms. Hugh- to source sales from Internet orders immediately and feel the
son; Ms. Armstrong; Mr. Hillman; Mr. Ryan; Ms. Christian; Mr. impact. However, cities with Chapter 380 agreements will benefit
Duffie; Mr. Howard; Ms. Howard; US Representative Carter; because of the delayed implementation.
Mr. Scott; Ms. Carlson; Mr. Torigian; and Mr. Kasner stated
Texas State Representative Drew Springer commented that rural
that the proposed provision regarding Internet orders will have
Texas is specifically hit hard because the cities are losing local
a negative impact on city sales and use tax revenues which will
tax revenue, which are hit harder as more cities execute Chapter
force many of the cities to increase property taxes, reduce core
380 agreements. He further commented that the definition of
services, and curtail economic development. Mr. Sheets, Mr.
a place of business as it relates to three or more orders is too
Fortune, Mr. Olsen, Mr. Hart, Mr. Morgan, Ms. Hunt, Mr. Harris,
broad, which can cause gamesmanship in the context of 380
and Mr. Durham commented that the amendment will cause a
agreements. Mr. Presley also does not think it is appropriate
downgrade to city bond ratings.
that cities need to support businesses in other cities.
Ms. Hurlbert stated that the proposed provisions related to Inter-
Representative Springer also commented that Chapter 380
net orders will narrow what qualifies for rebates under Chapter
agreements were established long before the proliferation
380 agreements. She is also concerned about the revenue loss
of Internet sales and the Wayfair decision and since these
from businesses that do not have Chapter 380 agreements that
changes, he thinks it necessary to address Internet orders with
will be grandfathered under the amendment.
the amendment.
At the Ways and Means hearing, Ms. Hunt expressed concern
In response to the comments, the comptroller is delaying the im-
that under the comptroller's definition many businesses in the
plementation of subsection (b)(5), regarding orders not received
City of Coppell will no longer be considered places of business
by sales personnel until October 1, 2021, giving interested par-
under the amended provisions.
ties an opportunity to seek a legislative change.
Mr. Selleck commented that the City of Kilgore has a large num-
Additionally, Representative Springer commented that the lack
ber of business-to-business transactions that are sourced to the
of a detailed list of all Chapter 380 agreements kept in a cen-
city; but will, in the future, automate their ordering systems. He
tral location creates a challenge for obtaining information on the
is concerned that the city will lose those revenues.
agreements because a lot of agreements are very protected.
Mr. Fortune, Mr. Olsen, and Mr. Hart commented that the
Commenters requested data and an analysis to determine the
proposed provisions related to Internet orders will impact busi-
impact the amendment will have on their communities, and
ness-to-business transactions. Mr. Gilmore commented that the
information on Chapter 380 agreements. The commenters
amendment will redistribute sales tax from less prosperous com-
were: Texas State Representative Sheryl Cole, Representative
munities to their more prosperous neighbors. Mr. Voelker com-
Zweiner, Mr. Fortune, Mr. Olsen, Mr. Hart, Ms. May, Mr. Land,
mented that the City of Richardson is concerned about losing
Ms. Hunt, Mr. Voelker, Mr. Scott, and Mr. Hillman. Mr. Fortune
sales tax because companies have sourced all of their sales to
asked that the House Ways and Means committee request
the city as it is where their employee base, sales force, and call
additional analysis on the amendment's provisions.
center staff are located, and it is where their product orders are
received and processed. Mr. Voelker and Mr. Scott requested that the comptroller gather
information across the state regarding Chapter 380 and Chap-
Representative Talarico, Mr. Morgan, Mr. Sheets, Ms. Hurlbert,
ter 381 agreements to fully understand how the agreements are
Mr. Gilmore, Mr. Durham, Mr. Meek, the Board of Directors for
being used. Mr. Voelker also requested that the comptroller per-
the Coppell Chamber of Commerce, Mr. Ball, Ms. Armstrong,
form an impact analysis to determine how the changes will affect
Mr. Rollins, Mr. Moseley, US Representative Carter, Ms. Carl-
local sales tax collections and existing businesses. Mr. Scott
son, Ms. Olson Bourland, Mr. Howard, Ms. Howard, Mr. Taplits,
made similar requests.
Mr. Torigian, Mr. Harris, Mr. Scott, and Mr. Camareno made
comments on the impact that the proposed provisions on Inter- Mr. Ryan commented that he does not believe the amendment
net orders will have on Chapter 380 agreements. complies with Texas Government Code, §2001.024 (Content of
Notice), which requires specific content in the notice of a pro-
Commenters believe the proposed grandfather provisions vio-
posed rule, relating to the fiscal impact of such amendment. Mr.
late the Constitution of the State of Texas because they impair
Ryan believes that a fiscal note detailing the fiscal implication
existing contracts. Specifically, Mr. Moore commented that the
for small business in reprogramming software, the shifting of lo-
proposed subparagraph (F) runs afoul of Article I, Section 16 of
cal tax among jurisdictions, the upending of pre-existing Chapter
the Constitution of the State of Texas. Texas State Represen-
380 or 381 agreements, and the economic cost to the public is
tative Jim Murphy and Ms. Olson Bourland made similar com-
required. Mr. Christian and Mr. Harris agreed. Mr. Harris, addi-
ments.
tionally, stated that the comptroller did not give adequate notice
Mr. Moore suggests that the comptroller revise the provision to when reversing a policy as required under federal case law. Mr.
grandfather existing agreements entered into before September Morgan commented that the fiscal impact statement contradicts
1, 2019, to the end of their existing term. Mr. Roberts, Mr. Bai- the known impact to the City of Round Rock. Mr. Sheets and
ley, Mr. Taplits, Ms. Carlson, Mr. Durham, Mr. Kelemen, Mr. Ms. Olson Bourland made similar comments. Ms. Hunt made
Butcher, Mr. Torigian and Mr. Rollins made a similar request. similar comments relating to the City of Coppell.
Mr. Roberts, Mr. Bailey, Mr. Duffie, Mr. Camareno, Mr. Scott,
Mr. Morgan; Ms. Hunt; Mr. Land; Mr. Sheets; Representative
Mr. Taplits, Mr. Torigian, and Mr. Butcher also support extending
Talarico; Representative Zwiener; US Representative Carter;
the grandfather clause from a range of five to 20 years.
Mr. Voelker; Mr. Morgan; the Board of Directors for the Coppell
Chamber of Commerce; Mr. Christian; Mr. Ryan; Ms. Christian;

ADOPTED RULES May 22, 2020 45 TexReg 3505

CP Ex-23-0020 of 0032
Mr. Scott; Mr. Camareno; Mr. Gilmore; Mr. Erb; Mr. Meek; the Mr. Kelemen, Mr. Morgan, Mr. Sheets, Ms. Olson Bourland, Mr.
Board of Directors for the Round Rock Chamber of Commerce; Ryan, Mr. Christian, Mr. Harris, Mr. Camareno, Mr. Pannell, Ms.
Mr. Kasner; Mr. Torigian; Mr. Kroll; Mr. Moore; and Mr. Harris Carlson, and Mr. Kroll stated that the amendment conflicts with
requested that the comptroller solely implement the provisions the statute or is not supported by law. Also, Mr. Morgan, Mr.
in House Bills 1525 and 2153 and the Wayfair decision. Mr. Sheets, and Ms. Olson Bourland commented that the statute
Kroll and Mr. Harris provided draft amendments to accomplish and the legislative intent require origin-based sourcing. Mr. Mor-
the objective. gan commented that the legislature has always concluded that
origin-based sourcing is the most effective method to allocate
Ms. Hunt requested that the comptroller withdraw the amend-
resources.
ment as proposed and republish only the language required to
implement House Bill 1525 and House Bill 2153 based on the Mr. Ryan, Mr. Christian, Mr. Harris, Mr. Kroll, Mr. Camareno,
staggering effects of the COVID-19 pandemic on public health and Mr. Pannell commented that Chapter 321 makes no distinc-
and the economy. Ms. Olson Bourland and the Board of Di- tion based on the technology used by the customer to commu-
rectors for the Coppell Chamber of Commerce had similar com- nicate an order except when made in person.
ments.
Mr. Harris commented that concluding that Internet orders are
Mr. Butcher, Mr. Ball, Ms. Armstrong, US Representative Carter, not received anywhere is at odds with the comptroller's long-
Ms. Christian, Mr. Harris, Mr. Erb, Mr. Kroll, Mr. Camareno, Ms. standing position that Internet orders are received at a location
Olson Bourland, Mr. Durham, Mr. Kelemen, Ms. Carlson, Mr. in Texas.
Harris, Mr. Sheets, and Mr. Pannell stated that the amendment
He commented that treating Internet orders for taxable
is improper because it goes beyond the scope of the Wayfair
items differently from non-Internet orders violates Tax Code,
decision, House Bill 1525, and House Bill 2153, and beyond the
§321.002(a)(3) and §321.203. He commented that in the City
comptroller's authority.
of Webster, the comptroller stated that Internet orders can be
Ms. Hunt, Mr. Land, the Board of Directors for the Coppell received at a place of business. He further stated that Chapter
Chamber of Commerce, Mr. Sheets, Representative Talarico, 321 already provides the rules for Internet orders. Mr. Sheets
Mr. Gilmore, Mr. Erb, Representative Zwiener, Representative and Ms. Olson Bourland made similar remarks.
Murphy, Mr. Meek, Mr. Camareno, Mr. Pannell, Mr. Taplits, Mr.
Ms. Olson Bourland stated numerous reasons that she believes
Harris, Mr. Hillman, Mr. Ball, and Mr. Selleck further requested
the amendment is contrary to law, including that the amendment
that the comptroller leave the remaining issues for the legisla-
is unconstitutional and contradicts comptroller's guidelines and
ture to decide in future sessions. Ms. Hunt and Mr. Land asked
letter rulings. She also commented that the comptroller is judi-
that the Ways and Means Committee request that the comptrol-
cially estopped from asserting that pertinent portions of the Tax
ler only implement House Bills 1525 and 2153.
Code are ambiguous.
Mr. Ryan, Mr. Christian, Mr. Harris, and Mr. Torigian opined that
She commented that the term "fulfillment" does not appear in
the legislature has accepted the comptroller's long-standing ad-
the statute, but instead contains the term "consummate," which
ministration of local sales taxes without regard to the technology
means offer, acceptance, and payment of an item. Mr. Sheets
used by the customer to submit an order and that the comptrol-
proposed to revise the rule to provide that Internet orders are
ler cannot make changes without a statutory change. Mr. Harris
treated the same as orders submitted and received by other
commented that in Combs v. City of Webster, the Court stated
means of communication. He also proposed that when making
that "whether {a} result involves 'fair' tax policy is a question for
orders through the Internet or by any other means of commu-
the legislature."
nication, the sale is consummated where the order is received,
Mr. Presley commented that the way the comptroller has pro- regardless of where the order is fulfilled. Mr. Kelemen made a
posed changes has given the legislature adequate time to ad- similar request for revision.
dress the issue. Representative Leman commented that it is a
In response to these comments, the comptroller deleted the pro-
part of the comptroller's function to provide clarifications when
posed language regarding Internet orders.
needed in a timely manner so that we can have a successful
economy. Representative Talarico, Representative Zwiener, Mr. Sheets,
Mr. Morgan, Ms. Olson Bourland, Mr. Ryan, and Mr. Ball stated
The comptroller declines to make revisions based on these com-
that origin-based sales tax has been applied across the board
ments. The comptroller has broad rulemaking authority under
to all transactions. Ms. Olson Bourland further stated that the
Tax Code, §§111.002 (Comptroller's Rules; Compliance; Forfei-
amendment completely upends the framework by making Inter-
ture); 321.306 (Comptroller's Rules); and 323.306 (Comptroller's
net orders destination-sourced for purposes of local sales tax.
Rules). There is ambiguity in the consummation rule as evi-
denced by the questions that the comptroller received. There are Mr. Ryan commented that local taxes default to the place of
situations in which the same fact pattern results in sourcing by delivery to the customer only when there is no place of business
companies in different manners. The comptroller's changes pro- of the seller to which taxes should be allocated.
vide clear guidance to address these situations. The comptroller
Mr. Sheets commented that Tax Code, §321.203(b) states that if
conducted a statewide fiscal impact analysis as required under
a retailer has only one place of business, all of a retailer's sales of
the Administrative Procedures Act. The comptroller declines to
taxable items are consummated at that place of business, except
only implement House Bills 1525 and 2153 and the Wayfair de-
as provided in subsection (e). Mr. Sheets proposed language to
cision. The comptroller delays the implementation of subsection
that effect. Mr. Sheets commented that if the comptroller applies
(b)(5), regarding orders not received by sales personnel, until
the Internet order rule to a seller with a single place of business in
October 1, 2021, giving interested parties time to seek a legisla-
the state, the amendment is illegal. Ms. Carlson and Mr. Butcher
tive change.
had similar requests.

45 TexReg 3506 May 22, 2020 Texas Register

CP Ex-23-0021 of 0032
Representative Talarico commented that sales tax is based on The comptroller adds new subsection (d) to include the provi-
the business, not on the consumer, and thus, it should apply to sions in former subsection (i), relating to use tax. The comp-
purchases over the phone or online. Mr. Stratton commented troller adds new paragraph (1), which includes the language in
that he supports an origin-based sales tax system because it is former subsection (i)(1) concerning general local use tax rules
"simpler to calculate, harder to pass the buck on, and more pro- with non-substantive changes for ease of readability.
tective of our privacy." However, Mr. Presley commented that all
The comptroller adds new paragraph (2) to include the provisions
transactions other than the customer showing up at the business
in former subsection (i)(2) concerning general use tax rules ap-
should be based on destination.
plied to specific situations with changes.
The comptroller declines to make revisions based on these com-
In light of the Wayfair decision, the comptroller gives effect to the
ments. For the reasons previously stated, the comptroller is
Tax Code's requirement that sellers engaged in business in the
deleting the provisions regarding Internet orders, and is adopt-
state collect local use tax for sales consummated in Texas and
ing provisions regarding orders placed in person, and those not
for sales consummated outside Texas based on the local tax-
placed in person.
ing jurisdictions in which a taxable item is first used, stored, or
Mr. Kelemen, Mr. Kennedy, Mr. Kroll, Mr. Pannell, Mr. Land, consumed, regardless of the specific local jurisdiction in which
Ms. Hurlbert, Mr. Edmonson, Mr. Ryan, Ms. Christian, Mr. a seller is engaged in business. See Tax Code, §§321.205,
Duffie, Mr. Harris, Ms. Olson Bourland, the Board of Directors 322.105 (Use Tax: Where Use Occurs), and 323.205.
for the Coppell Chamber of Commerce, and the Round Rock
When a sale is consummated in Texas, a seller is engaged in
Chamber of Commerce commented that the proposed provision
business in this state through the presence of property or em-
for Internet orders will place additional administrative compliance
ployees in the state. See Tax Code, §§151.107 (Retailer En-
burdens on sellers which will force them to update their software
gaged in Business in this State), 321.203, and 323.203. There-
within a short timeframe.
fore, the language that a seller be engaged in business in a
Mr. Pannell commented that the amendment will create an un- local jurisdiction for sales consummated in Texas is superflu-
due burden on Texas retailers as they will be required to calculate ous. Moreover, an engaged in business standard for local use
and collect tax based on the method of communication through tax does not give effect to the Tax Code's requirement that a
which their customers choose to submit orders. Mr. Edmonson, seller collect local use tax that is due and creates an opportu-
Mr. Kroll, Mr. Land, Mr. Torigian, Mr. Ryan, Ms. Christian, Mr. nity for sellers to avoid collecting local use tax due. See Tax
Duffie, Mr. Harris, and the Board of Directors for the Coppell Code §§151.103(Collection by Retailer; Purchaser's Receipt),
Chamber of Commerce made similar comments. 321.003 (Other Portions of Tax Applicable), 321.205, 322.108
(Certain Provisions of Municipal Sales and Use Tax Applicable),
The comptroller declines to make revisions based on these com-
323.003(Other Portions of Tax Applicable), and 323.205. There-
ments because taxpayers already must keep records of sales,
fore, the comptroller deletes the "engaged in business" require-
and such a burden is inherent in the consummation statutes (like
ment for local use tax throughout the section.
the burden of identifying a particular place of business that re-
ceives an order when a business has multiple places of busi- In new paragraph (2), the comptroller implements the Wayfair
ness). Taxpayers will also have time to update their systems decision by clarifying that the seller is responsible for collecting
under the extended implementation date. the local use tax due on the sale based upon the location in this
state to which the order is shipped or delivered or at which the
Mr. Ryan, Mr. Christian, Ms. Olson Bourland, Mr. Butcher, Mr.
purchaser of the item takes possession.
Harris, and Mr. Kroll commented that the proposed provisions
regarding Internet orders violate the Internet Tax Freedom Act In new subparagraphs (B) and (C), the comptroller also explic-
because they discriminate against the Internet. itly states that the location of the seller in Texas does not affect
the determination of whether the seller is required to collect addi-
The provisions do not impose a tax on or discriminate against the
tional local use tax due. In new clauses (i) and (ii), the comptrol-
Internet, and therefore, do not violate the Internet Tax Freedom
ler provides two examples to illustrate when a seller is required
Act.
to collect additional local use taxes.
Mr. Ryan commented that sellers are at risk of class action law-
The comptroller adds new subsection (e) to include the provi-
suits for failing to notify their customers that they may pay a
sions in former subsection (b), relating to the effects of other law,
higher amount of tax depending on the method the customer
with minor non-substantive changes to the provisions as they ap-
uses to place the order. Mr. Ryan adds that sellers are also at
peared in former subsection (b).
risk if they are unable to distinguish between Internet orders and
other orders when calculating local taxes. The comptroller adds new subsection (f), to include the pro-
visions of former subsection (c), relating to tax rates without
Mr. Kelemen; Mr. Hillman; Mr. Olsen; Mr. Land; Ms. Hurlbert;
changing the provisions as they appeared in former subsection
Mr. Camareno; Mr. Voelker; Ms. May; Mr. Scott; Mr. Kennedy;
(c).
Ms. Olson Bourland; Mr. Durham; Mr. Harris; and Teresa Wiley,
on behalf of Sysco, Inc., requested that the comptroller delay The comptroller adds new subsection (g) to include the provi-
the implementation date to provide additional time for entities sions of former subsection (d), relating to jurisdictional bound-
to comply with the provisions on Internet orders and traveling aries, combined areas, and city tax imposed through strategic
salespersons. In response to these comments, the comptroller partnership agreements, with non-substantive changes made to
has deleted the proposed provision regarding Internet orders, the language on combined areas for ease of readability.
and delayed the implementation of subsections (b)(4) and (b)(5)
The comptroller adds new subsection (h) to include the provi-
regarding orders received by sales personnel when they are not
sions in former subsection (f) concerning places of business and
at a place of business of the seller and orders not received by
job sites crossed by local taxing jurisdiction boundaries with a
sales personnel to October 1, 2021.

ADOPTED RULES May 22, 2020 45 TexReg 3507

CP Ex-23-0022 of 0032
change to the title of the subsection to read places of business local use tax rate that will be in effect for that calendar year in
of the seller. No other changes were made to those provisions. the Texas Register.
The comptroller adds new subsection (i). Throughout new sub- New subparagraph (F) provides the calculation for the single lo-
section (i), the comptroller implements the Wayfair decision for cal use tax rate.
local use tax to address sales consummated in Texas and sales
New subparagraph (G) provides that a purchaser may request
consummated outside of Texas, including sales by remote sell-
a refund based on local use taxes paid in a calendar year. The
ers.
refund is for the difference between the single local use tax rate
In new paragraph (1), the comptroller adds the language found in paid by the purchaser and the amount the purchaser would have
former subsection (g)(1) with changes. The comptroller explicitly paid based on the combined tax rate for all applicable local use
states in paragraph (1) that the location of the seller in Texas taxes. Non-permitted purchasers may request a refund directly
does not affect the determination of whether the seller is required from the comptroller on an annual basis without having to meet
to collect additional local use tax due. the requirements in §3.325(a)(1) of this title (relating to Refunds
and Payments Under Protest) and the statute of limitation under
In new paragraph (2), the comptroller includes the language in
Tax Code, §111.104 (Refunds).
former subsection (g)(2) with changes. The comptroller makes
a cross-reference to new subsection (i)(3) of the amendment, New subparagraph (H) addresses marketplace providers and
which implements House Bill 2153. The comptroller also clarifies states that a marketplace provider may only use the combined
that new subsection (i)(2) applies to sales not consummated in tax rate of all applicable local use taxes when computing the
Texas. The amendment provides that local use tax is based upon amount of local use tax to collect and remit.
the location in this state to which the item is shipped or delivered
In new paragraph (4), the comptroller restates the language in
or at which the purchaser takes possession.
deleted subsection (g)(4) concerning purchasers responsible for
In new paragraph (3), the amendment addresses local use tax accruing and remitting local taxes if the seller fails to collect with-
for remote sellers and implements the single local use tax rate out any changes.
for remote sellers enacted in House Bill 2153.
In new paragraph (5), the comptroller restates the language in
New subparagraph (A)(i) provides that a remote seller is required deleted subsection (g)(5) concerning local tax due on the sales
to collect and remit using the combined rate of all applicable local price of a taxable item without any changes.
use taxes based on the location to which the item is shipped
The comptroller adds new paragraph (6) to relieve a purchaser
or delivered or at which the purchaser takes possession. New
of liability for additional use tax if the purchaser pays local use
subparagraph (A)(ii) provides that at the remote seller's election,
tax using the single local use tax rate to an eligible remote seller
the remote seller may elect to use the single local use tax rate
electing to use the single local use tax rate. Paragraph (6) also
published in the Texas Register.
requires the purchaser to verify on the comptroller's website that
New subparagraph (B) addresses the single local use tax rate a remote seller has elected to use the single local use tax rate.
when a remote seller stores tangible personal property in Texas Moreover, paragraph (6) provides that if a remote seller is not
to be sold on a marketplace. The comptroller recognizes that a listed on the comptroller's website, the purchaser will be liable
remote seller selling tangible personal property on a marketplace for additional use tax due.
may not have control of where their tangible personal property
Mr. Edmonson commented that TechNet believes that para-
is stored. Therefore, to ease the burden on a remote seller, this
graph (6) will create an undue burden on the buyer to verify if the
provision allows the remote seller to elect the single local use tax
remote seller is registered with the comptroller. He commented
rate.
that the state should pursue the seller, not the buyer. The comp-
New subparagraph (C) addresses notice requirements a remote troller declines to make a revision based on this comment.
seller sends to the comptroller of its election and revocation of
The comptroller deletes existing subsection (b), relating to the
election to use the single local use tax rate. New clause (i) pro-
effect of other law, as this information is contained in new sub-
vides that a remote seller must notify the comptroller of its elec-
section (e) with minor, non-substantive changes.
tion to use the single local use tax rate on a form prescribed by
the comptroller or may notify the comptroller of the election on its The comptroller deletes existing subsection (c) relating to tax
use tax permit application form before being able to use the sin- rates, as that information is contained in new subsection (f) with-
gle local use tax rate. New clause (i) also requires that a remote out change.
seller use the single local use tax rate for all its sales of taxable
The comptroller deletes existing subsection (d) relating to ju-
items until the remote seller revokes the election in writing to the
risdictional boundaries, combined areas, and city tax imposed
comptroller. New clause (ii) addresses the requirements for a
through strategic partnership agreements, as this information is
remote seller to revoke its election to collect the single local use
contained in new subsection (g) with non-substantive changes
tax rate by filing a form prescribed by the comptroller by October
made to the provisions on combined areas for ease of readabil-
1 of the calendar year.
ity.
New subparagraph (D)(i) provides the initial single local use tax
The comptroller deletes existing subsection (e) relating to place
rate of 1.75%, which is in effect for the period beginning October
of business - special definitions, as this information is contained
1, 2019, and ending December 31, 2019. Subparagraph (D)(ii)
in new subsection (b) with changes.
provides the initial single local use tax rate of 1.75%, which is
in effect for the period beginning January 1, 2020, and ending The comptroller deletes existing subsection (f) concerning
December 31, 2020. places of business and job sites crossed by local taxing ju-
risdiction boundaries, as this information is contained in new
New subparagraph (E) provides that before the beginning of a
calendar year, the comptroller will publish notice of the single

45 TexReg 3508 May 22, 2020 Texas Register

CP Ex-23-0023 of 0032
subsection (h) with a change only to the title of the subsection §3.334. Local Sales and Use Taxes.
to read places of business of the seller. (a) Definitions. The following words and terms, when used
The comptroller deletes subsection (g) concerning sellers' and in this section, shall have the following meanings, unless the context
purchasers' responsibilities for collecting or accruing local taxes, clearly indicates otherwise.
as those provisions, except for subsection (g)(3), which was (1) Cable system--The system through which a cable ser-
deleted in its entirety, are contained in new subsection (i) with vice provider delivers cable television or bundled cable service, as
changes. those terms are defined in §3.313 of this title (relating to Cable Televi-
The comptroller deletes existing subsection (h) concerning local sion Service and Bundled Cable Service).
sales tax, as this information is contained in new subsection (c) (2) City--An incorporated city, municipality, town, or vil-
with changes. lage.
The comptroller deletes existing subsection (i) concerning use (3) City sales and use tax--The tax authorized under Tax
tax, as this information is contained in new subsection (d) with Code, §321.101(a), including the additional municipal sales and use
changes. tax authorized under Tax Code, §321.101(b), the municipal sales and
The comptroller adds new subsection (k)(5) to implement House use tax for street maintenance authorized under Tax Code, §327.003,
Bill 1525, to address sales of taxable items through marketplace the Type A Development Corporation sales and use tax authorized un-
providers. Subsequent paragraphs are renumbered. der Local Government Code, §504.251, the Type B Development Cor-
poration sales and use tax authorized under Local Government Code,
Mr. Kroll commented that House Bill 1525 could be interpreted §505.251, a sports and community venue project sales and use tax
to only source third-party marketplace seller transactions to des- adopted by a city under Local Government Code, §334.081, and a mu-
tination. He commented that the provision should be amended nicipal development corporation sales and use tax adopted by a city un-
to ensure that all taxable sales made via a marketplace, either der Local Government Code, §379A.081. The term does not include
by the marketplace provider itself or on behalf of a marketplace the fire control, prevention, and emergency medical services district
seller, should be sourced to destination. He suggested language sales and use tax authorized under Tax Code, §321.106, or the munic-
to that effect. The comptroller declines to make this revision be- ipal crime control and prevention district sales and use tax authorized
cause House Bill 1525 is specific to the sales made by market- under Tax Code, §321.108.
place providers on behalf of marketplace sellers. It does not
provide for sourcing on the marketplace provider's own sales. (4) Comptroller's website--The agency's website concern-
Additionally, amending §3.286 of this title in this section is not ing local taxes located at: https://comptroller.texas.gov/taxes/sales/.
appropriate. (5) County sales and use tax--The tax authorized under
The provisions related to remote sellers, the single local use tax Tax Code, §323.101, including a sports and community venue project
rate, and marketplace providers took effect October 1, 2019. sales and use tax adopted by a county under Local Government Code,
§334.081. The term does not include the county health services sales
Joe Strong, on behalf of Microsoft, made comments pertaining and use tax authorized under Tax Code, §324.021, the county landfill
to marketplace providers and marketplace sellers, registration, and criminal detention center sales and use tax authorized under Tax
good faith, and information requirements, which are addressed Code, §325.021, or the crime control and prevention district sales and
in §3.286 of this title and not this amendment. Mr. Howard and use tax authorized under Tax Code, §323.105.
Ms. Howard commented that they strongly disagree with the
amendment. (6) Drop shipment--A transaction in which an order is re-
ceived by a seller at one location, but the item purchased is shipped by
Mr. Pannell requested guidance on the information that will be the seller from another location, or is shipped by the seller's third-party
audited by the comptroller and the penalties for incorrect appli- supplier, directly to a location designated by the purchaser.
cation of local tax. Mr. Kroll commented that the comptroller
does not have any training or audit materials for this rule, so it (7) Engaged in business--This term has the meaning given
appears businesses will not face compliance scrutiny under au- in §3.286 of this title (relating to Seller's and Purchaser's Responsibil-
dit. The comptroller declines to make revisions based on this ities).
comment because this section addresses local sales and use (8) Extraterritorial jurisdiction--An unincorporated area
tax administration. The comptroller will provide audit guidelines that is contiguous to the corporate boundaries of a city as defined in
regarding this section in the appropriate audit materials. Local Government Code, §42.021.
Ms. May urged that the amendment continue to designate pur- (9) Fulfill--To complete an order by transferring a taxable
chasing offices as places of business if it is deemed that they item directly to a purchaser at a Texas location, or to ship or deliver a
do not exist solely to avoid or rebate sales tax. The comptroller taxable item to a location in Texas designated by the purchaser. The
did not make any amendments to the definition of purchasing of- term does not include tracking an order, determining shipping costs,
fices. managing inventory, or other activities that do not involve the transfer,
The comptroller adopts this amendment under Tax Code, shipment, or delivery of a taxable item to the purchaser or a location
§111.002 (Comptroller's Rules; Compliance; Forfeiture), which designated by the purchaser.
provides the comptroller with the authority to amend rules to (10) Itinerant vendor--A seller who travels to various loca-
reflect changes in the constitution or laws of the United States tions for the purpose of receiving orders and making sales of taxable
and judicial interpretations thereof. items and who has no place of business in this state. A person who
The amendments implement Tax Code, §§151.0595 (Single Lo- sells items through vending machines is also an itinerant vendor. A
cal Tax Rate for Remote Sellers), 321.203, and 323.203, and salesperson that operates out of a place of business in this state is not
South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (June 21, 2018). an itinerant vendor.
(11) Kiosk--A small stand-alone area or structure:

ADOPTED RULES May 22, 2020 45 TexReg 3509

CP Ex-23-0024 of 0032
(A) that is used solely to display merchandise or to sub- for the purpose of buying and selling taxable goods to be used or con-
mit orders for taxable items from a data entry device, or both; sumed by the retail or commercial business.
(B) that is located entirely within a location that is a (18) Remote Seller--As defined in §3.286 of this title, a re-
place of business of another seller, such as a department store or shop- mote seller is a seller engaged in business in this state whose only ac-
ping mall; and tivity in the state is:
(C) at which taxable items are not available for imme- (A) engaging in regular or systematic solicitation of
diate delivery to a purchaser. sales of taxable items in this state by the distribution of catalogs,
periodicals, advertising flyers, or other advertising, by means of print,
(12) Local taxes--Sales and use taxes imposed by any local
radio, or television media, or by mail, telegraphy, telephone, computer
taxing jurisdiction.
data base, cable, optic, microwave, or other communication system
(13) Local taxing jurisdiction--Any of the following: for the purpose of effecting sales of taxable items; or
(A) a city that imposes sales and use tax as provided (B) soliciting orders for taxable items by mail or
under paragraph (3) of this subsection; through other media including the Internet or other media that may be
developed in the future.
(B) a county that imposes sales and use tax as provided
under paragraph (5) of this subsection; (19) Seller--This term has the meaning given in §3.286 of
this title and also refers to any agent or employee of the seller.
(C) a special purpose district created under the Special
District Local Laws Code or other provisions of Texas law that is autho- (20) Special purpose district--A local governmental entity
rized to impose sales and use tax by the Tax Code or other provisions authorized by the Texas legislature for a specific purpose, such as crime
of Texas law and as governed by the provisions of Tax Code, Chapters control, a local library, emergency services, county health services, or
321 or 323 and other provisions of Texas law; or a county landfill and criminal detention center.
(D) a transit authority that imposes sales and use tax as (21) Storage--This term has the meaning given in §3.346
authorized by Transportation Code, Chapters, 451, 452, 453, 457, or of this title (relating to Use Tax).
460 and governed by the provisions of Tax Code, Chapter, 322.
(22) Temporary place of business of the seller--A location
(14) Marketplace provider--This term has the meaning operated by a seller for a limited period of time for the purpose of sell-
given in §3.286 of this title. ing and receiving orders for taxable items and where the seller has in-
ventory available for immediate delivery to a purchaser. For example,
(15) Order placed in person--An order placed by a pur-
a person who rents a booth at a weekend craft fair or art show to sell
chaser with the seller while physically present at the seller's place of
and take orders for jewelry, or a person who maintains a facility at a
business regardless of how the seller subsequently enters the order.
job site to rent tools and equipment to a contractor during the construc-
(16) Place of business of the seller - general definition--An tion of real property, has established a temporary place of business. A
established outlet, office, or location operated by a seller for the purpose temporary place of business of the seller includes a sale outside of a
of selling taxable items to those other than employees, independent distribution center, manufacturing plant, storage yard, warehouse, or
contractors, and natural persons affiliated with the seller, where sales similar facility of the seller in a parking lot or similar space sharing
personnel of the seller receive three or more orders for taxable items the same physical address as the facility but not within the walls of the
during the calendar year. The term does not include a computer server, facility.
Internet protocol address, domain name, website, or software applica-
(23) Transit authority--A metropolitan rapid transit author-
tion. Additional criteria for determining when a location is a place of
ity (MTA), advanced transportation district (ATD), regional or subre-
business of the seller are provided in subsection (b) of this section for
gional transportation authority (RTA), city transit department (CTD),
distribution centers, manufacturing plants, storage yards, warehouses
county transit authority (CTA), regional mobility authority (RMA) or
and similar facilities; kiosks; and purchasing offices. An outlet, of-
coordinated county transportation authority created under Transporta-
fice, facility, or any location that contracts with a retail or commercial
tion Code, Chapters 370, 451, 452, 453, 457, or 460.
business to process for that business invoices, purchase orders, bills
of lading, or other equivalent records onto which sales tax is added, in- (24) Two percent cap--A reference to the general rule that,
cluding an office operated for the purpose of buying and selling taxable except as otherwise provided by Texas law and as explained in this
goods to be used or consumed by the retail or commercial business, is section, a seller cannot collect, and a purchaser is not obligated to pay,
not a place of business of the seller if the comptroller determines that more than 2.0% of the sales price of a taxable item in total local sales
the outlet, office, facility, or location functions or exists to avoid the and use taxes for all local taxing jurisdictions.
tax legally due under Tax Code, Chapters 321, 322, and 323 or exists
(25) Use--This term has the meaning given in §3.346 of
solely to rebate a portion of the tax imposed by those chapters to the
this title.
contracting business. An outlet, office, facility, or location does not ex-
ist to avoid the tax legally due under Tax Code, Chapters 321, 322, and (26) Use tax--A tax imposed on the storage, use or other
323 or solely to rebate a portion of the tax imposed by those chapters consumption of a taxable item in this state.
if the outlet, office, facility, or location provides significant business
(b) Determining the place of business of a seller.
services, beyond processing invoices, to the contracting business, in-
cluding logistics management, purchasing, inventory control, or other (1) Distribution centers, manufacturing plants, storage
vital business services. yards, warehouses, and similar facilities.
(17) Purchasing office--An outlet, office, facility, or any lo- (A) A distribution center, manufacturing plant, storage
cation that contracts with a retail or commercial business to process for yard, warehouse, or similar facility operated by a seller for the purpose
that business invoices, purchase orders, bills of lading, or other equiva- of selling taxable items where sales personnel of the seller receive three
lent records onto which sales tax is added, including an office operated or more orders for taxable items during the calendar year from persons

45 TexReg 3510 May 22, 2020 Texas Register

CP Ex-23-0025 of 0032
other than employees, independent contractors, and natural persons af- and these locations will be treated as places of business of the seller for
filiated with the seller is a place of business of the seller. purposes of subsection (c) of this section.
(B) If a location that is a place of business of the seller, (5) Orders not received by sales personnel, including or-
such as a sales office, is in the same building as a distribution center, ders received by a shopping website or shopping software application.
manufacturing plant, storage yard, warehouse, or similar facility op- Effective October 1, 2021, these orders are received at locations that
erated by a seller, then the entire facility is a place of business of the are not places of business of the seller.
seller.
(c) Local sales tax - Consummation of sale - determining the
(2) Kiosks. A kiosk is not a place of business of the seller local taxing jurisdictions to which sales tax is due. Except for the spe-
for the purpose of determining where a sale is consummated for local cial rules applicable to remote sellers in subsection (i)(3) of this sec-
tax purposes. A seller who owns or operates a kiosk in Texas is, how- tion, direct payment permit purchases in subsection (j) of this section,
ever, engaged in business in this state as provided in §3.286 of this title. and certain taxable items, including taxable items sold by a market-
place provider, as provided in subsection (k) of this section, each sale
(3) Purchasing offices.
of a taxable item is consummated at the location indicated by the pro-
(A) A purchasing office is not a place of business of the visions of this subsection. The following rules, taken from Tax Code,
seller if the purchasing office exists solely to rebate a portion of the lo- §321.203 and §323.203, apply to all sellers engaged in business in this
cal sales and use tax imposed by Tax Code, Chapters 321, 322, or 323 state, regardless of whether they have no place of business in Texas, a
to a business with which it contracts; or if the purchasing office func- single place of business in Texas, or multiple places of business in the
tions or exists to avoid the tax legally due under Tax Code, Chapters state.
321, 322, or 323. A purchasing office does not exist solely to rebate
(1) Consummation of sale - order received at a place of
a portion of the local sales and use tax or to avoid the tax legally due
business of the seller in Texas.
under Tax Code, Chapters 321, 322, or 323 if the purchasing office pro-
vides significant business services to the contracting business beyond (A) Order placed in person. Except as provided by
processing invoices, including logistics management, purchasing, in- paragraph (3) of this subsection, when an order for a taxable item is
ventory control, or other vital business services. placed in person at a seller's place of business in Texas, including at a
temporary place of business of the seller in Texas, the sale of that item
(B) In making a determination under subparagraph (A)
is consummated at that place of business of the seller, regardless of
of this paragraph, as to whether a purchasing office provides signif-
the location where the order is fulfilled.
icant business services to the contracting business beyond processing
invoices, the comptroller will compare the total value of the other busi- (B) Order not placed in person.
ness services to the value of processing invoices. If the total value of
(i) Order fulfilled at a place of business of the seller
the other business services, including logistics management, purchas-
in Texas. When an order is received at a place of business of the seller
ing, inventory control, or other vital business services, is less than the
in Texas and is fulfilled at a place of business of the seller in Texas, the
value of the service to process invoices, then the purchasing office will
sale is consummated at the place of business where the order is fulfilled.
be presumed not to be a place of business of the seller.
(ii) Order not fulfilled at a place of business of the
(C) If the comptroller determines that a purchasing of-
seller in Texas. When an order is received at a place of business of the
fice is not a place of business of the seller, the sale of any taxable item
seller in Texas and is fulfilled at a location that is not a place of business
is deemed to be consummated at the place of business of the seller from
of the seller in Texas, the sale is consummated at the place of business
whom the purchasing office purchased the taxable item for resale and
where the order is received.
local sales and use taxes are due according to the following rules.
(2) Consummation of sale - order not received at a place of
(i) When taxable items are purchased from a Texas
business of the seller in Texas.
seller, local sales taxes are due based on the location of the seller's place
of business where the sale is deemed to be consummated, as determined (A) Order fulfilled at a place of business of the seller
in accordance with subsection (c) of this section. in Texas. When an order is received at a location that is not a place
of business of the seller in Texas or is received outside of Texas, and
(ii) When the sale of a taxable item is deemed to be
is fulfilled from a place of business of the seller in Texas, the sale is
consummated at a location outside of this state, local use tax is due
consummated at the place of business where the order is fulfilled.
based on the location where the items are first stored, used or consumed
by the entity that contracted with the purchasing office in accordance (B) Order not fulfilled from a place of business of the
with subsection (d) of this section. seller in Texas.
(4) Orders received by sales personnel who are not at a (i) Order fulfilled in Texas. When an order is re-
place of business of the seller in Texas when they receive the order, ceived at a location that is not a place of business of the seller in Texas
including orders received by mail, telephone, including Voice over In- and is fulfilled from a location in Texas that is not a place of business
ternet Protocol and cellular phone calls, facsimile, and email. This of the seller, the sale is consummated at the location in Texas to which
type of order is treated as being received at the location from which the order is shipped or delivered, or at which the purchaser of the item
the salesperson operates, that is, the principal fixed location where the takes possession.
salesperson conducts work-related activities. The location from which
(ii) Order not fulfilled in Texas. When an order is
a salesperson operates will be a place of business of the seller only if
received by a seller at a location outside of Texas or by a remote seller,
the location meets the definition of a "place of business of a seller" in
and is fulfilled from a location outside of Texas, the sale is not consum-
subsection (a)(16) of this section on its own, without regard to the or-
mated in Texas. However, local use tax is due based upon the location
ders imputed to that location by this paragraph. Orders received prior
in this state to which the item is shipped or delivered or at which the
to October 1, 2021, may also be treated as being received at the out-
purchaser of the item takes possession as provided in subsection (d) of
let, office, or location operated by the seller that serves as a base of
this section. Except as provided in subsection (i)(3) of this section, a
operations or that provides administrative support to the salesperson,

ADOPTED RULES May 22, 2020 45 TexReg 3511

CP Ex-23-0026 of 0032
remote seller required to collect state use tax under §3.286(b)(2) of this (B) If a local use tax cannot be collected or accrued at
title must also collect local use tax based on the location to which the its full rate without exceeding the two percent cap, the seller cannot
item is shipped or delivered or at which the purchaser of the item takes collect it, or any portion of it, and the purchaser is not responsible for
possession. accruing it.
(3) Exception for qualifying economic development (C) If a seller collects a local sales tax on an item, or a
agreements entered into before January 1, 2009, pursuant to Tax Code, purchaser accrues a local sales tax on an item, a use tax for the same
§321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is type of jurisdiction is not due on the same item. For example, after a
effective until September 1, 2024. If applicable, the local sales tax due city sales tax has been collected or accrued for an item, no use tax is
on the sale of a taxable item is based on the location of the qualifying due to that same or a different city on that item, but use tax may be due
warehouse, which is a place of business of the seller, from which the to a county, special purpose district, or transit authority. Similarly, if
item is shipped or delivered or at which the purchaser of the item takes one or more special purpose district sales taxes have been collected or
possession. accrued for an item, no special purpose district use tax is due on that
item, and if one or more transit authority sales taxes have been collected
(4) Local sales taxes are due to each local taxing jurisdic-
or accrued for an item, no transit authority use tax is due on that item.
tion with sales tax in effect where the sale is consummated. Local use
tax may also be due if the total amount of local sales taxes due does not (D) Collection or accrual of use tax for multiple special
reach the two percent cap, and the item purchased is shipped or deliv- purpose districts. If more than one special purpose district use tax is in
ered to a location in one or more different local taxing jurisdictions, as effect at the location where use of an item occurs, the special purpose
provided in subsection (d) of this section. district taxes are due in the order of their effective dates, beginning
with the earliest effective date, until the two percent cap is met. The
(5) Multiple special purpose district taxes, multiple transit
effective dates of all special purpose district taxes are available on the
authority sales taxes, or a combination of the two may apply to a single
comptroller's website. However, if the collection or accrual of use tax
transaction. If the sale of a taxable item is consummated at a location
for the district with the earliest effective date would exceed the two
within the boundaries of multiple special purpose districts or transit
percent cap, the tax for that district is not due and the seller or purchaser
authorities, local sales tax is owed to each of the jurisdictions in effect
should determine, following the criteria in subparagraphs (A) - (C) of
at that location. For example, a place of business of the seller located in
this paragraph, whether use tax is due for the district that next became
the city of San Antonio is within the boundaries of both the San Antonio
effective.
Advanced Transportation District and the San Antonio Metropolitan
Transit Authority, and the seller is required to collect sales tax for both (i) If the competing special purpose district taxes be-
transit authorities. Similarly, a place of business of the seller in Flower came effective on the same date, the special purpose district taxes are
Mound is located within the boundaries of two special purpose districts, due in the order of the earliest date for which the election in which the
the Flower Mound Crime Control District and the Flower Mound Fire district residents authorized the imposition of sales and use tax by the
Control District, and the seller is responsible for collecting sales tax for district was held.
both special purpose districts.
(ii) If the elections to impose the local taxes were
(6) Itinerant vendors; vending machines. held on the same date, the special purpose district taxes are due in the
order of the earliest date for which the enabling legislation under which
(A) Itinerant vendors. Sales made by itinerant vendors
each district was created became effective.
are consummated at, and itinerant vendors must collect sales tax based
upon, the location where the item is delivered or at which the purchaser (E) Collection or accrual of use tax for multiple transit
of the item takes possession. Itinerant vendors do not have any respon- authorities. If more than one transit authority use tax is in effect at
sibility to collect use tax. the location where use of an item occurs, and the two percent cap has
not been met, the transit authority taxes are due in the order of their
(B) Vending machines. Sales of taxable items made
effective dates, beginning with the earliest effective date, until the two
from a vending machine are consummated at the location of the vend-
percent cap is met. The effective dates of all transit authority taxes
ing machine. See §3.293 of this title (relating to Food; Food Prod-
are available on the comptroller's website. However, if the collection
ucts; Meals; Food Service) for more information about vending ma-
or accrual of use tax for the authority with the earliest effective date
chine sales.
would exceed the two percent cap, the tax for that authority is not due
(d) Local use tax. The provisions addressing the imposition and the seller or purchaser should determine, following the criteria in
of state use tax in §3.346 of this title also apply to the imposition of subparagraphs (A) - (D) of this paragraph, whether use tax is due for
local use tax. For example, consistent with §3.346(e) of this title, all the authority that next became effective.
taxable items that are shipped or delivered to a location in this state that
(i) If the competing transit authorities became effec-
is within the boundaries of a local taxing jurisdiction are presumed to
tive on the same date, the transit authority taxes are due in the order of
have been purchased for use in that local taxing jurisdiction as well as
the earliest date for which the election in which the authority residents
presumed to have been purchased for use in the state.
authorized the imposition of sales and use tax by the authority was held.
(1) General rules.
(ii) If the elections to impose local taxes were held
(A) When local use taxes are due in addition to local on the same date, the transit authority use taxes are due in the order of
sales taxes as provided by subsection (c) of this section, all applicable the earliest date for which the enabling legislation under which each
use taxes must be collected or accrued in the following order until the authority was created became effective.
two percent cap is reached: city, county, special purpose district, and
(2) General use tax rules applied to specific situations. The
transit authority. If more than one special purpose district use tax is due,
following fact patterns explain how local use tax is to be collected or
all such taxes are to be collected or accrued before any transit authority
accrued and remitted to the comptroller based on, and subject to, the
use tax is collected or accrued. See subparagraphs (D) and (E) of this
general rules in paragraph (1) of this subsection.
paragraph.

45 TexReg 3512 May 22, 2020 Texas Register

CP Ex-23-0027 of 0032
(A) Sale consummated outside the state, item delivered subsection, are due based upon the location where the items are shipped
from outside the state or from a location in Texas that is not operated by or delivered or at which the purchaser of the item takes possession.
the seller - local use tax due. Except as provided in subsection (i)(3) of
(e) Effect of other law.
this section, if a sale is consummated outside of this state according to
the provisions of subsection (c) of this section, and the item purchased (1) Tax Code, Title 2, Subtitles A (General Provisions) and
is either shipped or delivered to a location in this state as designated B (Enforcement and Collection), Tax Code, Chapter 141 (Multistate
by the purchaser from a location outside of the state, or if the order Tax Compact) and Tax Code, Chapter 151 (Limited Sales, Excise, and
is drop shipped directly to the purchaser from a third-party supplier, Use Tax) apply to transactions involving local taxes. Related sections
local use tax is owed based upon the location in this state to which of this title and comptroller rulings shall also apply with respect to local
the order is shipped or delivered or at which the purchaser of the item taxes. This includes authorities such as court cases and federal law
takes possession. The seller is responsible for collecting the local use that affect whether an item is taxable or is excluded or exempt from
tax due on the sale. If the seller does not collect the local use taxes due taxation.
on the sale, the purchaser is responsible for accruing such taxes and
(2) Permits, exemption certificates, and resale certificates
remitting them directly to the comptroller according to the provisions in
required by Tax Code, Chapter 151, shall also satisfy the requirements
paragraph (1) of this subsection. For example, if an order for a taxable
for collecting and remitting local taxes, unless otherwise indicated by
item is received by a seller at a location outside of Texas, and the order
this section or other sections of this title. For example, see subsection
is shipped to the purchaser from a location outside of the state, local
(n) of this section concerning prior contract exemptions.
use tax is due based upon the location to which the order is shipped or
delivered or at which the purchaser of the item takes possession. (3) Any provisions in this section or other sections of this
title related to a seller's responsibilities for collecting and remitting lo-
(B) Sale consummated in Texas outside a local taxing
cal taxes to the comptroller shall also apply to a purchaser if the seller
jurisdiction, item delivered into one or more local taxing jurisdictions -
does not collect local taxes that are due. The comptroller may proceed
local use tax due. If a sale is consummated at a location in Texas that is
against the seller or purchaser for the local tax owed by either.
outside of the boundaries of any local taxing jurisdiction according to
the provisions of subsection (c) of this section, and the order is shipped (f) Tax rates. Except as otherwise provided by law, no local
or delivered to the purchaser at a location in this state that is within the governmental entity may adopt or increase a sales and use tax if, as a
boundaries of one or more local taxing jurisdictions, local use tax is result of the adoption or increase of the tax, the combined rate of all
due based on the location to which the items are shipped or delivered sales and use taxes imposed by local taxing jurisdictions having terri-
or at which the purchaser of the item takes possession. The seller is tory in the local governmental entity would exceed 2.0% at any location
responsible for collecting the local use taxes due on the sale, regardless within the boundaries of the local governmental entity's jurisdiction.
of the location of the seller in Texas. If the seller fails to collect any The following are the local tax rates that may be adopted.
local use taxes due, the purchaser is responsible for accruing such taxes
(1) Cities. Cities may impose sales and use tax at a rate of
and remitting them directly to the comptroller.
up to 2.0%.
(C) Sale consummated in any local taxing jurisdictions
(2) Counties. Counties may impose sales and use tax at
imposing less than 2.0% in total local taxes - local sales taxes and use
rates ranging from 0.5% to 1.5%.
taxes due. If a sale is consummated at a location in Texas where the
total local sales tax rate imposed by the taxing jurisdictions in effect at (3) Special purpose districts. Special purpose districts may
that location does not equal 2.0% according to the provisions of sub- impose sales and use tax at rates ranging from 0.125% to 2.0%.
section (c) of this section, and the item is shipped or delivered to the
(4) Transit authorities. Transit authorities may impose
purchaser at a location in this state that is inside the boundaries of a
sales and use tax at rates ranging from 0.25% to 1.0%.
different local taxing jurisdiction, additional local use tax may be due
based on the location to which the order is shipped or delivered or at (g) Jurisdictional boundaries, combined areas, and city tax im-
which the purchaser of the item takes possession, subject to the two posed through strategic partnership agreements.
percent cap. The seller is responsible for collecting any additional lo-
(1) Jurisdictional boundaries.
cal use taxes due on the sale, regardless of the location of the seller in
Texas. See subsection (i) of this section. If the seller fails to collect the (A) City boundaries. City taxing jurisdictional bound-
additional local use taxes due, the purchaser is responsible for accruing aries cannot overlap one another and a city cannot impose a sales and
such taxes and remitting them directly to the comptroller. use tax in an area that is already within the jurisdiction of another city.
(i) Example one - if an order is received in person at (B) County boundaries. County tax applies to all loca-
a place of business of the seller, such that the sale is consummated at tions within that county.
the location where the order is received as provided under subsection
(C) Special purpose district and transit authority bound-
(c)(1)(A) of this section, and the local sales tax due on the sale does
aries. Special purpose districts and transit authorities may cross or
not meet the two percent cap, additional local use taxes are due based
share boundaries with other local taxing jurisdictions and may encom-
on the location to which the order is shipped or delivered or at which
pass, in whole or in part, other local taxing jurisdictions, including
the purchaser of the item takes possession, subject to the provisions in
cities and counties. A geographic location or address in this state may
paragraph (1) of this subsection.
lie within the boundaries of more than one special purpose district or
(ii) Example two - if a seller receives an order for a more than one transit authority.
taxable item at a seller's place of business in Texas, and the seller ships
(D) Extraterritorial jurisdictions. Except as otherwise
or delivers the item from an out-of-state location to a location in this
provided by paragraph (3) of this subsection concerning strategic part-
state as designated by the purchaser, local sales tax is due based upon
nership agreements and subsection (l)(5) of this section concerning the
the location of the place of business of the seller where the order is
City of El Paso and Fort Bliss, city sales and use tax does not apply to
received. If the local sales tax due on the item does not meet the two
taxable sales that are consummated outside the boundaries of the city,
percent cap, use taxes, subject to the provisions in paragraph (1) of this
including sales made in a city's extraterritorial jurisdiction. However,

ADOPTED RULES May 22, 2020 45 TexReg 3513

CP Ex-23-0028 of 0032
an extraterritorial jurisdiction may lie within the boundaries of a spe- boundaries of one or more local taxing jurisdictions, the local taxes due
cial purpose district, transit authority, county, or any combination of on any separately stated charges for taxable items incorporated into the
the three, and the sales and use taxes for those jurisdictions would ap- real property must be allocated to the local taxing jurisdictions based on
ply to those sales. the total square footage of the real property improvement located within
each jurisdiction, including the square footage of any standalone struc-
(2) Combined areas. A combined area is an area where the
tures that are part of the construction, repair, or remodeling project.
boundaries of a city overlap the boundaries of one or more other local
For more information about tax due on materials used at residential
taxing jurisdictions as a result of an annexation of additional territory
and new construction job sites, refer to §3.291 of this title (relating to
by the city, and where, as the result of the imposition of the city tax
Contractors).
in the area in addition to the local taxes imposed by the existing tax-
ing jurisdictions, the combined local tax rate would exceed 2.0%. The (B) Nonresidential real property repair and improve-
comptroller shall make accommodations to maintain a 2.0% rate in any ment. When taxable services are performed to repair, remodel, or
combined area by distributing the 2.0% tax revenue generated in these restore nonresidential real property, including a pipeline, transmission
combined areas to the local taxing jurisdictions located in the combined line, or parking lot, that is crossed by the boundaries of one or more
areas as provided in Tax Code, §321.102 or Health and Safety Code, local taxing jurisdictions, the local taxes due on the taxable services,
§775.0754. Combined areas are identified on the comptroller's web- including materials and any other charges connected to the services
site. Sellers engaged in transactions on which local sales or use taxes performed, must be allocated among the local taxing jurisdictions
are due in a combined area, or persons who must self-accrue and re- based upon the total mileage or square footage, as appropriate, of the
mit tax directly to the comptroller, must use the combined area local repair, remodeling, or restoration project located in each jurisdiction.
code when reporting the tax rather than the codes for the individual For more information about tax due on materials used at nonresidential
city, county, special purpose districts, or transit authorities that make real property repair and remodeling job sites, refer to §3.357 of this
up the combined area. title (relating to Nonresidential Real Property Repair, Remodeling,
and Restoration; Real Property Maintenance).
(3) City tax imposed through strategic partnership agree-
ments. (i) Sellers' and purchasers' responsibilities for collecting or ac-
cruing local taxes.
(A) The governing bodies of a district, as defined in
Local Government Code, §43.0751, and a city may enter into a lim- (1) Sale consummated in Texas; seller responsible for col-
ited-purpose annexation agreement known as a strategic partnership lecting local sales taxes and applicable local use taxes. When a sale
agreement. Under this agreement, the city may impose sales and use of a taxable item is consummated at a location in Texas as provided by
tax within all or part of the boundaries of a district. Areas within a dis- subsection (c) of this section, the seller must collect each local sales tax
trict that are annexed for this limited purpose are treated as though they in effect at the location. If the total rate of local sales tax due on the sale
are within the boundaries of the city for purposes of city sales and use does not reach the two percent cap, and the seller ships or delivers the
tax. item into another local taxing jurisdiction, then the seller is required to
collect additional local use taxes due, if any, based on the location to
(B) Counties, transit authorities, and special purpose
which the item is shipped or delivered or at which the purchaser of the
districts may not enter into strategic partnership agreements. Sales
item takes possession, regardless of the location of the seller in Texas.
and use taxes imposed by those taxing jurisdictions do not apply in
For more information regarding local use taxes, refer to subsection (d)
the limited-purpose annexed area as part of a strategic partnership
of this section.
agreement between a city and an authorized district. However, a
county, special purpose district, or transit authority sales and use tax, or (2) Out-of-state sale; seller engaged in business in Texas.
any combination of these three types of taxes, may apply at locations Except as provided in paragraph (3) of this subsection, when a sale is
included in a strategic partnership agreement between a city and an not consummated in Texas, a seller who is engaged in business in this
authorized district if the tax is imposed in that area by the applicable state is required to collect and remit local use taxes due, if any, on orders
jurisdiction as allowed under its own controlling authorities. of taxable items shipped or delivered at the direction of the purchaser
into a local taxing jurisdiction in this state based upon the location in
(C) Prior to September 1, 2011, the term "district" was
this state to which the item is shipped or delivered or at which the
defined in Local Government Code, §43.0751 as a municipal utility
purchaser of the item takes possession as provided in subsection (d)
district or a water control and improvement district. The definition
of this section.
was amended effective September 1, 2011, to mean a conservation and
reclamation district operating under Water Code, Chapter 49. (3) Local use tax rate for remote sellers.
(h) Places of business of the seller and job sites crossed by (A) A remote seller required to collect and remit one or
local taxing jurisdiction boundaries. more local use taxes in connection with a sale of a taxable item must
compute the amount using:
(1) Places of business of the seller crossed by local taxing
jurisdiction boundaries. If a place of business of the seller is crossed by (i) the combined tax rate of all applicable local use
one or more local taxing jurisdiction boundaries so that a portion of the taxes based on the location to which the item is shipped or delivered or
place of business of the seller is located within a taxing jurisdiction and at which the purchaser of the item takes possession; or
the remainder of the place of business of the seller lies outside of the
(ii) at the remote seller's election, the single local use
taxing jurisdiction, tax is due to the local taxing jurisdictions in which
tax rate published in the Texas Register.
the sales office is located. If there is no sales office, sales tax is due to
the local taxing jurisdictions in which any cash registers are located. (B) A remote seller that is storing tangible personal
property in Texas to be used for fulfillment at a facility of a market-
(2) Job sites.
place provider that has certified that it will assume the rights and duties
(A) Residential repair and remodeling; new construc- of a seller with respect to the tangible personal property, as provided
tion of an improvement to realty. When a contractor is improving real for in §3.286 of this title, may elect the single local use tax rate under
property under a separated contract, and the job site is crossed by the subparagraph (A)(ii) of this paragraph.

45 TexReg 3514 May 22, 2020 Texas Register

CP Ex-23-0029 of 0032
(C) Notice to the comptroller of election and revocation to collect and remit using the combined tax rate of all applicable local
of election. use taxes.
(i) Before using the single local use tax rate, a re- (4) Purchaser responsible for accruing and remitting local
mote seller must notify the comptroller of its election using a form pre- taxes if seller fails to collect.
scribed by the comptroller. A remote seller may also notify the comp-
(A) If a seller does not collect the state sales tax, any
troller of the election on its use tax permit application form. The remote
applicable local sales taxes, or both, on a sale of a taxable item that
seller must use the single local use tax rate for all of its sales of taxable
is consummated in Texas, then the purchaser is responsible for filing
items until the election is revoked as provided in clause (ii) of this sub-
a return and paying the tax. The local sales taxes due are based on
paragraph.
the location in this state where the sale is consummated as provided in
(ii) A remote seller may revoke its election by filing subsection (c) of this section.
a form prescribed by the comptroller. If the comptroller receives the
(B) A purchaser who buys an item for use in Texas from
notice by October 1, the revocation will be effective January 1 of the
a seller who does not collect the state use tax, any applicable local use
following year. If the comptroller receives the notice after October 1,
taxes, or both, is responsible for filing a return and paying the tax. The
the revocation will be effective January 1 of the year after the follow-
local use taxes due are based on the location where the item is first
ing year. For example, a remote seller must notify the comptroller by
stored, used, or consumed by the purchaser.
October 1, 2020, for the revocation to be effective January 1, 2021. If
the comptroller receives the revocation on November 1, 2020, the re- (C) For more information about how to report and pay
vocation will be effective January 1, 2022. use tax directly to the comptroller, see §3.286 of this title.
(D) Single local use tax rate. (5) Local tax is due on the sales price of a taxable item, as
defined in Tax Code, §151.007, in the report period in which the taxable
(i) The single local use tax rate in effect for the pe-
item is purchased or the period in which the taxable item is first stored,
riod beginning October 1, 2019, and ending December 31, 2019, is
used, or otherwise consumed in a local taxing jurisdiction.
1.75%.
(6) A purchaser is not liable for additional local use tax if
(ii) The single local use tax rate in effect for the pe-
the purchaser pays local use tax using the rate elected by an eligible re-
riod beginning January 1, 2020, and ending December 31, 2020, is
mote seller according to paragraph (3) of this subsection. The remote
1.75%.
seller must be identified on the comptroller's website as electing to use
(E) Annual publication of single local use tax rate. Be- the single local use tax rate. A purchaser must verify that the remote
fore the beginning of a calendar year, the comptroller will publish no- seller is listed on the comptroller's website. If the remote seller is not
tice of the single local use tax rate in the Texas Register that will be in listed on the comptroller's website, the purchaser will be liable for ad-
effect for that calendar year. ditional use tax due in accordance to paragraph (4) of this subsection.
(F) Calculating the single local use tax rate. The single (j) Items purchased under a direct payment permit.
local use tax rate effective in a calendar year is equal to the estimated
(1) When taxable items are purchased under a direct pay-
average rate of local sales and use taxes imposed in this state during the
ment permit, local use tax is due based upon the location where the
preceding state fiscal year. As soon as practicable after the end of a state
permit holder first stores the taxable items, except that if the taxable
fiscal year, the comptroller must determine the estimated average rate
items are not stored, then local use tax is due based upon the location
of local sales and use taxes imposed in this state during the preceding
where the taxable items are first used or otherwise consumed by the
state fiscal year by:
permit holder.
(i) dividing the total amount of net local sales and
(2) If, in a local taxing jurisdiction, storage facilities con-
use taxes remitted to the comptroller during the state fiscal year by the
tain taxable items purchased under a direct payment exemption certifi-
total amount of net state sales and use tax remitted to the comptroller
cate and at the time of storage it is not known whether the taxable items
during the state fiscal year;
will be used in Texas, then the taxpayer may elect to report the use tax
(ii) multiplying the amount computed under clause either when the taxable items are first stored in Texas or are first re-
(i) of this subparagraph by the rate provided in Tax Code, §151.051; moved from inventory for use in Texas, as long as use tax is reported
and in a consistent manner. See also §3.288(i) of this title (relating to Direct
Payment Procedures and Qualifications) and §3.346(g) of this title.
(iii) rounding the amount computed under clause (ii)
of this subparagraph to the nearest .0025. (3) If local use tax is paid on stored items that are subse-
quently removed from Texas before they are used, the tax may be re-
(G) Direct refund. A purchaser may request a refund
covered in accordance with the refund and credit provisions of §3.325
based on local use taxes paid in a calendar year for the difference be-
of this title and §3.338 of this title (relating to Multistate Tax Credits
tween the single local use tax rate paid by the purchaser and the amount
and Allowance of Credit for Tax Paid to Suppliers).
the purchaser would have paid based on the combined tax rate for all
applicable local use taxes. Notwithstanding the refund requirements (k) Special rules for certain taxable goods and services. Sales
under §3.325(a)(1) of this title (relating to Refunds and Payments Un- of the following taxable goods and services are consummated at, and
der Protest), a non-permitted purchaser may request a refund directly local tax is due based upon, the location indicated in this subsection.
from the comptroller for the tax paid in the previous calendar year, no
(1) Amusement services. Local tax is due based upon the
earlier than January 1 of the following calendar year within the statute
location where the performance or event occurs. For more information
of limitation under Tax Code, 111.104 (Refunds).
on amusement services, refer to §3.298 of this title (relating to Amuse-
(H) Marketplace providers. Notwithstanding subpara- ment Services).
graph (A) of this paragraph, marketplace providers may not use the
(2) Cable services. When a service provider uses a cable
single local use tax rate and must compute the amount of local use tax
system to provide cable television or bundled cable services to cus-

ADOPTED RULES May 22, 2020 45 TexReg 3515

CP Ex-23-0030 of 0032
tomers, local tax is due as provided for in §3.313 of this title. When customer's real property. See also subsection (h)(2)(A) of this section
a service provider uses a satellite system to provide cable services to and §3.291 of this title.
customers, no local tax is due on the service in accordance with the
(11) Waste collection services. Local taxes are due on
Telecommunications Act of 1996, §602.
garbage or other solid waste collection or removal services based on
(3) Florists. Local sales tax is due on all taxable items sold the location at which the waste is collected or from which the waste is
by a florist based upon the location where the order is received, regard- removed. For more information, refer to §3.356 of this title (relating
less of where or by whom delivery is made. Local use tax is not due on to Real Property Service).
deliveries of taxable items sold by florists. For example, if the place of
(l) Special exemptions and provisions applicable to individual
business of the florist where an order is taken is not within the bound-
jurisdictions.
aries of any local taxing jurisdiction, no local sales tax is due on the
item and no local use tax is due regardless of the location of delivery. (1) Residential use of natural gas and electricity.
If a Texas florist delivers an order in a local taxing jurisdiction at the
(A) Mandatory exemptions from local sales and use tax.
instruction of an unrelated florist, and if the unrelated florist did not
Residential use of natural gas and electricity is exempt from most lo-
take the order within the boundaries of a local taxing jurisdiction, local
cal sales and use taxes. Counties, transit authorities, and most special
use tax is not due on the delivery. For more information about florists'
purpose districts are not authorized to impose sales and use tax on the
sales and use tax obligations, refer to §3.307 of this title (relating to
residential use of natural gas and electricity. Pursuant to Tax Code,
Florists).
§321.105, any city that adopted a local sales and use tax effective Oc-
(4) Landline telecommunications services. Local taxes due tober 1, 1979, or later is prohibited from imposing tax on the residential
on landline telecommunications services are based upon the location of use of natural gas and electricity. See §3.295 of this title.
the device from which the call or other transmission originates. If the
(B) Imposition of tax allowed in certain cities. Cities
seller cannot determine where the call or transmission originates, local
that adopted local sales tax prior to October 1, 1979, may, in accor-
taxes due are based on the address to which the service is billed. For
dance with the provisions in Tax Code, §321.105, choose to repeal the
more information, refer to §3.344 of this title (relating to Telecommu-
exemption for residential use of natural gas and electricity. The comp-
nications Services).
troller's website provides a list of cities that impose tax on the residen-
(5) Marketplace provider sales. Local taxes are due on tial use of natural gas and electricity, as well as a list of those cities that
sales of taxable items through a marketplace provider based on the lo- do not currently impose the tax, but are eligible to do so.
cation in this state to which the item is shipped or delivered or at which
(C) Effective January 1, 2010, a fire control, preven-
the purchaser takes possession. For more information, refer to §3.286
tion, and emergency medical services district organized under Local
of this title.
Government Code, Chapter 344 that imposes sales tax under Tax Code,
(6) Mobile telecommunications services. Local taxes due §321.106, or a crime control and prevention district organized under
on mobile telecommunications services are based upon the location of Local Government Code, Chapter 363 that imposes sales tax under Tax
the customer's place of primary use as defined in §3.344(a)(8) of this Code, §321.108, that is located in all or part of a municipality that im-
title, and local taxes are to be collected as indicated in §3.344(h) of this poses a tax on the residential use of natural gas and electricity as pro-
title. vided under Tax Code, §321.105 may impose tax on residential use of
natural gas and electricity at locations within the district. A list of the
(7) Motor vehicle parking and storage. Local taxes are due
special purpose districts that impose tax on residential use of natural
based on the location of the space or facility where the vehicle is parked.
gas and electricity and those districts eligible to impose the tax that do
For more information, refer to §3.315 of this title (relating to Motor
not currently do so is available on the comptroller's website.
Vehicle Parking and Storage).
(2) Telecommunication services. Telecommunications ser-
(8) Natural gas and electricity. Any local city and special
vices are exempt from all local sales taxes unless the governing body
purpose taxes due are based upon the location where the natural gas
of a city, county, transit authority, or special purpose district votes
or electricity is delivered to the purchaser. As explained in subsection
to impose sales tax on these services. However, since 1999, under
(l)(1) of this section, residential use of natural gas and electricity is
Tax Code, §322.109(d), transit authorities created under Transporta-
exempt from all county sales and use taxes and all transit authority sales
tion Code, Chapter 451 cannot repeal the exemption unless the repeal
and use taxes, most special purpose district sales and use taxes, and
is first approved by the governing body of each city that created the
many city sales and use taxes. A list of the cities and special purpose
local taxing jurisdiction. The local sales tax is limited to telecommuni-
districts that do impose, and those that are eligible to impose, local
cations services occurring between locations within Texas. See §3.344
sales and use tax on residential use of natural gas and electricity is
of this title. The comptroller's website provides a list of local taxing
available on the comptroller's website. For more information, also refer
jurisdictions that impose tax on telecommunications services.
to §3.295 of this title (relating to Natural Gas and Electricity).
(3) Emergency services districts.
(9) Nonresidential real property repair and remodeling ser-
vices. Local taxes are due on services to remodel, repair, or restore (A) Authority to exclude territory from imposition of
nonresidential real property based on the location of the job site where emergency services district sales and use tax. Pursuant to the provi-
the remodeling, repair, or restoration is performed. See also subsection sions of Health and Safety Code, §775.0751(c-1), an emergency ser-
(h)(2)(B) of this section and §3.357 of this title. vices district wishing to enact a sales and use tax may exclude from the
election called to authorize the tax any territory in the district where the
(10) Residential real property repair and remodeling and
sales and use tax is then at 2.0%. The tax, if authorized by the voters
new construction of a real property improvement performed under a
eligible to vote on the enactment of the tax, then applies only in the
separated contract. When a contractor constructs a new improvement
portions of the district included in the election. The tax does not apply
to realty pursuant to a separated contract or improves residential real
to sales made in the excluded territories in the district and sellers in the
property pursuant to a separated contract, the sale is consummated at
excluded territories should continue to collect local sales and use taxes
the job site at which the contractor incorporates taxable items into the

45 TexReg 3516 May 22, 2020 Texas Register

CP Ex-23-0031 of 0032
for the local taxing jurisdictions in effect at the time of the election un- ernment Code, Chapters 380 or 381, to persons whose business consists
der which the district sales and use tax was authorized as applicable. primarily of purchasing taxable items using resale certificates and then
reselling those same items to a related party. A related party means a
(B) Consolidation of districts resulting in sales tax
person or entity which owns at least 80% of the business enterprise to
sub-districts. Pursuant to the provisions of Health and Safety Code,
which sales and use taxes would be rebated as part of an economic in-
§775.018(f), if the territory of a district proposed under Health and
centive.
Safety Code, Chapter 775 overlaps with the boundaries of another
district created under that chapter, the commissioners court of each (n) Prior contract exemptions. The provisions of §3.319 of this
county and boards of the counties in which the districts are located may title (relating to Prior Contracts) concerning definitions and exclusions
choose to create a consolidated district in the overlapping territory. If apply to prior contract exemptions.
two districts that want to consolidate under Health and Safety Code,
(1) Certain contracts and bids exempt. No local taxes are
§775.024 have different sales and use tax rates, the territory of the
due on the sale, use, storage, or other consumption in this state of tax-
former districts located within the consolidated area will be designated
able items used:
as sub-districts and the sales tax rate within each sub-district will
continue to be imposed at the rate the tax was imposed by the former (A) for the performance of a written contract executed
district that each sub-district was part of prior to the consolidation. prior to the effective date of any local tax if the contract may not be
modified because of the tax; or
(4) East Aldine Management District.
(B) pursuant to the obligation of a bid or bids submitted
(A) Special sales and use tax zones within district;
prior to the effective date of any local tax if the bid or bids and contract
separate sales and use tax rate. As set out in Special District Local
entered into pursuant thereto are at a fixed price and not subject to
Laws Code, §3817.154(e) and (f), the East Aldine Management
withdrawal, change, or modification because of the tax.
District board may create special sales and use tax zones within the
boundaries of the District and, with voter approval, enact a special (2) Annexations. Any annexation of territory into an exist-
sales and use tax rate in each zone that is different from the sales and ing local taxing jurisdiction is also a basis for claiming the exemption
use tax rate imposed in the rest of the district. provided by this subsection.
(B) Exemptions from special zone sales and use tax. (3) Local taxing jurisdiction rate increase; partial exemp-
The sale, production, distribution, lease, or rental of; and the use, stor- tion for certain contracts and bids. When an existing local taxing ju-
age, or other consumption within a special sales and use tax zone of; a risdiction raises its sales and use tax rate, the additional amount of tax
taxable item sold, leased, or rented by the entities identified in clauses that would be due as a result of the rate increase is not due on the sale,
(i) - (vi) of this subparagraph are exempt from the special zone sales use, storage, or other consumption in this state of taxable items used:
and use tax. State and all other applicable local taxes apply unless oth-
(A) for the performance of a written contract executed
erwise exempted by law. The special zone sales and use tax exemption
prior to the effective date of the tax rate increase if the contract may
applies to:
not be modified because of the tax; or
(i) a retail electric provider as defined by Utilities
(B) pursuant to the obligation of a bid or bids submitted
Code, §31.002;
prior to the effective date of the tax rate increase if the bid or bids and
(ii) an electric utility or a power generation company contract entered into pursuant thereto are at a fixed price and not subject
as defined by Utilities Code, §31.002; to withdrawal, change, or modification because of the tax.
(iii) a gas utility as defined by Utilities Code, (4) Three-year statute of limitations.
§101.003 or §121.001, or a person who owns pipelines used for
(A) The exemption in paragraph (1) of this subsection
transportation or sale of oil or gas or a product or constituent of oil or
and the partial exemption in paragraph (3) of this subsection have no
gas;
effect after three years from the date the adoption or increase of the tax
(iv) a person who owns pipelines used for the trans- takes effect in the local taxing jurisdiction.
portation or sale of carbon dioxide;
(B) The provisions of §3.319 of this title apply to this
(v) a telecommunications provider as defined by subsection to the extent they are consistent.
Utilities Code, §51.002; or
(C) Leases. Any renewal or exercise of an option to
(vi) a cable service provider or video service extend the time of a lease or rental contract under the exemptions pro-
provider as defined by Utilities Code, §66.002. vided by this subsection shall be deemed to be a new contract and no
exemption will apply.
(5) Imposition of city sales tax and transit tax on certain
military installations; El Paso and Fort Bliss. Pursuant to Tax Code, (5) Records. Persons claiming the exemption provided by
§321.1045 (Imposition of Sales and Use Tax in Certain Federal Military this subsection must maintain records which can be verified by the
Installations), for purposes of the local sales and use tax imposed under comptroller or the exemption will be lost.
Tax Code, Chapter 321, the city of El Paso includes the area within the
(6) Exemption certificate. An identification number is re-
boundaries of Fort Bliss to the extent it is in the city's extraterritorial
quired on the prior contract exemption certificates furnished to sellers.
jurisdiction. However, the El Paso transit authority does not include
The identification number should be the person's 11-digit Texas tax-
Fort Bliss. See Transportation Code, §453.051 concerning the Creation
payer number or federal employer's identification (FEI) number.
of Transit Departments.
The agency certifies that legal counsel has reviewed the adop-
(m) Restrictions on local sales tax rebates and other economic
tion and found it to be a valid exercise of the agency's legal au-
incentives. Pursuant to Local Government Code, §501.161, Section 4A
thority.
and 4B development corporations may not offer to provide economic
incentives, such as local sales tax rebates authorized under Local Gov-
Filed with the Office of the Secretary of State on May 11, 2020.

ADOPTED RULES May 22, 2020 45 TexReg 3517

CP Ex-23-0032 of 0032
TAB
G
The Comptroller of Public Accounts proposes new §1.200, con- the employee to the family leave pool, and employees may apply for
cerning state employee family leave pool. The new section will leave time under the family leave pool.
be located in Chapter 1, new Subchapter C, Administration.
(2) The comptroller or deputy comptroller shall designate
The new section implements House Bill 2063, 87th Legislature, a pool administrator.
R.S., 2021, which enacted Government Code, §§661.021 -
(3) The pool administrator will develop procedures and
661.028 (State Employee Family Leave Pool).
forms as necessary for the administration of the family leave pool.
Proposed §1.200 creates a process for the Comptroller's State
(4) Operation of the family leave pool shall be consistent
Employee Family Leave Pool. Subsection (a) outlines the es-
with Government Code, Chapter 661, Subchapter A-1.
tablishment and purpose, which is to provide eligible employees
more flexibility in bonding with and caring for children during a The agency certifies that legal counsel has reviewed the pro-
child's first year following birth, adoption, or foster placement, posal and found it to be within the state agency's legal authority
and caring for a seriously ill family member or the employee, in- to adopt.
cluding pandemic-related illnesses or complications caused by
a pandemic. Subsection (b) outlines guidelines for the program, Filed with the Office of the Secretary of State on September 12,
provides for designation of a pool administrator, describes the
2022.
responsibilities of the pool administrator, and provides that the
operation of the family leave pool shall be consistent with Gov- TRD-202203667
ernment Code, Chapter 661, Subchapter A-1. Victoria North
Brad Reynolds, Chief Revenue Estimator, has determined that General Counsel for Fiscal and Agency Affairs
during the first five years that the proposed new rule is in effect, Comptroller of Public Accounts
the rule: will not create or eliminate a government program; will Earliest possible date of adoption: October 23, 2022
not require the creation or elimination of employee positions; will For further information, please call: (512) 475-2220
not require an increase or decrease in future legislative appropri-
ations to the agency; will not require an increase or decrease in
♦ ♦ ♦
fees paid to the agency; will not increase or decrease the num- CHAPTER 3. TAX ADMINISTRATION
ber of individuals subject to the rule's applicability; and will not
positively or adversely affect this state's economy. SUBCHAPTER O. STATE AND LOCAL SALES
Mr. Reynolds also has determined that the proposed new rule AND USE TAXES
would have no significant fiscal impact on the state government,
units of local government, or individuals. The proposed new rule
34 TAC §3.334
would benefit the public by implementing the rule regarding state The Comptroller of Public Accounts proposes amendments to
employee family leave pool. There would be no significant an- §3.334, concerning local sales and use taxes.
ticipated economic cost to the public. The proposed new rule
Background.
would have no fiscal impact on small businesses or rural com-
munities. The comptroller's local sales and use tax rulemaking process
began in 2018, when several issues arose regarding local sales
Comments on the proposal may be submitted to Yadira Gibson,
and use tax. The United States Supreme Court issued a deci-
Senior Legal Counsel to Human Resources, Texas Comptrol-
sion in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (June 21,
ler of Public Accounts, P.O. Box 13528, Austin, Texas 78711 or
2018), which appeared to expand the states' authority to impose
to the email address: Yadi.Gibson@cpa.texas.gov. Comments
use tax collection obligations on remote sellers. In addition, as
must be received no later than 30 days from the date of publica-
the comptroller began to receive inquiries regarding the legiti-
tion of the proposal in the Texas Register.
macy of various local tax revenue-sharing schemes, it became
This new section is proposed under Government Code, apparent that the comptroller's existing rule was inadequate to
§661.022(c), which requires the governing body of each state explain the comptroller's interpretation of the local sales and use
agency to adopt rules and prescribe procedures relating to the tax consummation statutes.
operation of the state employee family leave pool.
Before proposing the rule amendments, the comptroller con-
The new section implements Government Code, §§661.021 - sulted with various organizations, including the Texas Municipal
661.028 (State Employee Family Leave Pool) League, the City of Round Rock, the City of Coppell, and the City
of Carrollton. The comptroller was aware that cities had con-
§1.200. State Employee Family Leave Pool.
flicting concerns. Some were concerned that other cities were
(a) Establishment and Purpose. In accordance with Govern-
siphoning off sales tax revenue under various revenue-sharing
ment Code, Chapter 661, Subchapter A-1 (State Employee Family
schemes with vendors, while other cities were concerned that
Leave Pool), the comptroller establishes the Employee Family Leave
their revenue-sharing agreements with vendors would be in jeop-
Pool program to provide eligible employees more flexibility in bond-
ardy. Again, it became clear that the comptroller's existing rule
ing with and caring for children during a child's first year following
did not provide adequate guidance to resolve these concerns.
birth, adoption, or foster placement, and caring for a seriously ill
family member or the employee, including pandemic-related illnesses The comptroller published a notice of proposed rulemaking in
or complications caused by a pandemic. the January 3, 2020, issue of the Texas Register. After the pub-
lication of the notice of proposed rulemaking, the comptroller ex-
(b) Guidelines.
tended the 30-day public comment period to 90 days. In addition,
(1) Under the Employee Family Leave Pool, an agency em- the comptroller held a public hearing on February 4, 2020. The
ployee may voluntarily transfer sick leave or vacation leave earned by comptroller scrutinized the comments, made some changes, and

D-1-GN-21-003198

TRIAL EXHIBIT
47 TexReg 6158 September 23, 2022 Texas Register

CP Ex-31-0001 of 0017
CP Ex-31
rejected others. The comptroller published the final rule in the authority sales and use tax) and Chapter 323 (county sales and
May 22, 2020, issue of the Texas Register. use tax).
The Cities of Round Rock, Coppell, DeSoto, Humble, and Car- The rule uses "place of business of the seller," while the
rollton then challenged the validity of the 2020 rule amendments. statute uses "place of business of the retailer." See Tax Code,
The litigation has been consolidated in Cause No. D-1-GN-21- §321.002(3)(A). The terms "seller" and "retailer" are synony-
003198, City of Coppell, Texas, et al. v. Glenn Hegar, in the mous for sales and use tax purposes. Tax Code, §151.008. The
201st District Court of Travis County Texas. current rule and the proposed rule use "place of business of the
seller" rather than "place of business of the retailer" to avoid
The district court found that the comptroller failed to substan-
potential confusion over the term "retailer." The term "retailer" is
tially comply with one or more of the procedural requirements
statutorily defined to include both retailers and wholesalers, as
for the notice of proposed rule (Government Code, §2001.024)
those terms are commonly used. Tax Code, §151.008.
when the comptroller adopted §3.334(b)(5). The court remanded
§3.334(b)(5) to give the comptroller the opportunity to either re- The statute defines "place of business of the retailer" with 82
vise or readopt it through established procedure. Accordingly, words:
the comptroller is proposing to revise §3.334(b)(5) and other por-
"Place of business of the retailer" means an established outlet,
tions of the rule, with an explanation that augments the explana-
office, or location operated by the retailer or the retailer's agent
tion in the notice of proposed rulemaking published in the Jan-
or employee for the purpose of receiving orders for taxable items
uary 3, 2020, issue of the Texas Register (45 TexReg 98) and
and includes any location at which three or more orders are re-
the order adopting amendments to §3.334 published in the May
ceived by the retailer during a calendar year. A warehouse, stor-
22, 2020, issue of the Texas Register (45 TexReg 3499).
age yard, or manufacturing plant is not a "place of business of
Proposed amendments the retailer" unless at least three orders are received by the re-
tailer during the calendar year at the warehouse, storage yard,
The comptroller proposes to amend subsection (a)(9) to make
or manufacturing plant.
the language more consistent with Tax Code, §321.203(c-1):
The definition is narrower than the ordinary meaning of the
(9) Fulfill--To complete an order by transferring possession of a
phrase. The definition includes the concept of receiving orders
taxable item to a purchaser, or to ship or deliver a taxable item
for taxable items, which could exclude locations ordinarily
to a location designated by the purchaser. The term does not in-
considered to be places of business, such as executive offices.
clude receiving or tracking an order, determining shipping costs,
Additionally, a location is not a "place of business" simply
managing inventory, or other activities that do not involve the
because it receives orders. If that were the case, the legislature
transfer, shipment, or delivery of a taxable item to the purchaser
could have defined the phrase with those very words, which can
or to a location designated by the purchaser.
be counted on one hand.
The comptroller proposes to amend the definition of "place of
Against this backdrop, the comptroller proposes to amend the
business of the seller" in subsection (a)(16):
definition of "place of business of the seller" in subsection (a)(16).
(16) Place of business of the seller - general definition--A place
The first sentence of the proposed definition states: "A place of
of business of the seller must be an established outlet, office, or
business of the seller must be an established outlet, office, or lo-
location operated by a seller for the purpose of receiving orders
cation operated by a seller for the purpose of receiving orders for
for taxable items from persons other than employees, indepen-
taxable items from persons other than employees, independent
dent contractors, and natural persons affiliated with the seller.
contractors, and natural persons affiliated with the seller." This
An "established outlet, office, or location" requires staffing by one
definition tracks the statutory definition, but adds a qualifier from
or more sales personnel. The term does not include a computer
the existing rule definition, which would allow a facility to make
server, Internet protocol address, domain name, website, or soft-
in-house courtesy sales without becoming a place of business.
ware application. The "purpose" element of the definition may be
established by proof that sales personnel of the seller received In the City of Webster litigation, the court of appeals stated: "we
three or more orders for taxable items at the facility during the do not determine whether a place of business must be 'an es-
calendar year. ... tablished outlet, office, or location operated by the retailer or the
retailer's agent or employee,' see id., as appellees do not raise
The definition of "place of business of the seller" comes into play
this issue." Combs v. City of Webster, 311 S.W.3d 85, 96 at n.
in determining where a local sale or use is consummated. The
7 (Tex. App.-Austin 2009, pet. Denied). The first sentence of
consummation standards are not all "origin-based." Possible out-
the proposed definition is worded in the imperative to clearly an-
comes include consummation at the place of business where the
swer that unanswered question. The comptroller interprets the
order was received, consummation at the place of business from
statute to mean that a place of business of the seller must be an
which the order was shipped or delivered, consummation at the
established outlet, office, or location operated by a seller for the
location to which the item is shipped or delivered, and consum-
purpose of receiving orders for taxable items.
mation at the first point in the state where the item is stored,
used, or consumed. Tax Code, §321.203 and §321.205. The The second sentence states: "An 'established outlet, office, or
location of the consummation can be affected by whether an or- location' requires staffing by one or more sales personnel." This
der is received at a "place of business of the seller" in Texas, requirement is based on several rules of statutory construction.
and whether the seller ships or delivers the item from a "place of Every word of a statute, including each word in the phrase "es-
business of the seller" in Texas. tablished outlet, office, or location," should have meaning. Amar-
illo v. Martin, 971 426, 430 (Tex. 1998). If the word "location" is
The consummation standards for municipal sales and use taxes
given its broadest application, it would subsume the words "out-
are in Tax Code, §321.203 for sales tax and Tax Code, §321.205
let" and "office," rendering them meaningless. Therefore, the
for use tax. Other local sales and use tax statutes have similar
rule of "ejusdem generis" should apply, in which general words
standards. See, Tax Code, Chapter 322 (special purpose taxing

PROPOSED RULES September 23, 2022 47 TexReg 6159

CP Ex-31-0002 of 0017
are not to be construed in their widest meaning, but are limited to But it seems to the administrative law judge that the legislature
persons or things of the same kind or class as those expressly was amending the law if not entirely in reaction to the then-pend-
mentioned. Stanford v. Butler, 181 S.W.2d 269 (Tex. 1944). ing case of Bullock v. Dunigan Tool & Supply Co., 588 S.W.2d
Thus, a "location" should be a facility that is similar to an "outlet" 633 (Tex. Civ. App.-Texarkana, writ ref'd n.r.e.), at least partly in
or "office." reaction to that case. And if that be so, then the legislature did
not want warehousing and storage facilities (many of which are
The term "outlet" implies the presence of sales personnel, par-
outside city limits) to be the places where sales were consum-
ticularly in the sales tax context. Each retail store is considered
mated for local sales tax purposes unless orders were actually
to be an "outlet" for reporting sales tax.
received there by personnel working there, but wanted the of-
In the abstract, there could be many types of "offices." But in the fice location out of which the salesman operated to be the place
context of "receiving orders," the term implies a sales office. where the sales were consummated.
Thus, to provide something of a bright-line test for buyers, sell- The City of Coppell and others have advanced a contrary expla-
ers, and auditors to follow, the rule provides that an "established nation regarding fulfillment warehouses that has superficial ap-
outlet, office, or location" requires staffing by one or more sales peal: a warehouse cannot fulfill an order unless the warehouse
personnel. See, Perry Homes v. Strayhorn, 108 S.W.3d 444, has "received" the order, and therefore a fulfillment warehouse
448 (Tex. App.- Austin 2003, no pet.) (example of bright line is inherently a "place of business." In the abstract, this argument
rule); DuPont Photomasks, Inc. v. Strayhorn, 219 S.W.3d 414, may seem like a reasonable interpretation of the word "received."
422 (Tex. App.-Austin 2006, pet. Denied) (example of bright line But not in context. When the words of the rather lengthy statu-
rule). tory definition are considered, and when the legislative history is
considered, the legislature intended the opposite - a fulfillment
This interpretation of the statute is confirmed by legislative his-
warehouse is not automatically a "place of business" simply be-
tory. The Texas Legislature added the definition of "place of busi-
cause orders have to be forwarded to the warehouse for fulfill-
ness of the retailer" in 1979. 66th Legislature, R.S., Ch. 624,
ment.
Art. 1, §3 (SB 582). During that session of the legislature, a
House Study Group analysis stated that the "bill is necessary The third sentence in the proposed definition of "place of busi-
to protect the state from possible consequences of the pend- ness" states: "The term does not include a computer server,
ing court suits." The analysis specifically referenced "Dunigan Internet protocol address, domain name, website, or software
Tool and Supply v. Bullock" as one of those suits. The analy- application." This sentence is consistent with the concept that a
sis is available at the Legislative Reference Library website at "place of business" requires the presence of personnel to receive
https://lrl.texas.gov/scanned/hroBillAnalyses/66-0/SB582.pdf. the order. Even a broad, every-day usage of the term "place of
business" does not include computer servers, Internet protocol
In the Dunigan litigation, retail stores took orders that were ful-
addresses, and automated telephone ordering systems. Many
filled from a warehouse. The comptroller wanted to source the
sellers house their computer servers at a co-location facility or
local tax to the retail stores, but the district court and the court
rent computer server space at a managed hosting site. An ordi-
of appeals sourced the local tax to the warehouse, declaring the
nary person would not consider the physical locations of these
warehouse to be a place of business. Bullock v. Dunigan Tool
computer servers to be places of business of the seller. Simi-
& Supply Co., 588 S.W.2d 633 (Tex. Civ. App.- Austin, Sept. 6,
larly, an ordinary person would not perceive an Internet protocol
1979, writ ref'd n.r.e.).
address, a domain name, or a website as an "established out-
The 1979 House Study Group bill analysis states that the bill let, office, or location" so as to constitute a place of business in
was intended to protect the state from the consequences of the ordinary usage. And, in this statutory context, which is narrower
Dunnigan litigation. Thus, the legislative intent was that a fulfill- than ordinary usage, the comptroller has concluded that the leg-
ment warehouse without sales personnel would not be a "place islature could not have intended that the receipt of an order by
of business." an automated mechanical device would make the device an "es-
tablished outlet, office or location operated by the retailer."
The legislative intent was further confirmed by the subsequent
October 2, 1980, Interim Report of the House Ways and Means The treatment of computer servers, while new to the rule in 2020,
Committee, which was produced by the City of Coppell during is not new to the comptroller. Comptroller Letter Ruling (STAR
the litigation. The committee was considering whether to allow Accession No.) 200510723L (2005) stated:
the recently adopted statutory definition of "place of business" to
The location of the server does not create a "place of business"
expire. The committee described the consequence: "The loca-
for purposes of local Tax Collection.
tion of sale would no longer be tied to permitted outlets, sales-
men's locations, or sales offices." Interim Report at 20. These And Comptroller Letter Ruling (STAR Accession No.)
words confirm the comptroller's current interpretation that the 200605592L (2006) similarly stated:
definition of a "place of business" requires staffing by one or more
The location of the server does not create a "place of business"
sales personnel: "location" was intended to mean "salesmen's
for purposes of local tax collection.
locations" and "office" was intended to mean "sales office."
And Comptroller Letter Ruling (STAR Accession No.)
In the subsequent legislative session, the legislature did not
201906015L (2019) similarly stated:
allow the "place of business" definition to expire, and instead,
made it permanent. 67th Legislature, R.S., Ch. 838 §1 (H.B. COMPANY operates **************'s online marketplace (Web-
1838). The 1979 definition and its legislative history remain in site) and various apps used by Texas customers to make online
place today. And, the comptroller's interpretation of "place of orders. ... Orders placed on the Website or through COMPANY's
business," which tracks the legislative history, is a longstanding apps and processed and routed by servers are not received at a
one. In 1985, the comptroller adopted the proposal for decision place of business.
in Comptroller's Decision No. 15,654 (1985), which stated:

47 TexReg 6160 September 23, 2022 Texas Register

CP Ex-31-0003 of 0017
The fourth sentence of the proposed definition of "place of busi- The comptroller proposes to amend subsections (b)(4) and (b)(5)
ness of the seller" states: "The 'purpose' element of the definition for stylistic reasons and to more clearly state the comptroller's
may be established by proof that sales personnel of the seller re- application of the definition of place of business of the seller from
ceived three or more orders for taxable items at the facility dur- subsection (a)(16):
ing the calendar year." The sentence conforms the rule to the
(4) An order that is received by a salesperson who is not at a
statute, as explained in Combs v. City of Webster, 311 S.W.3d
place of business of the seller when the salesperson receives
85, 96 (Tex. App.-Austin 2009, pet. denied). In that opinion, the
the order is treated as being received at the location from which
court stated that the statutory "phrase 'and includes' can reason-
the salesperson operates. Examples include orders that a sales-
ably be interpreted to indicate that the 'for the purpose of' phrase
person receives by mail, telephone, including Voice over Internet
and the 'three or more orders' phrase are alternate methods of
Protocol and cellular phone calls, facsimile, and email while trav-
satisfying the statutory definition."
eling. The location from which the salesperson operates is the
Finally, in addition to being the most reasonable interpretation principal fixed location where the salesperson conducts work-re-
of the statute, the proposed definition of "place of business of lated activities. The location from which a salesperson operates
the seller" is a practical interpretation that will facilitate uniformity will be a place of business of the seller only if the location meets
and ease of administration for taxpayers and auditors. Website the definition of a "place of business of a seller" in subsection
orders can be received at multiple physical addresses - any lo- (a)(16) of this section on its own, without regard to the orders
cations that have Internet access. A website order is sent to an imputed to that location by this subsection.
Internet protocol ("IP") address. An IP address is not a perma-
(5) An order that is not received by a salesperson is received at
nent physical address. It is a series of numbers assigned to a
a location that is not a place of business of the seller. Exam-
device, such as a computer server. Websites may use dynamic
ples are orders received by a computer server through a shop-
IP addresses that are assigned by the network upon connection
ping cart software program and orders received by an automated
and that change over time. The public IP address of a website
telephone ordering system.
may simply be routing orders to different, private IP addresses.
Load balancers may change the IP addresses that communicate The examples have been moved from the headings to separate
with customers. Conversely, multiple web sites may be hosted sentences in both subsections (b)(4) and (b)(5), and labeled as
at a single IP address. examples. The new examples in subsection (b)(5) are more pre-
cise examples than the former examples of "a shopping website
The computer server receiving an order may belong to the seller
or shopping software application."
or it may belong to a third party. The computer server may be sit-
uated on the seller's premises, it may be situated at a co-location Subsection (b)(5) is an application of the definition of "place of
facility operated by a third party, or it may be situated at a web business of the seller" in subsection (a)(16). The explanation of
hosting facility operated by a third party. The computer server subsection (a)(16) is also applicable to subsection (b)(5).
may be one of multiple servers that serve the same website from
The comptroller proposes to amend subsection (c)(2)(B)(ii) to
different physical addresses as part of a cloud distribution net-
make the language more consistent with Tax Code, §321.205(c):
work. The computer server may route the order to multiple other
servers for load balancing purposes. Conversely, a single com- (ii) Order not fulfilled in Texas. When an order is received by a
puter server may serve multiple websites. Also, the seller may seller at a location that is not a place of business of the seller
or may not know the physical address of the server receiving the in Texas, and is fulfilled from a location outside of Texas, the
order. The physical locations of computer servers that receive sale is not consummated in Texas. However, a use is consid-
website orders are often random, variable, and uncertain. The ered to be consummated at the first point in this state where the
best way to treat computer servers consistently and coherently item is stored, used, or consumed after the interstate transit has
is to uniformly recognize that they are not "established" places ceased. A taxable item delivered to a point in this state is pre-
of business of the seller. sumed to be for storage, use, or consumption at that point until
the contrary is established. Local use tax should be collected as
In conclusion, regarding the proposed definition of "place of busi-
provided in subsection (d) of this section. Except as provided in
ness of the seller," the comptroller is under no illusions that the
subsection (i)(3) of this section, a remote seller required to col-
definition will eliminate all ambiguities. In many instances, the
lect state use tax under §3.286(b)(2) of this title must also collect
determination of whether or not particular facilities have "sales
local use tax.
personnel" will have to be made on a case-by-case basis. But
the rule makes clear that mere hardware installations, or other Sourcing of local tax
facilities that do not use any personnel, are not "places of busi-
It has been alleged that the proposed rule would result in a
ness of the seller." To that extent, the rule will help taxpayers
wholesale policy change from origin sourcing to destination
understand how the comptroller interprets and intends to apply
sourcing for website orders. However, there cannot be a whole-
the statute.
sale policy change because the consummation statutes for
The comptroller proposes to amend subsection (b)(1)(A) re- website orders are not inherently origin-based in the first place.
garding distribution centers, manufacturing plants, storage Marketplace sales made through marketplaces are consum-
yards, warehouses, or similar facilities to add the sentence: mated at destination. Tax Code, §321.203(e-1). And there are
"The forwarding of previously received orders to the facility for other circumstances in which website orders do not use origin
fulfilment does not make the facility a place of business." sourcing. Website orders fulfilled from a place of business of the
seller in Texas are consummated at the place of business where
Subsection (b)(1)(A) is an application of the definition of "place
the order is fulfilled. Tax Code, §321.203(c-1). Website orders
of business of the seller" in subsection (a)(16). The explanation
received outside of Texas and fulfilled from a location in Texas
of subsection (a)(16) is also applicable to subsection (b)(1)(A).
other than a place of business of the seller are consummated
at destination. Tax Code, §321.203(c). Website orders that are

PROPOSED RULES September 23, 2022 47 TexReg 6161

CP Ex-31-0004 of 0017
received outside of Texas and fulfilled from outside of Texas tion (j), and certain taxable items as provided in subsection (k),
are consummated at destination. Tax Code, §321.205(c). And, the sale will be consummated at the single place of business
amusement services, which may be delivered over the Internet, of the seller in Texas out of which the sales personnel operate.
are sourced to destination. Tax Code, §321.203(h). See §3.334(b)(4), (c), (c)(1)(B)(i), (c)(1)(B)(ii), (j), and (k) and
Tax Code, §321.203(b), (c-1), (d), (f), (g), (g-1), (g-2), (g-3), (h),
Rather than being a wholesale change in sourcing, the proposed
(i), (j), (k), and (n).
rule is an articulation of the pre-existing comptroller interpretation
of "place of business of the retailer" as defined by the legislature. If orders are received by sales personnel of the retailer who are
The definition requires the presence of sales personnel to re- not at the place of business of the seller in Texas when they
ceive orders, and if there are no sales personnel involved, such receive the orders, and who do not operate out of the place of
as an automated website order received by a computer server, business of the seller in Texas, local tax will be sourced the same
the order is received at a location that is not a "place of busi- regardless of the text of subsection (b)(5). Except for the appli-
ness." And, that interpretation of "place of business" does not cation of special rules for direct payment permit purchases in
mean that every website sale is sourced to destination, since subsection (j), and certain taxable items as provided in subsec-
some will be sourced to the place of business of the seller where tion (k), the sale will be consummated at the place of business of
the order is fulfilled. the seller in Texas from which the order is fulfilled, or if not, the
sale will be consummated, or a use will be consummated at the
It has also been alleged that the proposed subsection (b)(5) will
location in Texas to which the item is shipped or delivered or at
change the way that Texas retailers with one place of business
which the purchaser of the item takes possession as provided in
in Texas will source local tax. However, in most instances, sub-
subsection (d). See §3.334(c), (c)(2), (j) and (k) and Tax Code,
section (b)(5) will not change the way that Texas retailers with
§321.203(b), (c-1), (e), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k),
one place of business in Texas will source local tax.
(n) and §321.205(c).
If orders are received by Internet servers located outside the
If the orders are not received by sales personnel, such as orders
state, local tax will be sourced the same regardless of the text
received by an automated shopping website operated by the re-
of subsection (b)(5). Except for the application of special rules
tailer, but the orders are fulfilled at the single place of business
for remote sellers in subsection (i)(3), direct payment permit pur-
of the seller in Texas, local tax will be sourced the same regard-
chases in subsection (j), and certain taxable items, including tax-
less of the text of subsection (b)(5). Except for the application
able items sold by a marketplace provider, as provided in sub-
of special rules for direct payment permit purchases in subsec-
section (k), the sale will be consummated at the place of busi-
tion (j) of this section, and certain taxable items as provided in
ness of the seller in Texas from which the order is fulfilled, or if
subsection (k) of this section, the sale will be consummated at
not, the a sale will be consummated, or a use will be consum-
the single place of business of the seller in Texas from which the
mated at the location in Texas to which the item is shipped or
orders are fulfilled. See §3.334(c), (c)(2)(A), (j) and (k), and Tax
delivered or at which the purchaser of the item takes possession
Code, §321.203(b), (c-1), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j),
as provided in subsection (d). See §3.334(c), (c)(2), (j) and (k)
(k), and (n).
and Tax Code, §321.203(b), (c-1), (e), (e-1), (f), (g), (g-1), (g-2),
(g-3), (h), (i), (j), (k), (n) and §321.205(c). If the orders are not received by sales personnel, such as or-
ders received by an automated shopping website operated by
If orders are placed in person at the place of business of the
the retailer, and the orders are shipped or delivered or the pur-
seller in Texas, local tax will be sourced the same regardless
chaser takes possession in the same jurisdiction in which the re-
of the text of subsection (b)(5). Except for the application of
tailer’s single place of business in Texas is located, local tax will
special rules for direct payment permit purchases in subsection
be sourced the same regardless of the text of subsection (b)(5).
(j), and certain taxable items, including taxable items sold by a
Except for the application of special rules for direct payment per-
marketplace provider, as provided in subsection (k), the sale will
mit purchases in subsection (j) of this section, and certain taxable
be consummated at the single place of business of the seller in
items as provided in subsection (k) of this section, the sale or use
Texas where the order was received. See §3.334(c), (c)(1)(A),
will be consummated in the jurisdiction where the single place
(j), and (k) and Tax Code, §321.203(b), (c), (e-1), (f), (g), (g-1),
of business of the seller is located. See §3.334(c), (c)(2)(A),
(g-2), (g-3), (h), (i), (j), (k), and (n).
(c)(2)(B)(i), (c)(2)(B)(ii), (j) and (k), and Tax Code, §321.203(b),
If orders are received by sales personnel of the retailer at the (c-1), (e), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), and (n) and
place of business of the seller in Texas, but the orders are not §321.205(c).
placed in person by the buyer, local tax will be sourced the same
If the orders are received by a shopping website operated by a
regardless of the text of subsection (b)(5). Except for the ap-
marketplace provider, or the orders are received by any other
plication of special rules for direct payment permit purchases
physical medium operated by a marketplace provider such as
in subsection (j), and certain taxable items as provided in sub-
catalogs and stores, local tax will be sourced the same regard-
section (k), the sale will be consummated at the single place
less of the text of subsection (b)(5). Except for the application of
of business of the seller in Texas where the order was received.
special rules for direct payment permit purchases in subsection
See §3.334(c), (c)(1)(B)(i), (c)(1)(B)(ii), (j), and (k) and Tax Code,
(j), and certain taxable items as provided in subsection (k), the
§321.203(b), (c-1), (d), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k),
sale will be consummated at the location in Texas state to which
and (n).
the item is shipped or delivered or at which possession is taken
If orders are received by sales personnel of the retailer who are by the purchaser. See §3.334(k)(5), (j) and (k), and Tax Code,
not at the place of business of the seller in Texas when they re- §321.203(e-1), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), and (n).
ceive the orders, but who operate out of the place of business
If orders are received from purchasers with direct pay permits,
of the seller in Texas, local tax will be sourced the same regard-
local tax will be sourced the same regardless of the text of sub-
less of the text of subsection (b)(5). Except for the application
section (b)(5). A use will be consummated, and local use tax
of special rules for direct payment permit purchases in subsec-
will be due based upon the location where the permit holder first

47 TexReg 6162 September 23, 2022 Texas Register

CP Ex-31-0005 of 0017
stores or otherwise uses the item. See §3.334(j) and Tax Code, circumstances described in subparagraph (F) of this paragraph,
§321.205(d). concerning qualifying economic development agreements.
If the purchasers issue resale exemption certificates, subsection (B) Order received at a place of business in Texas, fulfilled at
(b)(5) will have no effect because the transactions will not be a location that is not a place of business. When an order that
subject to local tax. is placed over the telephone, through the Internet, or by any
means other than in person is received by the seller at a place
If orders are for the sale of exempt items, subsection (b)(5) will
of business in Texas, and the seller fulfills the order at a loca-
have no effect because the transactions will not be subject to
tion that is not a place of business of the seller in Texas, such as
local tax.
a warehouse or distribution center, the sale is consummated at
If the orders are for the sale of items to exempt entities, subsec- the place of business at which the order for the taxable item is
tion (b)(5) will have no effect because the transactions will not received.
be subject to local tax.
(C) Order fulfilled at a place of business in Texas. When an order
If the orders are for the sale of natural gas or electricity, local is placed in person at a location that is not a place of business of
tax will be sourced the same regardless of the text of subsection the seller in this state, such as a kiosk, or when an order is placed
(b)(5). The sale will be consummated at the point of delivery to over the telephone, through the Internet, or by any means other
the consumer. See §3.334(k)(8) and Tax Code, §321.203(f). than in person, and the seller fulfills the order at a location that
is a place of business in Texas, the sale is consummated at the
If the orders are for the sale of amusement services, local tax will
place of business where the order is fulfilled.
be sourced the same regardless of the text of subsection (b)(5).
The sale will be consummated where the performance or event (D) Order fulfilled within the state at a location that is not a place
occurs. See §3.334(k)(1) and Tax Code, §321.203(h). of business. When an order is received by a seller at any location
other than a place of business of the seller in this state, and the
If the orders are for the sale of cable television service, local
seller fulfills the order at a location in Texas that is not a place
tax, if any, will be sourced the same regardless of the text of
of business of the seller, then the sale is consummated at the
subsection (b)(5). The sale will be consummated at the point
location in Texas to which the order is shipped or delivered, or
of delivery to the consumer. See §3.334(k)(2), §3.313, and Tax
the location where it is transferred to the purchaser.
Code, §321.203(j).
(E) Order received outside of the state, fulfilled outside of the
If the orders are for the sale of landline telecommunications ser-
state. When an order is received by a seller at a location outside
vice, local tax will be sourced the same regardless of the text
of Texas, and the order is shipped or delivered into a local taxing
of subsection (b)(5). The sale will be consummated at the loca-
jurisdiction from a location outside of the state, the sale is not
tion of the device from which the call or other transmission orig-
consummated at a location in Texas. However, local use tax is
inates, or the billing address. See §3.334(k)(4) and Tax Code,
due based upon the location in this state to which the item is
§321.203(g-1).
shipped or delivered or at which possession of the item is taken
If the orders are for the sale of mobile telecommunication ser- by the purchaser as provided in subsection (i) of this section.
vices, local tax will be sourced the same regardless of the text of
Former subsection (h)(3)(B) did not distinguish between website
subsection (b)(5). The sale will be consummated at the primary
orders received by sales personnel, such as emails, and web-
place of use. See §3.334(k)(6) and Tax Code, §321.203(g).
site orders not received by sales personnel, such as automated
If the orders are for the sale of garbage or other solid waste col- shopping cart orders. If a taxpayer relied solely on the rule and
lection or removal, local tax will be sourced the same regardless did not review the hearings decisions and letter rulings available
of the text of subsection (b)(5). The sale will be consummated on the comptroller's STAR system, a taxpayer might conclude
at location from which the waste is collected or removed. See that an automated order placed through the Internet could be
§3.334(k)(11) and Tax Code, §321.203(k). received at a place of business, whereas proposed subsection
(b)(5) explicitly states that orders not received by sales person-
If the orders are for the remodeling, repair, or restoration of
nel are received at locations that are not places of business of
nonresidential real property, local tax will be sourced the same
the seller. Thus, under the former rule, if a retailer had a com-
regardless of the text of subsection (b)(5). The sale will be
puter server at a single location that was a place of business of
consummated at the job site. See §3.334(k)(9) and Tax Code,
the seller in Texas; and if the retailer had no other location in
§321.203(n).
Texas where the retailer received orders; and if the orders were
In one circumstance, subsection (b)(5) of §3.334 might change not fulfilled at the place of business of the seller in Texas; and
the way Texas retailers with one place of business in Texas if the orders were not delivered to the same jurisdiction in which
will source local sales tax. Prior to the 2020 amendment, they were received; and if the orders were not received from
§3.334(h)(3) provided in pertinent part (emphasis added): purchasers with direct pay permits; and if the orders were not
received from exempt purchasers; and if the purchasers did not
(3) Consummation of sale. The following rules, taken from Tax
issue resale exemption certificates; and if the orders were not
Code, §321.203 and §323.203, apply to all sellers engaged in
for the sale exempt items, natural gas or electricity, amusement
business in this state, regardless of whether they have a place
services, cable television service, landline telecommunications
of business in Texas or multiple places of business in the state.
service, mobile telecommunication services, garbage or other
(A) Order placed in person at a seller’s place of business in solid waste collection or removal, or the remodeling, repair, or
Texas. When a purchaser places an order for a taxable item restoration of nonresidential real property; and if the orders were
in person at a seller’s place of business in Texas, the sale of received by the retailer’s computer server located at its single
that item is consummated at that place of business, regardless place of business in Texas and not by a marketplace provider,
of the location where the order is fulfilled, except in the limited then the rule might lead the taxpayer to conclude that the sale
would be consummated at the retailer’s single place of business

PROPOSED RULES September 23, 2022 47 TexReg 6163

CP Ex-31-0006 of 0017
in Texas where the computer server was located. If all of these picked up the item at a Best Buy outlet in Houston, Best Buy
conditions were met under the 2020 version of the rule (which would collect local sales tax for the City of San Marcos. How-
is carried forward in this proposed rulemaking), the sale would ever, it appears that the Best Buy website was actually operated
be consummated under subsection (c)(2)(B)(i) at the location in by a different Best Buy affiliate, which would make it a market-
Texas to which the orders are shipped or delivered, or at which place provider as defined in Tax Code, §151.0242(a)(2). Un-
the purchasers take possession. der the marketplace statute, local tax is sourced to the location
where the item is shipped or delivered or at which possession is
Fiscal note
taken by the purchaser. Thus, any loss to the City of San Marcos
Brad Reynolds, Chief Revenue Estimator, has determined the of local sales tax revenue from the sale to the Houston resident
following for each year of the first five years that the rule will be would be the result of compliance with the marketplace statute.
in effect. And the loss of tax revenue would not be attributable to the rule.
The loss resulting from compliance with the statute would occur
There will be no additional estimated cost to the state and to local
without regard to whether the proposed rule was adopted.
governments expected as a result of enforcing or administering
the proposed rule. The proposed amendments explain the man- The City of Round Rock identified Dell as an entity that would
ner in which the comptroller intends to apply the consummation change its method of reporting. The comptroller does not have
statutes. The explanation should lead to greater taxpayer com- sufficient current information about the company or other affili-
pliance, and less audit resources required to enforce or admin- ates to determine whether the company is or is not complying
ister the rule. with the consummation statutes, former consummation rule, the
consummation rule adopted in 2020, or the proposed consum-
There will be no estimated reductions in costs to the state and to
mation rule.
local governments as a result of enforcing or administering the
rule amendments. Local governments do not administer the tax, Most other cities have not identified specific taxpayers or the
and the comptroller will not be reducing the size of its audit staff circumstances that would enable verification of their claims.
as a result of the rule.
Nevertheless, it is conceivable that the clarifications proposed
There could be loss or increase in revenue to individual local in the rule will cause some vendors to recognize their noncom-
governments as a result of enforcing or administering the rule pliance and change their reporting methods, and that these
due to increased compliance with the consummation statutes. A changes could cause shifts in tax revenue between local juris-
revenue loss to one local government will often but not always dictions.
be a revenue gain to others. Amounts for individual local gov-
Public benefits and costs
ernments cannot be estimated.
Brad Reynolds, Chief Revenue Estimator, has determined the
In general, due both to the number of taxing jurisdictions and
following for each year of the first five years that the rule will be
lack of pertinent, detailed information regarding the specific cir-
in effect.
cumstances of the myriad businesses reporting local sales and
use taxes, estimation of fiscal effects of a proposed law or rule, The public will benefit from greater clarity regarding the consum-
whether of dollar amounts or merely sign of change, on an indi- mation standards, making compliance easier.
vidual jurisdiction by jurisdiction basis is infeasible of execution.
There are no probable additional economic costs to a person re-
However, with respect to this rulemaking, it may be noted that
quired to comply with the rule. There is undoubtedly a burden
some cities with Local Government Code, Chapter 380 agree-
associated with collecting and remitting local tax. But the bur-
ments involving rebates of local sales and use tax revenues to
den is imposed by the statute. It is conceivable that the rule may
certain businesses have asserted that the clarifications provided
cause some vendors to realize that they are noncompliant. If the
by the rule will result in changes in sourcing and reporting of lo-
vendors come into compliance by changing from single-location
cal taxes by those businesses, with consequent reductions in
reporting to multiple-location reporting, their compliance burden
revenue subject to the agreements, though their assessments
may increase. And if vendors change from multiple-location re-
of such have not been verified by the comptroller.
porting to single-location reporting, their compliance burden may
Generally, the cities have not provided the data from which they diminish.
have calculated their asserted lost revenue, have not identified
Government growth impact statement
the vendors that would change their method of reporting, and
have not identified the circumstances that would require those Brad Reynolds, Chief Revenue Estimator, has determined the
vendors to change their methods of reporting as a result of the following for each year of the first five years that the rule will be
rule. The significance of the assertions cannot be verified. in effect: The amendment: will not create or eliminate a gov-
ernment program; will not require the creation or elimination of
An exception is the City of San Marcos. During the 2020 rule-
employee positions; will not require an increase or decrease in
making, the City of San Marcos filed comments claiming that the
future legislative appropriations to the comptroller; will not re-
proposed rule would cause the city to lose $7-8 million in local
quire an increase or decrease in fees paid to the comptroller;
sales tax revenue generated by a Best Buy call center, with the
will not create a new regulation; will not expand, limit, or repeal
net effect of economic development incentive revenue loss es-
an existing regulation; will not increase or decrease the number
timated at $3.4 million, presumably because the balance of the
of individuals subject to the rule's applicability; and will not posi-
local sales tax would have been rebated to Best Buy under a
tively or adversely affect this state's economy.
Chapter 380 agreement. Best Buy also filed comments stating
that it created a subsidiary called Best Buy Texas.com LLC and Local employment impact statement
sourced the local tax for all of its Internet and telephone sales
For the first five years that the rule will be in effect, the effect on
to the City of San Marcos. This would mean that if a resident of
local economies and employment, if any, cannot be determined.
the City of Houston placed an Internet order from Houston and
To the extent that the proposed rule leads to greater awareness

47 TexReg 6164 September 23, 2022 Texas Register

CP Ex-31-0007 of 0017
and compliance with the local tax consummation standards, Statutory or other authority under which the rule is proposed to
some vendors may change their reporting methods, which be adopted
might positively or negatively affect the tax revenue of particular
Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei-
local tax jurisdictions. Whether a change in local tax revenue
ture); 321.306 (Comptroller's Rules); 322.203 (Comptroller's
might increase or decrease the provision of local government
Rules); 323.306 (Comptroller's Rules) authorize the comptroller
services to an extent that would affect local economic activity
to adopt rules to implement the tax statutes.
or employment would depend on discretionary actions of the
governing body or the electorate of an affected jurisdiction, and Sections or articles of the code affected
cannot be determined.
Tax Code, §151.0595 (Single Local Tax Rate for Remote Sell-
Fiscal implications for small businesses and rural communities ers); Tax Code, Chapter 321, Subchapters A, B, C, D, and F;
Tax Code, Chapter 322; Tax Code, Chapter 323.
A statement of fiscal implications for small businesses or rural
communities is not required by Government Code, Chapter 2006 §3.334. Local Sales and Use Taxes.
if the rule is proposed under Tax Code, Title 2. In this instance, (a) Definitions. The following words and terms, when used
the rule is proposed under both Title 2 (State Taxation) and Title in this section, shall have the following meanings, unless the context
3 (Local Taxation). The comptroller has determined that the rule clearly indicates otherwise.
will not have an adverse economic effect on small businesses,
micro-businesses, or rural communities. (1) Cable system--The system through which a cable ser-
vice provider delivers cable television or bundled cable service, as
During the 2020 rulemaking, the comptroller received comments those terms are defined in §3.313 of this title (relating to Cable Televi-
that the proposed rule would increase compliance costs of small sion Service and Bundled Cable Service).
businesses that would have to switch from origin sourcing to des-
tination sourcing. However, the rule does not cause that result (2) City--An incorporated city, municipality, town, or vil-
for a small business that has all of its operations under one roof. lage.
A small business that does not sell through a marketplace and (3) City sales and use tax--The tax authorized under Tax
that has all of its operations at a single location, including sales Code, §321.101(a), including the additional municipal sales and use
and fulfillment, will be a "place of business" under the statute, tax authorized under Tax Code, §321.101(b), the municipal sales and
under the 2020 version of the rule, and under the proposed rule. use tax for street maintenance authorized under Tax Code, §327.003,
Non-marketplace orders fulfilled from that location will continue the Type A Development Corporation sales and use tax authorized un-
to be consummated at that location pursuant to §3.334(c)(1) or der Local Government Code, §504.251, the Type B Development Cor-
(c)(2)(A). Sales of a small business that are through a market- poration sales and use tax authorized under Local Government Code,
place are already subject to destination sourcing. §505.251, a sports and community venue project sales and use tax
It is conceivable that the rule may cause some vendors, small adopted by a city under Local Government Code, §334.081, and a mu-
or large, to realize that they are noncompliant. If the vendors nicipal development corporation sales and use tax adopted by a city un-
come into compliance by changing from single-location report- der Local Government Code, §379A.081. The term does not include
ing to multiple-location reporting, their compliance burden may the fire control, prevention, and emergency medical services district
increase. And if vendors change from multiple-location reporting sales and use tax authorized under Tax Code, §321.106, or the munic-
to single-location reporting, their compliance burden may dimin- ipal crime control and prevention district sales and use tax authorized
ish. under Tax Code, §321.108.

And, to the extent that the vendors have been reaching the two (4) Comptroller's website--The comptroller's [agency's]
percent ceiling on local taxes by over-collecting city sales taxes, website concerning local taxes located at: https://comptrol-
and the vendors begin correctly reporting, unincorporated rural ler.texas.gov/taxes/sales/.
communities may actually benefit from increased collection of (5) County sales and use tax--The tax authorized under
county use tax and special purpose use tax. See Tax Code, Tax Code, §323.101, including a sports and community venue project
§321.205(b) and §3.334(d)(1). sales and use tax adopted by a county under Local Government Code,
Public hearing §334.081. The term does not include the county health services sales
and use tax authorized under Tax Code, §324.021, the county landfill
The comptroller will hold a hearing to take public comments, on and criminal detention center sales and use tax authorized under Tax
Monday, October 17, 2022, at 9:00 a.m. in Room 170 of the Code, §325.021, or the crime control and prevention district sales and
Stephen F. Austin Building, 1700 Congress Ave., Austin, Texas use tax authorized under Tax Code, §323.105.
78701. Interested persons may sign up to testify beginning at
8:30 a.m. and testimony will be heard on a first come first serve (6) Drop shipment--A transaction in which an order is re-
basis. All persons will have 10 minutes to present their testimony ceived by a seller at one location, but the item purchased is shipped by
and shall also provide their testimony in writing prior to their oral the seller from another location, or is shipped by the seller's third-party
testimony. supplier, directly to a location designated by the purchaser.

Comments (7) Engaged in business--This term has the meaning given
in §3.286 of this title (relating to Seller's and Purchaser's Responsibil-
Comments on the proposal may be submitted to Jennifer ities).
Burleson, Director, Tax Policy Division, P.O. Box 13528,
Austin, Texas 78711-3528 or to the email address: tp.rule.com- (8) Extraterritorial jurisdiction-An unincorporated area
ments@cpa.texas.gov. Comments must be received no later that is contiguous to the corporate boundaries of a city as defined in
than 30 days from the date of publication of the proposal in the Local Government Code, §42.021.
Texas Register. (9) Fulfill--To complete an order by transferring
possession of a taxable item [directly] to a purchaser [at a Texas

PROPOSED RULES September 23, 2022 47 TexReg 6165

CP Ex-31-0008 of 0017
location], or to ship or deliver a taxable item to a location [in Texas] a retail or commercial business to process for that business invoices,
designated by the purchaser. The term does not include receiving or purchase orders, bills of lading, or other equivalent records onto which
tracking an order, determining shipping costs, managing inventory, or sales tax is added, including an office operated for the purpose of buy-
other activities that do not involve the transfer, shipment, or delivery ing and selling taxable goods to be used or consumed by the retail or
of a taxable item to the purchaser or a location designated by the commercial business, is not a place of business of the seller if the comp-
purchaser. troller determines that the outlet, office, facility, or location functions
or exists to avoid the tax legally due under Tax Code, Chapters 321,
(10) Itinerant vendor--A seller who travels to various lo-
322, and 323 or exists solely to rebate a portion of the tax imposed
cations for the purpose of receiving orders and making sales of taxable
by those chapters to the contracting business. An outlet, office, facil-
items and who has no place of business in this state. A person who
ity, or location does not exist to avoid the tax legally due under Tax
sells items through vending machines is also an itinerant vendor. A
Code, Chapters 321, 322, and 323 or solely to rebate a portion of the
salesperson that operates out of a place of business in this state is not
tax imposed by those chapters if the outlet, office, facility, or location
an itinerant vendor.
provides significant business services, beyond processing invoices, to
(11) Kiosk--A small stand-alone area or structure: the contracting business, including logistics management, purchasing,
inventory control, or other vital business services.
(A) that is used solely to display merchandise or to sub-
mit orders for taxable items from a data entry device, or both; (17) Purchasing office--An outlet, office, facility, or any
location that contracts with a retail or commercial business to process
(B) that is located entirely within a location that is a
for that business invoices, purchase orders, bills of lading, or other
place of business of another seller, such as a department store or shop-
equivalent records onto which sales tax is added, including an office
ping mall; and
operated for the purpose of buying and selling taxable goods to be used
(C) at which taxable items are not available for imme- or consumed by the retail or commercial business.
diate delivery to a purchaser.
(18) Remote Seller--As defined in §3.286 of this title, a
(12) Local taxes--Sales and use taxes imposed by any local remote seller is a seller engaged in business in this state whose only
taxing jurisdiction. activity in the state is:
(13) Local taxing jurisdiction--Any of the following: (A) engaging in regular or systematic solicitation of
sales of taxable items in this state by the distribution of catalogs, pe-
(A) a city that imposes sales and use tax as provided
riodicals, advertising flyers, or other advertising, by means of print,
under paragraph (3) of this subsection;
radio, or television media, or by mail, telegraphy, telephone, computer
(B) a county that imposes sales and use tax as provided data base, cable, optic, microwave, or other communication system for
under paragraph (5) of this subsection; the purpose of effecting sales of taxable items; or
(C) a special purpose district created under the Special (B) soliciting orders for taxable items by mail or
District Local Laws Code or other provisions of Texas law that is autho- through other media including the Internet or other media that may be
rized to impose sales and use tax by the Tax Code or other provisions developed in the future.
of Texas law and as governed by the provisions of Tax Code, Chapters
(19) Seller--This term has the meaning given in §3.286 of
321 or 323 and other provisions of Texas law; or
this title and also refers to any agent or employee of the seller.
(D) a transit authority that imposes sales and use tax as
(20) Special purpose district--A local governmental entity
authorized by Transportation Code, Chapters, 451, 452, 453, 457, or
authorized by the Texas legislature for a specific purpose, such as crime
460 and governed by the provisions of Tax Code, Chapter, 322.
control, a local library, emergency services, county health services, or
(14) Marketplace provider--This term has the meaning a county landfill and criminal detention center.
given in §3.286 of this title.
(21) Storage--This term has the meaning given in §3.346
(15) Order placed in person--An order placed by a pur- of this title (relating to Use Tax).
chaser with the seller while physically present at the seller's place of
(22) Temporary place of business of the seller--A location
business regardless of how the seller subsequently enters the order.
operated by a seller for a limited period of time for the purpose of sell-
(16) Place of business of the seller- general definition--A ing and receiving orders for taxable items and where the seller has in-
place of business of the seller must be an [An] established outlet, office, ventory available for immediate delivery to a purchaser. For example,
or location operated by a seller for the purpose of receiving orders for a person who rents a booth at a weekend craft fair or art show to sell
taxable items from persons [selling taxable items to those] other than and take orders for jewelry, or a person who maintains a facility at a
employees, independent contractors, and natural persons affiliated with job site to rent tools and equipment to a contractor during the construc-
the seller. An "established outlet, office, or location" requires staffing tion of real property, has established a temporary place of business. A
by one or more sales personnel.[, where sales personnel of the seller re- temporary place of business of the seller includes a sale outside of a
ceive three or more orders for taxable items during the calendar year.] distribution center, manufacturing plant, storage yard, warehouse, or
The term does not include a computer server, Internet protocol address, similar facility of the seller in a parking lot or similar space sharing
domain name, website, or software application. The "purpose" element the same physical address as the facility but not within the walls of the
of the definition may be established by proof that the sales personnel of facility.
the seller receive three or more orders for taxable items at the facility
(23) Transit authority--A metropolitan rapid transit author-
during the calendar year. Additional criteria for determining when a
ity (MTA), advanced transportation district (ATD), regional or subre-
location is a place of business of the seller are provided in subsection
gional transportation authority (RTA), city transit department (CTD),
(b) of this section for distribution centers, manufacturing plants, stor-
county transit authority (CTA), regional mobility authority (RMA) or
age yards, warehouses and similar facilities; kiosks; and purchasing
coordinated county transportation authority created under Transporta-
offices. An outlet, office, facility, or any location that contracts with
tion Code, Chapters 370, 451, 452, 453, 457, or 460.

47 TexReg 6166 September 23, 2022 Texas Register

CP Ex-31-0009 of 0017
(24) Two percent cap--A reference to the general rule that, of business where the sale is deemed to be consummated, as determined
except as otherwise provided by Texas law and as explained in this in accordance with subsection (c) of this section.
section, a seller cannot collect, and a purchaser is not obligated to pay,
(ii) When the sale of a taxable item is deemed to
more than 2.0% of the sales price of a taxable item in total local sales
be consummated at a location outside of this state, local use tax is due
and use taxes for all local taxing jurisdictions.
based on the location where the items are first stored, used or consumed
(25) Use--This term has the meaning given in §3.346 of by the entity that contracted with the purchasing office in accordance
this title. with subsection (d) of this section.
(26) Use tax--A tax imposed on the storage, use or other (4) An order that is received by a salesperson who is not at
consumption of a taxable item in this state. a place of business of the seller when the salesperson receives the order
is treated as being received at the location from which the salesperson
(b) Determining the place of business of a seller.
operates. Examples include orders that a salesperson receives [Orders
(1) Distribution centers, manufacturing plants, storage received by sales personnel who are not at a place of business of the
yards, warehouses, and similar facilities. seller in Texas when they receive the order, including orders received]
by mail, telephone, including Voice over Internet Protocol and cellu-
(A) A distribution center, manufacturing plant, storage
lar phone calls, facsimile, and email while traveling. The [This type
yard, warehouse, or similar facility operated by a seller for the purpose
of order is treated as being received at the] location from which the
of selling taxable items where sales personnel of the seller receive three
salesperson operates[, that] is[,] the principal fixed location where the
or more orders for taxable items during the calendar year from persons
salesperson conducts work-related activities. The location from which
other than employees, independent contractors, and natural persons af-
a salesperson operates will be a place of business of the seller only if
filiated with the seller is a place of business of the seller. The forward-
the location meets the definition of a "place of business of a seller" in
ing of previously received orders to the facility for fulfilment does not
subsection (a)(16) of this section on its own, without regard to the or-
make the facility a place of business.
ders imputed to that location by this paragraph. [Orders received prior
(B) If a location that is a place of business of the seller, to October 1, 2021, may also be treated as being received at the out-
such as a sales office, is in the same building as a distribution center, let, office, or location operated by the seller that serves as a base of
manufacturing plant, storage yard, warehouse, or similar facility op- operations or that provides administrative support to the salesperson,
erated by a seller, then the entire facility is a place of business of the and these locations will be treated as places of business of the seller for
seller. purposes of subsection (c) of this section.]
(2) Kiosks. A kiosk is not a place of business of the seller (5) An order that is not received by a salesperson is re-
for the purpose of determining where a sale is consummated for local ceived at a location that is not a place of business of the seller. Ex-
tax purposes. A seller who owns or operates a kiosk in Texas is, how- amples are orders received by a computer server through a shopping
ever, engaged in business in this state as provided in §3.286 of this title. cart software program and orders received by an automated telephone
ordering system. [Orders not received by sales personnel, including or-
(3) Purchasing offices.
ders received by a shopping website or shopping software application.
(A) A purchasing office is not a place of business of the Effective October 1, 2021, these orders are received at locations that
seller if the purchasing office exists solely to rebate a portion of the lo- are not places of business of the seller.]
cal sales and use tax imposed by Tax Code, Chapters 321, 322, or 323
(c) Local sales tax- Consummation of sale - determining the
to a business with which it contracts; or if the purchasing office func-
local taxing jurisdictions to which sales tax is due. Except for the spe-
tions or exists to avoid the tax legally due under Tax Code, Chapters
cial rules applicable to remote sellers in subsection (i)(3) of this sec-
321, 322, or 323. A purchasing office does not exist solely to rebate
tion, direct payment permit purchases in subsection (j) of this section,
a portion of the local sales and use tax or to avoid the tax legally due
and certain taxable items, including taxable items sold by a market-
under Tax Code, Chapters 321, 322, or 323 if the purchasing office pro-
place provider, as provided in subsection (k) of this section, each sale
vides significant business services to the contracting business beyond
of a taxable item is consummated at the location indicated by the pro-
processing invoices, including logistics management, purchasing, in-
visions of this subsection. The following rules, taken from Tax Code,
ventory control, or other vital business services.
§321.203 and §323.203, apply to all sellers engaged in business in this
(B) In making a determination under subparagraph (A) state, regardless of whether they have no place of business in Texas, a
of this paragraph, as to whether a purchasing office provides signif- single place of business in Texas, or multiple places of business in the
icant business services to the contracting business beyond processing state.
invoices, the comptroller will compare the total value of the other busi-
(1) Consummation of sale- order received at a place of
ness services to the value of processing invoices. If the total value of
business of the seller in Texas.
the other business services, including logistics management, purchas-
ing, inventory control, or other vital business services, is less than the (A) Order placed in person. Except as provided by
value of the service to process invoices, then the purchasing office will paragraph (3) of this subsection, when an order for a taxable item is
be presumed not to be a place of business of the seller. placed in person at a seller's place of business in Texas, including at a
temporary place of business of the seller in Texas, the sale of that item
(C) If the comptroller determines that a purchasing of-
is consummated at that place of business of the seller, regardless of the
fice is not a place of business of the seller, the sale of any taxable item
location where the order is fulfilled.
is deemed to be consummated at the place of business of the seller from
whom the purchasing office purchased the taxable item for resale and (B) Order not placed in person.
local sales and use taxes are due according to the following rules.
(i) Order fulfilled at a place of business of the seller
(i) When taxable items are purchased from a Texas in Texas. When an order is received at a place of business of the seller
seller, local sales taxes are due based on the location of the seller's place in Texas and is fulfilled at a place of business of the seller in Texas, the
sale is consummated at the place of business where the order is fulfilled.

PROPOSED RULES September 23, 2022 47 TexReg 6167

CP Ex-31-0010 of 0017
(ii) Order not fulfilled at a place of business of the transit authorities. Similarly, a place of business of the seller in Flower
seller in Texas. When an order is received at a place of business of the Mound is located within the boundaries of two special purpose districts,
seller in Texas and is fulfilled at a location that is not a place of business the Flower Mound Crime Control District and the Flower Mound Fire
of the seller in Texas, the sale is consummated at the place of business Control District, and the seller is responsible for collecting sales tax for
where the order is received. both special purpose districts.
(2) Consummation of sale- order not received at a place of (6) Itinerant vendors; vending machines.
business of the seller in Texas.
(A) Itinerant vendors. Sales made by itinerant vendors
(A) Order fulfilled at a place of business of the seller are consummated at, and itinerant vendors must collect sales tax based
in Texas. When an order is received at a location that is not a place upon, the location where the item is delivered or at which the purchaser
of business of the seller in Texas or is received outside of Texas, and of the item takes possession. Itinerant vendors do not have any respon-
is fulfilled from a place of business of the seller in Texas, the sale is sibility to collect use tax.
consummated at the place of business where the order is fulfilled.
(B) Vending machines. Sales of taxable items made
(B) Order not fulfilled from a place of business of the from a vending machine are consummated at the location of the vend-
seller in Texas. ing machine. See §3.293 of this title (relating to Food; Food Prod-
ucts; Meals; Food Service) for more information about vending ma-
(i) Order fulfilled in Texas. When an order is re-
chine sales.
ceived at a location that is not a place of business of the seller in Texas
and is fulfilled from a location in Texas that is not a place of business (d) Local use tax. The provisions addressing the imposition
of the seller, the sale is consummated at the location in Texas to which of state use tax in §3.346 of this title also apply to the imposition of
the order is shipped or delivered, or at which the purchaser of the item local use tax. For example, consistent with §3.346(e) of this title, all
takes possession. taxable items that are shipped or delivered to a location in this state that
is within the boundaries of a local taxing jurisdiction are presumed to
(ii) Order not fulfilled in Texas. When an order is
have been purchased for use in that local taxing jurisdiction as well as
received by a seller at a location that is not a place of business of the
presumed to have been purchased for use in the state.
seller in Texas [outside of Texas or by a remote seller], and is fulfilled
from a location outside of Texas, the sale is not consummated in Texas. (1) General rules.
However, a use is considered to be consummated at the first point in
(A) When local use taxes are due in addition to local
this state where the item is stored, used, or consumed after the inter-
sales taxes as provided by subsection (c) of this section, all applicable
state transit has ceased. A taxable item delivered to a point in this state
use taxes must be collected or accrued in the following order until the
is presumed to be used for storage, use, or consumption at that point
two percent cap is reached: city, county, special purpose district, and
until the contrary is established. Local use tax should be collected as
transit authority. If more than one special purpose district use tax is due,
provided in subsection (d) of this section. [local use tax is due based
all such taxes are to be collected or accrued before any transit authority
upon the location in this state to which the item is shipped or delivered
use tax is collected or accrued. See subparagraphs (D) and (E) of this
or at which the purchaser of the item takes possession as provided in
paragraph.
subsection (d) of this section.] Except as provided in subsection (i)(3)
of this section, a remote seller required to collect state use tax under (B) If a local use tax cannot be collected or accrued at
§3.286(b)(2) of this title must also collect local use tax [based on the its full rate without exceeding the two percent cap, the seller cannot
location to which the item is shipped or delivered or at which the pur- collect it, or any portion of it, and the purchaser is not responsible for
chaser of the item takes possession]. accruing it.
(3) Exception for qualifying economic development (C) If a seller collects a local sales tax on an item, or a
agreements entered into before January 1, 2009, pursuant to Tax Code, purchaser accrues a local sales tax on an item, a use tax for the same
§321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is type of jurisdiction is not due on the same item. For example, after a
effective until September 1, 2024. If applicable, the local sales tax due city sales tax has been collected or accrued for an item, no use tax is
on the sale of a taxable item is based on the location of the qualifying due to that same or a different city on that item, but use tax may be due
warehouse, which is a place of business of the seller, from which the to a county, special purpose district, or transit authority. Similarly, if
item is shipped or delivered or at which the purchaser of the item takes one or more special purpose district sales taxes have been collected or
possession. accrued for an item, no special purpose district use tax is due on that
item, and if one or more transit authority sales taxes have been collected
(4) Local sales taxes are due to each local taxing jurisdic-
or accrued for an item, no transit authority use tax is due on that item.
tion with sales tax in effect where the sale is consummated. Local use
tax may also be due if the total amount of local sales taxes due does not (D) Collection or accrual of use tax for multiple special
reach the two percent cap, and the item purchased is shipped or deliv- purpose districts. If more than one special purpose district use tax is in
ered to a location in one or more different local taxing jurisdictions, as effect at the location where use of an item occurs, the special purpose
provided in subsection (d) of this section. district taxes are due in the order of their effective dates, beginning
with the earliest effective date, until the two percent cap is met. The
(5) Multiple special purpose district taxes, multiple transit
effective dates of all special purpose district taxes are available on the
authority sales taxes, or a combination of the two may apply to a single
comptroller's website. However, if the collection or accrual of use tax
transaction. If the sale of a taxable item is consummated at a location
for the district with the earliest effective date would exceed the two
within the boundaries of multiple special purpose districts or transit
percent cap, the tax for that district is not due and the seller or purchaser
authorities, local sales tax is owed to each of the jurisdictions in effect
should determine, following the criteria in subparagraphs (A) - (C) of
at that location. For example, a place of business of the seller located in
this paragraph, whether use tax is due for the district that next became
the city of San Antonio is within the boundaries of both the San Antonio
effective.
Advanced Transportation District and the San Antonio Metropolitan
Transit Authority, and the seller is required to collect sales tax for both

47 TexReg 6168 September 23, 2022 Texas Register

CP Ex-31-0011 of 0017
(i) If the competing special purpose district taxes or at which the purchaser of the item takes possession. The seller is
became effective on the same date, the special purpose district taxes responsible for collecting the local use taxes due on the sale, regardless
are due in the order of the earliest date for which the election in which of the location of the seller in Texas. If the seller fails to collect any
the district residents authorized the imposition of sales and use tax by local use taxes due, the purchaser is responsible for accruing such taxes
the district was held. and remitting them directly to the comptroller.
(ii) If the elections to impose the local taxes were (C) Sale consummated in any local taxing jurisdictions
held on the same date, the special purpose district taxes are due in the imposing less than 2.0% in total local taxes - local sales taxes and use
order of the earliest date for which the enabling legislation under which taxes due. If a sale is consummated at a location in Texas where the
each district was created became effective. total local sales tax rate imposed by the taxing jurisdictions in effect at
that location does not equal 2.0% according to the provisions of sub-
(E) Collection or accrual of use tax for multiple transit
section (c) of this section, and the item is shipped or delivered to the
authorities. If more than one transit authority use tax is in effect at
purchaser at a location in this state that is inside the boundaries of a
the location where use of an item occurs, and the two percent cap has
different local taxing jurisdiction, additional local use tax may be due
not been met, the transit authority taxes are due in the order of their
based on the location to which the order is shipped or delivered or at
effective dates, beginning with the earliest effective date, until the two
which the purchaser of the item takes possession, subject to the two
percent cap is met. The effective dates of all transit authority taxes
percent cap. The seller is responsible for collecting any additional lo-
are available on the comptroller's website. However, if the collection
cal use taxes due on the sale, regardless of the location of the seller in
or accrual of use tax for the authority with the earliest effective date
Texas. See subsection (i) of this section. If the seller fails to collect the
would exceed the two percent cap, the tax for that authority is not due
additional local use taxes due, the purchaser is responsible for accruing
and the seller or purchaser should determine, following the criteria in
such taxes and remitting them directly to the comptroller.
subparagraphs (A)- (D) of this paragraph, whether use tax is due for
the authority that next became effective. (i) Example one - if an order is received in person
at a place of business of the seller, such that the sale is consummated at
(i) If the competing transit authorities became ef-
the location where the order is received as provided under subsection
fective on the same date, the transit authority taxes are due in the order
(c)(1)(A) of this section, and the local sales tax due on the sale does
of the earliest date for which the election in which the authority res-
not meet the two percent cap, additional local use taxes are due based
idents authorized the imposition of sales and use tax by the authority
on the location to which the order is shipped or delivered or at which
was held.
the purchaser of the item takes possession, subject to the provisions in
(ii) If the elections to impose local taxes were held paragraph (1) of this subsection.
on the same date, the transit authority use taxes are due in the order of
(ii) Example two - if a seller receives an order for
the earliest date for which the enabling legislation under which each
a taxable item at a seller's place of business in Texas, and the seller
authority was created became effective.
ships or delivers the item from an out-of-state location to a location in
(2) General use tax rules applied to specific situations. The this state as designated by the purchaser, local sales tax is due based
following fact patterns explain how local use tax is to be collected or upon the location of the place of business of the seller where the order
accrued and remitted to the comptroller based on, and subject to, the is received. If the local sales tax due on the item does not meet the two
general rules in paragraph (1) of this subsection. percent cap, use taxes, subject to the provisions in paragraph (1) of this
subsection, are due based upon the location where the items are shipped
(A) Sale consummated outside the state, item delivered
or delivered or at which the purchaser of the item takes possession.
from outside the state or from a location in Texas that is not operated by
the seller - local use tax due. Except as provided in subsection (i)(3) of (e) Effect of other law.
this section, if a sale is consummated outside of this state according to
(1) Tax Code, Title 2, Subtitles A (General Provisions) and
the provisions of subsection (c) of this section, and the item purchased
B (Enforcement and Collection), Tax Code, Chapter 141 (Multistate
is either shipped or delivered to a location in this state as designated
Tax Compact) and Tax Code, Chapter 151 (Limited Sales, Excise, and
by the purchaser from a location outside of the state, or if the order
Use Tax) apply to transactions involving local taxes. Related sections
is drop shipped directly to the purchaser from a third-party supplier,
of this title and comptroller rulings shall also apply with respect to local
local use tax is owed based upon the location in this state to which
taxes. This includes authorities such as court cases and federal law
the order is shipped or delivered or at which the purchaser of the item
that affect whether an item is taxable or is excluded or exempt from
takes possession. The seller is responsible for collecting the local use
taxation.
tax due on the sale. If the seller does not collect the local use taxes due
on the sale, the purchaser is responsible for accruing such taxes and (2) Permits, exemption certificates, and resale certificates
remitting them directly to the comptroller according to the provisions in required by Tax Code, Chapter 151, shall also satisfy the requirements
paragraph (1) of this subsection. For example, if an order for a taxable for collecting and remitting local taxes, unless otherwise indicated by
item is received by a seller at a location outside of Texas, and the order this section or other sections of this title. For example, see subsection
is shipped to the purchaser from a location outside of the state, local (n) of this section concerning prior contract exemptions.
use tax is due based upon the location to which the order is shipped or
(3) Any provisions in this section or other sections of this
delivered or at which the purchaser of the item takes possession.
title related to a seller's responsibilities for collecting and remitting lo-
(B) Sale consummated in Texas outside a local taxing cal taxes to the comptroller shall also apply to a purchaser if the seller
jurisdiction, item delivered into one or more local taxing jurisdictions - does not collect local taxes that are due. The comptroller may proceed
local use tax due. If a sale is consummated at a location in Texas that is against the seller or purchaser for the local tax owed by either.
outside of the boundaries of any local taxing jurisdiction according to
(f) Tax rates. Except as otherwise provided by law, no local
the provisions of subsection (c) of this section, and the order is shipped
governmental entity may adopt or increase a sales and use tax if, as a re-
or delivered to the purchaser at a location in this state that is within the
sult of the adoption or increase of the tax, the combined rate of all sales
boundaries of one or more local taxing jurisdictions, local use tax is
and use taxes imposed by local taxing jurisdictions having territory in
due based on the location to which the items are shipped or delivered

PROPOSED RULES September 23, 2022 47 TexReg 6169

CP Ex-31-0012 of 0017
the local governmental entity would exceed 2.0% at any location within agreement. Under this agreement, the city may impose sales and use
the boundaries of the local governmental entity's jurisdiction. The fol- tax within all or part of the boundaries of a district. Areas within a dis-
lowing are the local tax rates that may be adopted. trict that are annexed for this limited purpose are treated as though they
are within the boundaries of the city for purposes of city sales and use
(1) Cities. Cities may impose sales and use tax at a rate of
tax.
up to 2.0%.
(B) Counties, transit authorities, and special purpose
(2) Counties. Counties may impose sales and use tax at
districts may not enter into strategic partnership agreements. Sales and
rates ranging from 0.5% to 1.5%.
use taxes imposed by those taxing jurisdictions do not apply in the lim-
(3) Special purpose districts. Special purpose districts may ited-purpose annexed area as part of a strategic partnership agreement
impose sales and use tax at rates ranging from 0.125% to 2.0%. between a city and an authorized district. However, a county, special
purpose district, or transit authority sales and use tax, or any combina-
(4) Transit authorities. Transit authorities may impose
tion of these three types of taxes, may apply at locations included in a
sales and use tax at rates ranging from 0.25% to 1.0%.
strategic partnership agreement between a city and an authorized dis-
(g) Jurisdictional boundaries, combined areas, and city tax im- trict if the tax is imposed in that area by the applicable jurisdiction as
posed through strategic partnership agreements. allowed under its own controlling authorities.
(1) Jurisdictional boundaries. (C) Prior to September 1, 2011, the term "district" was
defined in Local Government Code, §43.0751 as a municipal utility
(A) City boundaries. City taxing jurisdictional bound-
district or a water control and improvement district. The definition
aries cannot overlap one another and a city cannot impose a sales and
was amended effective September 1, 2011, to mean a conservation and
use tax in an area that is already within the jurisdiction of another city.
reclamation district operating under Water Code, Chapter 49.
(B) County boundaries. County tax applies to all loca-
(h) Places of business of the seller and job sites crossed by
tions within that county.
local taxing jurisdiction boundaries.
(C) Special purpose district and transit authority
(1) Places of business of the seller crossed by local taxing
boundaries. Special purpose districts and transit authorities may
jurisdiction boundaries. If a place of business of the seller is crossed by
cross or share boundaries with other local taxing jurisdictions and
one or more local taxing jurisdiction boundaries so that a portion of the
may encompass, in whole or in part, other local taxing jurisdictions,
place of business of the seller is located within a taxing jurisdiction and
including cities and counties. A geographic location or address in this
the remainder of the place of business of the seller lies outside of the
state may lie within the boundaries of more than one special purpose
taxing jurisdiction, tax is due to the local taxing jurisdictions in which
district or more than one transit authority.
the sales office is located. If there is no sales office, sales tax is due to
(D) Extraterritorial jurisdictions. Except as otherwise the local taxing jurisdictions in which any cash registers are located.
provided by paragraph (3) of this subsection concerning strategic part-
(2) Job sites.
nership agreements and subsection (l)(5) of this section concerning the
City of El Paso and Fort Bliss, city sales and use tax does not apply to (A) Residential repair and remodeling; new construc-
taxable sales that are consummated outside the boundaries of the city, tion of an improvement to realty. When a contractor is improving real
including sales made in a city's extraterritorial jurisdiction. However, property under a separated contract, and the job site is crossed by the
an extraterritorial jurisdiction may lie within the boundaries of a spe- boundaries of one or more local taxing jurisdictions, the local taxes due
cial purpose district, transit authority, county, or any combination of on any separately stated charges for taxable items incorporated into the
the three, and the sales and use taxes for those jurisdictions would ap- real property must be allocated to the local taxing jurisdictions based on
ply to those sales. the total square footage of the real property improvement located within
each jurisdiction, including the square footage of any standalone struc-
(2) Combined areas. A combined area is an area where the
tures that are part of the construction, repair, or remodeling project.
boundaries of a city overlap the boundaries of one or more other local
For more information about tax due on materials used at residential
taxing jurisdictions as a result of an annexation of additional territory
and new construction job sites, refer to §3.291 of this title (relating to
by the city, and where, as the result of the imposition of the city tax
Contractors).
in the area in addition to the local taxes imposed by the existing tax-
ing jurisdictions, the combined local tax rate would exceed 2.0%. The (B) Nonresidential real property repair and improve-
comptroller shall make accommodations to maintain a 2.0% rate in any ment. When taxable services are performed to repair, remodel, or re-
combined area by distributing the 2.0% tax revenue generated in these store nonresidential real property, including a pipeline, transmission
combined areas to the local taxing jurisdictions located in the combined line, or parking lot, that is crossed by the boundaries of one or more
areas as provided in Tax Code, §321.102 or Health and Safety Code, local taxing jurisdictions, the local taxes due on the taxable services,
§775.0754. Combined areas are identified on the comptroller's web- including materials and any other charges connected to the services per-
site. Sellers engaged in transactions on which local sales or use taxes formed, must be allocated among the local taxing jurisdictions based
are due in a combined area, or persons who must self-accrue and re- upon the total mileage or square footage, as appropriate, of the repair,
mit tax directly to the comptroller, must use the combined area local remodeling, or restoration project located in each jurisdiction. For
code when reporting the tax rather than the codes for the individual more information about tax due on materials used at nonresidential
city, county, special purpose districts, or transit authorities that make real property repair and remodeling job sites, refer to §3.357 of this ti-
up the combined area. tle (relating to Nonresidential Real Property Repair, Remodeling, and
Restoration; Real Property Maintenance).
(3) City tax imposed through strategic partnership agree-
ments. (i) Sellers' and purchasers' responsibilities for collecting or
accruing local taxes.
(A) The governing bodies of a district, as defined in
Local Government Code, §43.0751, and a city may enter into a lim- (1) Sale consummated in Texas; seller responsible for col-
ited-purpose annexation agreement known as a strategic partnership lecting local sales taxes and applicable local use taxes. When a sale

47 TexReg 6170 September 23, 2022 Texas Register

CP Ex-31-0013 of 0017
of a taxable item is consummated at a location in Texas as provided by (ii) The single local use tax rate in effect for the
subsection (c) of this section, the seller must collect each local sales tax period beginning January 1, 2020, and ending December 31, 2020, is
in effect at the location. If the total rate of local sales tax due on the sale 1.75%.
does not reach the two percent cap, and the seller ships or delivers the
(E) Annual publication of single local use tax rate. Be-
item into another local taxing jurisdiction, then the seller is required to
fore the beginning of a calendar year, the comptroller will publish no-
collect additional local use taxes due, if any, based on the location to
tice of the single local use tax rate in the Texas Register that will be in
which the item is shipped or delivered or at which the purchaser of the
effect for that calendar year.
item takes possession, regardless of the location of the seller in Texas.
For more information regarding local use taxes, refer to subsection (d) (F) Calculating the single local use tax rate. The single
of this section. local use tax rate effective in a calendar year is equal to the estimated
average rate of local sales and use taxes imposed in this state during the
(2) Out-of-state sale; seller engaged in business in Texas.
preceding state fiscal year. As soon as practicable after the end of a state
Except as provided in paragraph (3) of this subsection, when a sale is
fiscal year, the comptroller must determine the estimated average rate
not consummated in Texas, a seller who is engaged in business in this
of local sales and use taxes imposed in this state during the preceding
state is required to collect and remit local use taxes due, if any, on orders
state fiscal year by:
of taxable items shipped or delivered at the direction of the purchaser
into a local taxing jurisdiction in this state based upon the location in (i) dividing the total amount of net local sales and
this state to which the item is shipped or delivered or at which the use taxes remitted to the comptroller during the state fiscal year by the
purchaser of the item takes possession as provided in subsection (d) total amount of net state sales and use tax remitted to the comptroller
of this section. during the state fiscal year;
(3) Local use tax rate for remote sellers. (ii) multiplying the amount computed under clause
(i) of this subparagraph by the rate provided in Tax Code, §151.051;
(A) A remote seller required to collect and remit one or
and
more local use taxes in connection with a sale of a taxable item must
compute the amount using: (iii) rounding the amount computed under clause
(ii) of this subparagraph to the nearest .0025.
(i) the combined tax rate of all applicable local use
taxes based on the location to which the item is shipped or delivered or (G) Direct refund. A purchaser may request a refund
at which the purchaser of the item takes possession; or based on local use taxes paid in a calendar year for the difference be-
tween the single local use tax rate paid by the purchaser and the amount
(ii) at the remote seller's election, the single local
the purchaser would have paid based on the combined tax rate for all
use tax rate published in the Texas Register.
applicable local use taxes. Notwithstanding the refund requirements
(B) A remote seller that is storing tangible personal under §3.325(a)(1) of this title (relating to Refunds and Payments Un-
property in Texas to be used for fulfillment at a facility of a market- der Protest), a non-permitted purchaser may request a refund directly
place provider that has certified that it will assume the rights and duties from the comptroller for the tax paid in the previous calendar year, no
of a seller with respect to the tangible personal property, as provided earlier than January 1 of the following calendar year within the statute
for in §3.286 of this title, may elect the single local use tax rate under of limitation under Tax Code, 111.104 (Refunds).
subparagraph (A)(ii) of this paragraph.
(H) Marketplace providers. Notwithstanding subpara-
(C) Notice to the comptroller of election and revocation graph (A) of this paragraph, marketplace providers may not use the
of election. single local use tax rate and must compute the amount of local use tax
to collect and remit using the combined tax rate of all applicable local
(i) Before using the single local use tax rate, a re-
use taxes.
mote seller must notify the comptroller of its election using a form pre-
scribed by the comptroller. A remote seller may also notify the comp- (4) Purchaser responsible for accruing and remitting local
troller of the election on its use tax permit application form. The remote taxes if seller fails to collect.
seller must use the single local use tax rate for all of its sales of taxable
(A) If a seller does not collect the state sales tax, any
items until the election is revoked as provided in clause (ii) of this sub-
applicable local sales taxes, or both, on a sale of a taxable item that
paragraph.
is consummated in Texas, then the purchaser is responsible for filing
(ii) A remote seller may revoke its election by filing a return and paying the tax. The local sales taxes due are based on
a form prescribed by the comptroller. If the comptroller receives the the location in this state where the sale is consummated as provided in
notice by October 1, the revocation will be effective January 1 of the subsection (c) of this section.
following year. If the comptroller receives the notice after October 1,
(B) A purchaser who buys an item for use in Texas from
the revocation will be effective January 1 of the year after the follow-
a seller who does not collect the state use tax, any applicable local use
ing year. For example, a remote seller must notify the comptroller by
taxes, or both, is responsible for filing a return and paying the tax. The
October 1, 2020, for the revocation to be effective January 1, 2021. If
local use taxes due are based on the location where the item is first
the comptroller receives the revocation on November 1, 2020, the re-
stored, used, or consumed by the purchaser.
vocation will be effective January 1, 2022.
(C) For more information about how to report and pay
(D) Single local use tax rate.
use tax directly to the comptroller, see §3.286 of this title.
(i) The single local use tax rate in effect for the pe-
(5) Local tax is due on the sales price of a taxable item, as
riod beginning October 1, 2019, and ending December 31, 2019, is
defined in Tax Code, §151.007, in the report period in which the taxable
1.75%.
item is purchased or the period in which the taxable item is first stored,
used, or otherwise consumed in a local taxing jurisdiction.

PROPOSED RULES September 23, 2022 47 TexReg 6171

CP Ex-31-0014 of 0017
(6) A purchaser is not liable for additional local use tax if For more information, refer to §3.344 of this title (relating to Telecom-
the purchaser pays local use tax using the rate elected by an eligible re- munications Services).
mote seller according to paragraph (3) of this subsection. The remote
(5) Marketplace provider sales. Local taxes are due on
seller must be identified on the comptroller's website as electing to use
sales of taxable items through a marketplace provider based on the lo-
the single local use tax rate. A purchaser must verify that the remote
cation in this state to which the item is shipped or delivered or at which
seller is listed on the comptroller's website. If the remote seller is not
the purchaser takes possession. For more information, refer to §3.286
listed on the comptroller's website, the purchaser will be liable for ad-
of this title.
ditional use tax due in accordance to paragraph (4) of this subsection.
(6) Mobile telecommunications services. Local taxes due
(j) Items purchased under a direct payment permit.
on mobile telecommunications services are based upon the location of
(1) When taxable items are purchased under a direct pay- the customer's place of primary use as defined in §3.344(a)(8) of this
ment permit, local use tax is due based upon the location where the title, and local taxes are to be collected as indicated in §3.344(h) of this
permit holder first stores the taxable items, except that if the taxable title.
items are not stored, then local use tax is due based upon the location
(7) Motor vehicle parking and storage. Local taxes are
where the taxable items are first used or otherwise consumed by the
due based on the location of the space or facility where the vehicle is
permit holder.
parked. For more information, refer to §3.315 of this title (relating to
(2) If, in a local taxing jurisdiction, storage facilities con- Motor Vehicle Parking and Storage).
tain taxable items purchased under a direct payment exemption certifi-
(8) Natural gas and electricity. Any local city and special
cate and at the time of storage it is not known whether the taxable items
purpose taxes due are based upon the location where the natural gas
will be used in Texas, then the taxpayer may elect to report the use tax
or electricity is delivered to the purchaser. As explained in subsection
either when the taxable items are first stored in Texas or are first re-
(l)(1) of this section, residential use of natural gas and electricity is
moved from inventory for use in Texas, as long as use tax is reported
exempt from all county sales and use taxes and all transit authority sales
in a consistent manner. See also §3.288(i) of this title (relating to Direct
and use taxes, most special purpose district sales and use taxes, and
Payment Procedures and Qualifications) and §3.346(g) of this title.
many city sales and use taxes. A list of the cities and special purpose
(3) If local use tax is paid on stored items that are subse- districts that do impose, and those that are eligible to impose, local
quently removed from Texas before they are used, the tax may be re- sales and use tax on residential use of natural gas and electricity is
covered in accordance with the refund and credit provisions of §3.325 available on the comptroller's website. For more information, also refer
of this title and §3.338 of this title (relating to Multistate Tax Credits to §3.295 of this title (relating to Natural Gas and Electricity).
and Allowance of Credit for Tax Paid to Suppliers).
(9) Nonresidential real property repair and remodeling ser-
(k) Special rules for certain taxable goods and services. Sales vices. Local taxes are due on services to remodel, repair, or restore
of the following taxable goods and services are consummated at, and nonresidential real property based on the location of the job site where
local tax is due based upon, the location indicated in this subsection. the remodeling, repair, or restoration is performed. See also subsection
(h)(2)(B) of this section and §3.357 of this title.
(1) Amusement services. Local tax is due based upon the
location where the performance or event occurs. For more information (10) Residential real property repair and remodeling and
on amusement services, refer to §3.298 of this title (relating to Amuse- new construction of a real property improvement performed under a
ment Services). separated contract. When a contractor constructs a new improvement
to realty pursuant to a separated contract or improves residential real
(2) Cable services. When a service provider uses a cable
property pursuant to a separated contract, the sale is consummated at
system to provide cable television or bundled cable services to cus-
the job site at which the contractor incorporates taxable items into the
tomers, local tax is due as provided for in §3.313 of this title. When
customer's real property. See also subsection (h)(2)(A) of this section
a service provider uses a satellite system to provide cable services to
and §3.291 of this title.
customers, no local tax is due on the service in accordance with the
Telecommunications Act of 1996, §602. (11) Waste collection services. Local taxes are due on
garbage or other solid waste collection or removal services based on
(3) Florists. Local sales tax is due on all taxable items
the location at which the waste is collected or from which the waste is
sold by a florist based upon the location where the order is received,
removed. For more information, refer to §3.356 of this title (relating
regardless of where or by whom delivery is made. Local use tax is not
to Real Property Service).
due on deliveries of taxable items sold by florists. For example, if the
place of business of the florist where an order is taken is not within the (l) Special exemptions and provisions applicable to individual
boundaries of any local taxing jurisdiction, no local sales tax is due on jurisdictions.
the item and no local use tax is due regardless of the location of delivery.
(1) Residential use of natural gas and electricity.
If a Texas florist delivers an order in a local taxing jurisdiction at the
instruction of an unrelated florist, and if the unrelated florist did not (A) Mandatory exemptions from local sales and use
take the order within the boundaries of a local taxing jurisdiction, local tax. Residential use of natural gas and electricity is exempt from most
use tax is not due on the delivery. For more information about florists' local sales and use taxes. Counties, transit authorities, and most spe-
sales and use tax obligations, refer to §3.307 of this title (relating to cial purpose districts are not authorized to impose sales and use tax on
Florists). the residential use of natural gas and electricity. Pursuant to Tax Code,
§321.105, any city that adopted a local sales and use tax effective Octo-
(4) Landline telecommunications services. Local taxes
ber 1, 1979, or later is prohibited from imposing tax on the residential
due on landline telecommunications services are based upon the loca-
use of natural gas and electricity. See §3.295 of this title.
tion of the device from which the call or other transmission originates.
If the seller cannot determine where the call or transmission originates, (B) Imposition of tax allowed in certain cities. Cities
local taxes due are based on the address to which the service is billed. that adopted local sales tax prior to October 1, 1979, may, in accordance
with the provisions in Tax Code, §321.105, choose to repeal the exemp-

47 TexReg 6172 September 23, 2022 Texas Register

CP Ex-31-0015 of 0017
tion for residential use of natural gas and electricity. The comptroller's (B) Exemptions from special zone sales and use tax.
website provides a list of cities that impose tax on the residential use The sale, production, distribution, lease, or rental of; and the use, stor-
of natural gas and electricity, as well as a list of those cities that do not age, or other consumption within a special sales and use tax zone of; a
currently impose the tax, but are eligible to do so. taxable item sold, leased, or rented by the entities identified in clauses
(i)- (vi) of this subparagraph are exempt from the special zone sales
(C) Effective January 1, 2010, a fire control, preven-
and use tax. State and all other applicable local taxes apply unless oth-
tion, and emergency medical services district organized under Local
erwise exempted by law. The special zone sales and use tax exemption
Government Code, Chapter 344 that imposes sales tax under Tax Code,
applies to:
§321.106, or a crime control and prevention district organized under
Local Government Code, Chapter 363 that imposes sales tax under Tax (i) a retail electric provider as defined by Utilities
Code, §321.108, that is located in all or part of a municipality that im- Code, §31.002;
poses a tax on the residential use of natural gas and electricity as pro-
(ii) an electric utility or a power generation com-
vided under Tax Code, §321.105 may impose tax on residential use of
pany as defined by Utilities Code, §31.002;
natural gas and electricity at locations within the district. A list of the
special purpose districts that impose tax on residential use of natural (iii) a gas utility as defined by Utilities Code,
gas and electricity and those districts eligible to impose the tax that do §101.003 or §121.001, or a person who owns pipelines used for
not currently do so is available on the comptroller's website. transportation or sale of oil or gas or a product or constituent of oil or
gas;
(2) Telecommunication services. Telecommunications
services are exempt from all local sales taxes unless the governing (iv) a person who owns pipelines used for the trans-
body of a city, county, transit authority, or special purpose district votes portation or sale of carbon dioxide;
to impose sales tax on these services. However, since 1999, under Tax
(v) a telecommunications provider as defined by
Code, §322.109(d), transit authorities created under Transportation
Utilities Code, §51.002; or
Code, Chapter 451 cannot repeal the exemption unless the repeal is
first approved by the governing body of each city that created the local (vi) a cable service provider or video service
taxing jurisdiction. The local sales tax is limited to telecommunica- provider as defined by Utilities Code, §66.002.
tions services occurring between locations within Texas. See §3.344
(5) Imposition of city sales tax and transit tax on certain
of this title. The comptroller's website provides a list of local taxing
military installations; El Paso and Fort Bliss. Pursuant to Tax Code,
jurisdictions that impose tax on telecommunications services.
§321.1045 (Imposition of Sales and Use Tax in Certain Federal Military
(3) Emergency services districts. Installations), for purposes of the local sales and use tax imposed under
Tax Code, Chapter 321, the city of El Paso includes the area within the
(A) Authority to exclude territory from imposition of
boundaries of Fort Bliss to the extent it is in the city's extraterritorial
emergency services district sales and use tax. Pursuant to the provi-
jurisdiction. However, the El Paso transit authority does not include
sions of Health and Safety Code, §775.0751(c-1), an emergency ser-
Fort Bliss. See Transportation Code, §453.051 concerning the Creation
vices district wishing to enact a sales and use tax may exclude from the
of Transit Departments.
election called to authorize the tax any territory in the district where the
sales and use tax is then at 2.0%. The tax, if authorized by the voters (m) Restrictions on local sales tax rebates and other economic
eligible to vote on the enactment of the tax, then applies only in the incentives. Pursuant to Local Government Code, §501.161, Section 4A
portions of the district included in the election. The tax does not apply and 4B development corporations may not offer to provide economic
to sales made in the excluded territories in the district and sellers in the incentives, such as local sales tax rebates authorized under Local Gov-
excluded territories should continue to collect local sales and use taxes ernment Code, Chapters 380 or 381, to persons whose business consists
for the local taxing jurisdictions in effect at the time of the election un- primarily of purchasing taxable items using resale certificates and then
der which the district sales and use tax was authorized as applicable. reselling those same items to a related party. A related party means a
person or entity which owns at least 80% of the business enterprise to
(B) Consolidation of districts resulting in sales tax
which sales and use taxes would be rebated as part of an economic in-
sub-districts. Pursuant to the provisions of Health and Safety Code,
centive.
§775.018(f), if the territory of a district proposed under Health and
Safety Code, Chapter 775 overlaps with the boundaries of another (n) Prior contract exemptions. The provisions of §3.319 of
district created under that chapter, the commissioners court of each this title (relating to Prior Contracts) concerning definitions and exclu-
county and boards of the counties in which the districts are located may sions apply to prior contract exemptions.
choose to create a consolidated district in the overlapping territory. If
(1) Certain contracts and bids exempt. No local taxes are
two districts that want to consolidate under Health and Safety Code,
due on the sale, use, storage, or other consumption in this state of tax-
§775.024 have different sales and use tax rates, the territory of the
able items used:
former districts located within the consolidated area will be designated
as sub-districts and the sales tax rate within each sub-district will (A) for the performance of a written contract executed
continue to be imposed at the rate the tax was imposed by the former prior to the effective date of any local tax if the contract may not be
district that each sub-district was part of prior to the consolidation. modified because of the tax; or
(4) East Aldine Management District. (B) pursuant to the obligation of a bid or bids submitted
prior to the effective date of any local tax if the bid or bids and contract
(A) Special sales and use tax zones within district;
entered into pursuant thereto are at a fixed price and not subject to
separate sales and use tax rate. As set out in Special District Local
withdrawal, change, or modification because of the tax.
Laws Code, §3817.154(e) and (f), the East Aldine Management
District board may create special sales and use tax zones within the (2) Annexations. Any annexation of territory into an exist-
boundaries of the District and, with voter approval, enact a special ing local taxing jurisdiction is also a basis for claiming the exemption
sales and use tax rate in each zone that is different from the sales and provided by this subsection.
use tax rate imposed in the rest of the district.

PROPOSED RULES September 23, 2022 47 TexReg 6173

CP Ex-31-0016 of 0017
(3) Local taxing jurisdiction rate increase; partial exemp- §16.38, concerning special rule for overlapping project areas
tion for certain contracts and bids. When an existing local taxing ju- in noncommercial applications, §16.39, concerning application
risdiction raises its sales and use tax rate, the additional amount of tax requirements, §16.40, concerning evaluation criteria, §16.41,
that would be due as a result of the rate increase is not due on the sale, concerning application protest process, §16.42, concerning
use, storage, or other consumption in this state of taxable items used: awards; grant agreement, §16.43, concerning reporting, §16.44,
concerning records retention; audit, §16.45, concerning failure
(A) for the performance of a written contract executed
to perform, and §16.46, concerning forms; notices. These new
prior to the effective date of the tax rate increase if the contract may
sections implement the Texas Broadband Development Office.
not be modified because of the tax; or
The new sections will be located in Chapter 16 (Broadband
(B) pursuant to the obligation of a bid or bids submitted Development), new Subchapter B (Broadband Development
prior to the effective date of the tax rate increase if the bid or bids and Program).
contract entered into pursuant thereto are at a fixed price and not subject
The proposal is to comply with Government Code, Chapter 490I,
to withdrawal, change, or modification because of the tax.
which was enacted by House Bill 5, 87th Legislature, R.S., 2021.
(4) Three-year statute of limitations. Government Code, §490I.0109, permits the comptroller to adopt
rules regarding the Texas Broadband Development Office as
(A) The exemption in paragraph (1) of this subsection
necessary to implement that chapter.
and the partial exemption in paragraph (3) of this subsection have no
effect after three years from the date the adoption or increase of the tax Section 16.30 provides definitions.
takes effect in the local taxing jurisdiction.
Section 16.31 provides that the office shall publish a notice of
(B) The provisions of §3.319 of this title apply to this funds availability.
subsection to the extent they are consistent.
Section 16.32 establishes that the office may establish eligibil-
(C) Leases. Any renewal or exercise of an option to ity and program requirements and preferences and make award
extend the time of a lease or rental contract under the exemptions pro- decisions in compliance with state or federal law, rule, regula-
vided by this subsection shall be deemed to be a new contract and no tion, or guidance applicable to the type of funding to the extent
exemption will apply. necessary to avoid a conflict between the relevant law, rule, reg-
ulation, or guidance and this subchapter.
(5) Records. Persons claiming the exemption provided by
this subsection must maintain records which can be verified by the Section 16.33 describes designated area eligibility requirements
comptroller or the exemption will be lost. in compliance with state and federal law, rule, regulation and
guidance.
(6) Exemption certificate. An identification number is re-
quired on the prior contract exemption certificates furnished to sellers. Section 16.34 establishes the process for petitioning for desig-
The identification number should be the person's 11-digit Texas tax- nated area reclassification.
payer number or federal employer's identification (FEI) number.
Section 16.35 describes program eligibility requirements.
The agency certifies that legal counsel has reviewed the pro-
Section 16.36 describes the application process.
posal and found it to be within the state agency's legal authority
to adopt. Section 16.37 establishes criteria for overlapping project areas.
Section 16.38 establishes an application amendment process for
Filed with the Office of the Secretary of State on September 9,
applications from noncommercial broadband service providers
2022. that contain project areas that overlap with project areas in ap-
TRD-202203623 plications from commercial broadband service providers.
Jenny Burleson Section 16.39 establishes application requirements.
Director, Tax Policy Division
Section 16.40 establishes criteria the office shall use to evalu-
Comptroller of Public Accounts ate applications and provides preferences the office may use to
Earliest possible date of adoption: October 23, 2022 make award decisions.
For further information, please call: (512) 475-2220
Section 16.41 establishes an application protest process.
♦ ♦ ♦ Section 16.42 provides award decisions will be made at the sole
CHAPTER 16. BROADBAND DEVELOPMENT discretion of the office, requires awards to be used only for cer-
tain specified purposes, and establishes a timeline for grant re-
SUBCHAPTER B. BROADBAND cipients to negotiate and sign grant agreements.
DEVELOPMENT PROGRAM Section 16.43 provides requirements for the submission of re-
ports and documentation by a grant recipient.
34 TAC §§16.30 - 16.46
Section 16.44 provides records retention requirements and de-
The Comptroller of Public Accounts proposes new §16.30,
scribes requirements for providing records, documentation, or
concerning definitions, §16.31, concerning notice of funds
other information required by the office and authorizes the of-
availability, §16.32, concerning federal funding; conflict with
fice, upon reasonable notice, to audit the activities of a grant
laws, rules, regulations, or guidance, §16.33, concerning
recipient as necessary to ensure that grant funds are used for
designated area eligibility, §16.34, concerning designated
the intended purpose of the reimbursement award and that the
area reclassification, §16.35, concerning program eligibility
grant recipient has complied with the terms, conditions, and re-
requirements, §16.36, concerning application process generally,
quirements of the grant.
§16.37, concerning overlapping applications or project areas,

47 TexReg 6174 September 23, 2022 Texas Register

CP Ex-31-0017 of 0017
TAB
H
The department has determined that the rule as proposed will The agency certifies that legal counsel has reviewed the pro-
not affect rural communities, as it does not directly regulate any posal and found it to be within the state agency's legal authority
rural community. to adopt.
The department has not drafted a local employment impact
Filed with the Office of the Secretary of State on April 8, 2024.
statement under the Administrative Procedures Act, §2001.022,
as the agency has determined that the rule as proposed will not TRD-202401417
impact local economies. James Murphy
General Counsel
The department has determined that Government Code,
§2001.0225 (Regulatory Analysis of Major Environmental Texas Parks and Wildlife Department
Rules), does not apply to the proposed rule. Earliest possible date of adoption: May 19, 2024
For further information, please call: (512) 389-4775
The department has determined that there will not be a taking of
private real property, as defined by Government Code, Chapter ♦ ♦ ♦
2007, as a result of the proposed rule.
TITLE 34. PUBLIC FINANCE
In compliance with the requirements of Government Code,
§2001.0221, the department has prepared the following Govern- PART 1. COMPTROLLER OF PUBLIC
ment Growth Impact Statement (GGIS). The rule as proposed,
if adopted, will not create a government program; not result in ACCOUNTS
an increase or decrease in the number of full-time equivalent
employee needs; not result in a need for additional General CHAPTER 3. TAX ADMINISTRATION
Revenue funding; not affect the amount of any fee; create a SUBCHAPTER O. STATE AND LOCAL SALES
new regulation (to prohibit "canned" hunting of mountain lions
and establish trapping rules); not expand an existing regulation; AND USE TAXES
neither increase nor decrease the number of individuals subject 34 TAC §3.334
to regulation; and not positively or adversely affect the state's
economy. The Comptroller of Public Accounts proposes the repeal of
§3.334, concerning local sales and use taxes. The comptroller
Comments on the proposed rule may be submitted to Richard repeals existing §3.334 to replace it with new §3.334. The
Heilbrun, Texas Parks and Wildlife Department, 4200 Smith repeal of §3.334 will be effective the date the new §3.334 takes
School Road, Austin, Texas 78744; (512) 389-8104; email: effect.
richard.heilbrun@tpwd.texas.gov or via the department website
at www.tpwd.texas.gov. Brief explanation of the proposed rulemaking.
The new rule is proposed under the authority of Parks and It has been called to the comptroller's attention that the October
Wildlife Code, §67.004, which requires the commission by 27, 2023 notice of proposed rulemaking did not contain a state-
regulation to establish any limits on the taking, possession, ment of fiscal implications for small businesses or rural commu-
propagation, transportation, importation, exportation, sale, or nities as required by Government Code, Chapter 2006. See (48
offering for sale of nongame fish or wildlife that the department TexReg 6340) (October 27, 2023). Therefore, the comptroller is
considers necessary to manage the species. proposing to repeal the adopted rule as proposed in the October
27, 2023 notice of proposed rulemaking. The comptroller is si-
The proposed new rule affects Parks and Wildlife Code, Chapter multaneously proposing to readopt the text of the rule effective
67. on January 5, 2024, with amendments, under the same num-
§65.950. Mountain Lions (Puma concolor). ber and title, with the repeal to be effective as of the date of the
adopted rule.
(a) In this section "captivity" means the state of being held
under control, or kept caged, penned, or trapped. Fiscal note.
(b) No person in this state may: Brad Reynolds, Chief Revenue Estimator, has determined that
repeal of the current rule is of no consequence apart from facilita-
(1) hunt a mountain lion that is in captivity;
tion of adoption of a new substitute §3.334 and has no fiscal im-
(2) release a mountain lion from captivity for purposes of: plications in and of itself. The fiscal implications of the repeal are
the same as the fiscal implication of the proposed new substitute
(A) being hunted;
§3.334. The statements in this fiscal note are supplemented by
(B) training dogs; the additional statements in the preamble to the proposed new
§3.334, which the comptroller will propose to adopt concurrently
(3) allow a live mountain lion to be captured in a trap or
with this proposed repeal.
snare for more than 36 hours; or
Brad Reynolds has determined the following for each year of the
(4) conduct, promote, assist, or advertise an activity pro-
first five years that the proposed repeal and the substitute new
hibited by this subsection.
rule will be in effect.
(c) This section does not:
The additional estimated cost to the state and to local govern-
(1) prohibit a person from humanely dispatching a lawfully ments expected as a result of enforcing or administering the rule.
trapped mountain lion; or
There will be no additional estimated cost to the state and to local
(2) apply to the use of snares designed to break away or governments expected as a result of enforcing or administering
disassemble with 285 pounds of force or less. the proposed repeal of the existing rule and concurrent new rule.

D-1-GN-21-003198

TRIAL EXHIBIT
49 TexReg 2440 April 19, 2024 Texas Register

CP Ex-38-0001 of 0018 CP Ex-38
The proposed amendments explain the manner in which the affect local economic activity or employment would depend on
comptroller intends to apply the consummation statutes. The ex- discretionary actions of the governing body or the electorate of
planation should lead to greater taxpayer compliance, and less an affected jurisdiction, and cannot be determined.
audit resources required to enforce or administer the rule.
Government growth impact statement.
The estimated reductions in costs to the state and to local gov-
Brad Reynolds, Chief Revenue Estimator, has determined the
ernments as a result of enforcing or administering the rule.
following for each year of the first five years that the existing rule
There will be no estimated reductions in costs to the state and to will be repealed and the proposed new rule will be in effect: the
local governments as a result of enforcing or administering the amendment will not create or eliminate a government program;
proposed repeal of the existing rule and the concurrent new rule. will not require the creation or elimination of employee positions;
Local governments do not administer the tax, and the comptroller will not require an increase or decrease in future legislative ap-
will not be reducing the size of its audit staff as a result of the rule. propriations to the comptroller; will not require an increase or
decrease in fees paid to the comptroller; will not create a new
The estimated loss or increase in revenue to the state or to local
regulation; will increase the number of individuals subject to the
governments as a result of enforcing or administering the rule,
rule's applicability because sellers without a physical presence
and the foreseeable implications relating to cost or revenues of
in a local tax jurisdiction will be required to collect local use tax if
the state or local governments.
they are required to collect state use tax; and will not positively
Change in sourcing of transactions subject to local sales taxation or adversely affect this state's economy.
could result in net change in sales tax revenue of local taxing en-
Economic impact statement and regulatory flexibility analysis.
tities generally, which may be significant for some jurisdictions.
Most, but not all, reductions in taxable transactions sourced to A "rural community" is a municipality with a population of less
some jurisdictions would be increases in taxable transactions than 25,000. The comptroller estimates that there are 1,098
sourced to other jurisdictions. If the comptroller repeals the exist- such rural communities, of which 1,017 impose a sales tax and
ing rule and concurrently adopts the proposed new rule, it is esti- may have revenue affected by compliance with the rule.
mated that there could be a $28.5 million reduction in aggregate
A "small business" is a legal entity, including a corporation, part-
local sales tax levies sourced to unincorporated areas without lo-
nership, or sole proprietorship, that: (A) is formed for the pur-
cal sales tax or with cumulative local county and special district
pose of making a profit; (B) is independently owned and oper-
tax rates less than the cumulative local rates that applied at the
ated; and (C) has fewer than 100 employees or less than $6
locations where the taxable transactions were formerly sourced.
million in annual gross receipts. The Comptroller estimates that
A $28.5 million reduction in aggregate local tax levies would re-
there are 470,000 businesses with fewer than 100 employees,
sult in reduced state service charge revenue of $570,000.
and 377,000 businesses with annual gross receipts less than $6
Reliable estimates of net changes in revenue for each of the million; the sum of these two estimates would overstate the num-
1,759 local sales taxing jurisdictions that might stem from compli- ber of small businesses, as many businesses would be expected
ance with the proposed repeal of the existing rule and concurrent to have both fewer than 100 employees and less than $6 million
adoption of new rule cannot feasibly be produced by the comp- in annual gross receipts.
troller.
To the extent that the repeal of the existing rule and the adoption
Public benefits and costs. of the proposed new rule leads to greater awareness and compli-
ance with the local tax consummation standards, some vendors
Brad Reynolds, Chief Revenue Estimator, has determined the
may change their reporting methods, which might positively or
following for each year of the first five years that the existing rule
negatively affect the tax revenue of particular local tax jurisdic-
will be repealed and the proposed new rule will be in effect.
tions. As previously explained, the comptroller does not have
The public will benefit from greater clarity regarding the consum- sufficient data on the business operations of each business to
mation standards, making compliance easier. identify and quantify the businesses and transactions that might
be affected, and the positive or negative revenue impact on each
There may be additional economic costs to a person required to
tax jurisdiction.
comply with the proposed repeal of the existing rule and adoption
of the new rule. The rule may cause some vendors to realize that It is conceivable that repeal of the existing rule and adoption of
they are noncompliant. If the vendors come into compliance by the proposed new rule may cause some vendors, small or large,
changing from single-location reporting to multiple-location re- to realize that they are noncompliant. If the vendors come into
porting, their compliance burden may increase. And if vendors compliance by changing from single-location reporting to multi-
change from multiple-location reporting to single-location report- ple-location reporting, their compliance burden may increase.
ing, their compliance burden may diminish.
The repeal of the existing rule and the adoption of the proposed
Local employment impact statement. new rule will expand the local tax collection obligations of remote
sellers - out-of-state sellers that collect state use tax must also
For the first five years that the existing rule will be repealed
collect local sales tax. The expansion of the remote seller local
and the proposed new rule will be in effect, the effect on local
tax collection obligation may benefit small businesses in Texas
economies and employment, if any, cannot be determined. To
by reducing the perception of customers that purchases from
the extent that the repeal of the existing rule and the proposed
out-of-state sellers are preferable because out-of-state sellers
new rule leads to greater awareness and compliance with the
charge less sales or use tax than the small businesses in Texas.
local tax consummation standards, some vendors may change
their reporting methods, which might positively or negatively af- The proposed new rule adds subsection (b)(6):
fect the tax revenue of particular local tax jurisdictions. Whether
"If a small business or a micro-business operates a single lo-
a change in local tax revenue might increase or decrease the
cation out of which it conducts all of its business activities, the
provision of local government services to an extent that would

PROPOSED RULES April 19, 2024 49 TexReg 2441

CP Ex-38-0002 of 0018
comptroller will presume that the location is a place of business 53) (January 5, 2024), (48 TexReg 391) (January 27, 2023), (45
of the seller." TexReg 3499) (May 22, 2020). The amendments implemented
House Bill 1525, 86th Legislature, 2019, which placed local sales
To the extent that repeal of the existing rule facilitates the adop-
and use tax collection responsibilities on marketplace providers.
tion of the proposed new rule, the repeal will simplify the collec-
The amendments also implemented House Bill 2153, 86th Leg-
tion of local sales tax for many small businesses and micro-busi-
islature, 2019, which set a single local use tax rate that remote
nesses.
sellers may elect to use. The amendments also expanded the
Public hearing local sales tax collection responsibilities of sellers based on the
United States Supreme Court decision in South Dakota v. Way-
The comptroller will hold a hearing to take public comments, on
fair, Inc., 138 S. Ct. 2080 (June 21, 2018). These amendments
May 9, 2024, at 9:00 a.m. in Room 2.034 of the Barbara Jordan
have been noncontroversial.
Building, 1601 Congress Avenue, Austin, Texas 78701. Inter-
ested persons may sign up to testify beginning at 8:30 a.m. and The rulemaking made other revisions to the text, which are now
testimony will be heard on a first come first serve basis begin- the subject of litigation in Cause No. D-1-GN-21-003198, City of
ning at 9:00 a.m. All persons will have 10 minutes to present Coppell, Texas, et al. v. Glenn Hegar, in the 201st District Court
their testimony and shall also provide their testimony in writing of Travis County Texas. The Plaintiff cities claim that the agency
prior to their oral testimony. did not comply with the rulemaking procedures in Government
Code, §2001.024 and Government Code, Chapter 2006. The
Comments
purpose of this rulemaking is to address those claims by propos-
You may submit comments on the proposal to Jenny ing the readoption of the rule, with amendments, and a more
Burleson, Director, Tax Policy Division, P.O. Box 13528 complete statement of the elements required by Government
Austin, Texas 78711 or to the email address: tp.rule.com- Code, §2001.024 and Government Code, Chapter 2006.
ments@cpa.texas.gov. The comptroller must receive your
The comptroller proposes to add the following definitions:
comments no later than 30 days from the date of publication of
the proposal in the Texas Register. "Micro-business--a legal entity, including a corporation, partner-
ship, or sole proprietorship, that:
Statement of the statutory or other authority under which the rule-
making is proposed. (A) is formed for the purpose of making a profit;
The repeal is proposed under Tax Code, §§111.002 (Comp- (B) is independently owned and operated; and
troller's Rule; Compliance; Forfeiture), 321.306 (Comptroller's
(C) has not more than 20 employees."
Rules), 322.203 (Comptroller's Rules), and 323.306 (Comptrol-
ler's Rules), which authorize the comptroller to adopt rules to "Small business--a legal entity, including a corporation, partner-
implement the tax statutes. ship, or sole proprietorship, that:
Sections or articles of the code affected. (A) is formed for the purpose of making a profit;
The repeal affects Tax Code, §151.0595 (Single Local Tax Rate (B) is independently owned and operated; and
for Remote Sellers); Tax Code, Chapter 321, Subchapters A, B,
(C) has fewer than 100 employees or less than $6 million in an-
C, D, and F; Tax Code, Chapter 322; and Tax Code, Chapter
nual gross receipts."
323.
The definition of "independently owned and operated business"
§3.334. Local Sales and Use Taxes.
is taken from the Attorney General of Texas' Government Code
The agency certifies that legal counsel has reviewed the pro- Chapter 2006 Small Businesses and Rural Communities Impact
posal and found it to be within the state agency's legal authority Guidelines updated in December 2017.
to adopt.
The definitions of "micro-business" and "small business" are
Filed with the Office of the Secretary of State on April 8, 2024. taken from Government Code, Chapter 2006.
TRD-202401426 The comptroller further proposes to add subsection (b)(6):
Jenny Burleson
"If a small business seller or a micro-business seller operates a
Director, Tax Policy Division single location out of which it conducts all of its business activi-
Comptroller of Public Accounts ties, the comptroller will presume that the location is a place of
Earliest possible date of adoption: May 19, 2024 business of the seller."
For further information, please call: (512) 475-2220
Fiscal note.
♦ ♦ ♦ Brad Reynolds, Chief Revenue Estimator, has determined the
34 TAC §3.334 following for each year of the first five years that the rule will be
in effect. The fiscal note considers the effect of the prior 2020,
The Comptroller of Public Accounts proposes new §3.334, con- 2023, and 2024 amendments to the rule, as well as the amend-
cerning local sales and use taxes. The comptroller proposes ments in this proposal.
new §3.334 to readopt the text of existing §3.334 proposed for
repeal, with the addition of paragraph (b)(6). The additional estimated cost to the state and to local govern-
ments expected as a result of enforcing or administering the rule.
Brief explanation of the proposed rule.
There will be no additional estimated cost to the state and to local
In January 2020, the comptroller initiated a rulemaking to update governments expected as a result of enforcing or administering
its local sales and use tax rule. The comptroller subsequently the proposed rule. The proposed amendments explain the man-
adopted amendments in 2020, 2023, and 2024. (49 TexReg

49 TexReg 2442 April 19, 2024 Texas Register

CP Ex-38-0003 of 0018
ner in which the comptroller intends to apply the consummation The comptroller does not have sufficient data to verify these cal-
statutes. The explanation should lead to greater taxpayer com- culations or to make similar estimates for other jurisdictions. The
pliance, and less audit resources required to enforce or admin- agency does have data regarding the amount of sales tax re-
ister the rule. ceipts that that a vendor reports to local jurisdictions. But, that
data does not prove that the vendor is incorrectly reporting, that
The estimated reductions in costs to the state and to local gov-
the vendor would change its reporting as a result of the rule
ernments as a result of enforcing or administering the rule.
amendments, or that specific jurisdictions would gain or lose tax
There will be no estimated reductions in costs to the state and to revenue as a result of the rule amendments. Those determi-
local governments as a result of enforcing or administering the nations would require an understanding of the business opera-
rule amendments. Local governments do not administer the tax, tions of the vendor to determine which business locations were
and the comptroller will not be reducing the size of its audit staff "places of business" for purposes of local tax sourcing. Then,
as a result of the rule. the comptroller would have to examine individual transactions to
determine the location where the orders were received, the loca-
The estimated loss or increase in revenue to the state or to local
tion where the orders were fulfilled, and the location where the
governments as a result of enforcing or administering the rule,
order was delivered, since all three locations are potential sourc-
and the foreseeable implications relating to cost or revenues of
ing locations. Then, the comptroller would have to compare that
the state or local governments.
information with how the vendor has been reporting local tax on
Change in sourcing of transactions subject to local sales taxa- each transaction, identify the circumstances, if any, that would
tion could result in net change in sales tax revenue of local tax- require the vendor to change its methods of reporting as a result
ing entities generally, with the net change quite significant for of the rule, and determine the dollar value for each transaction.
some jurisdictions. Most, but not all, reductions in taxable trans- The comptroller does not have sufficient information on the indi-
actions sourced to some jurisdictions would be increases in tax- vidual vendors to make this determination.
able transactions sourced to other jurisdictions. But to the ex-
The consultant's explanation of his methodology confirms that
tent that transactions previously sourced within an incorporated
the comptroller does not have sufficient data on hand, and that
municipality would be sourced to an unincorporated area with-
the comptroller could not reasonably acquire the necessary data
out a cumulative local tax rate levied by municipal (pursuant to
to perform a study for every jurisdiction. The consultant identified
a limited purpose annexation agreement), county, and/or special
and researched the "top tier" taxpayers for the cities in his study,
purpose taxing authorities commensurate with the cumulative lo-
and then conducted research to determine who they were selling
cal tax rate levied by the municipal, county, and/or special pur-
to and whether any sales were made other than through web-
pose taxing authorities applicable where the transactions were
sites. The research ranged from interviews with local employ-
formerly sourced, there would be a reduction in aggregate lo-
ees, to passive research on web pages, job postings, certificate
cal sales tax levies and consequent reduction in state service
of occupancy maps/filings, and in some instances, purchases
charge revenues under §§ 321.503, 322.303, and 323.503, Tax
were made as well as physical visits to the taxpayer's locations.
Code.
From this research, the consultant identified "suspect" taxpay-
For reasons further discussed, reliable estimates of net changes ers and estimated the value of their shipment outside of the city.
in revenue by individual jurisdictions for the 1,759 local sales tax- In doing this work, the consultant estimated that he spent forty
ing jurisdictions that might stem from compliance with the rule hours per jurisdiction. The comptroller does not have the time or
cannot feasibly be produced by the comptroller. Even if the req- resources to conduct what is essentially an audit of the tens of
uisite audits of potentially affected sales tax permittees in every thousands of permitted taxpayers to identify noncompliant tax-
jurisdiction could be timely performed to support such estima- payers and then estimate the extent of their noncompliance.
tion, the sales tax permittees are not static entities. It would not
With the exception of the City of Round Rock, the Plaintiff cities
be plausible to assume that those who currently source local tax
have alleged that their jurisdictions have a particular type of tax-
to a location that is not a place of business as defined in the
payer that is primarily affected - "fulfillment centers" that ship or-
rule would not adjust their operations to qualify such locations as
ders to customers. According to the cities, the fulfillment cen-
places of business and consequently not be obligated to change
ters are sourcing local tax to the cities in which they are located,
the sourcing of local tax.
pursuant to Tax Code, §321.203(c-1)(1), which provides that a
Plaintiff cities allege that portions of the proposed rule are invalid, sale is consummated at the place of business of the retailer
that the proposed rule "dramatically" or "fundamentally" changes from which the retailer ships or delivers the item. For subsec-
the former rule, that compliance with the proposed rule will re- tion (c-1)(1) to apply, a fulfillment center has to be a "place of
quire vendors to change to existing reporting methods, and that business of the retailer" for local sales tax sourcing purposes.
the changes to existing reporting methods will result in the loss The term "place of business of the retailer" (hereinafter "place of
of revenue to the cities. business") is defined by Tax Code, §321.002(a)(3)(A) to include
a location at which three or more orders are received during a
One consultant estimated that the City of Carrollton would have
calendar year.
a likely net loss of $1.1 to $2 million; that the City of Coppell
would have a likely net loss of $18.8 million of $30.8 million, that The Plaintiff cities contend that the fulfillment centers are prop-
the City of DeSoto would have a likely net loss of $5.1 million, erly sourcing local tax to the cities in which they are located be-
that the City of Farmers Branch would have a likely net loss of cause every fulfillment center is automatically a "place of busi-
$600,000 to $1.8 million, and the City of Humble would have ness." The theory is that a fulfillment center is automatically a
a likely net loss of $5.6 million. The consultant did not provide "place of business" because it has to "receive" orders as a nec-
the comptroller with data to support these calculations and he essary prerequisite to fulfilling the orders, and a fulfillment center
declined to identify the vendors that he predicted would have to can be expected to "receive" three or more orders in a calendar
change their reporting methods. year.

PROPOSED RULES April 19, 2024 49 TexReg 2443

CP Ex-38-0004 of 0018
Subsection (c)(7) of the proposed rule now explicitly states that "(2) Distribution centers, manufacturing plants, storage yards,
the location where an order is "received" for purposes of local warehouses, and similar facilities.
sales tax sourcing is the location where the order is initially re-
(A) A distribution center, manufacturing plant, storage yard,
ceived. Therefore, under the proposed rule, a fulfillment cen-
warehouse, or similar facility operated by a seller at which the
ter that processes orders forwarded from another location is not
seller receives three or more orders for taxable items during the
automatically a "place of business" for local tax sourcing. The
calendar year is a place of business.
Plaintiff cities contend that if the fulfillment centers in their juris-
diction begin sourcing local sales tax to other cities, they will lose (B) If a salesperson who receives three or more orders for tax-
millions of dollars in tax revenue. able items within a calendar year is assigned to work from, or to
work at, a distribution center, manufacturing plant, storage yard,
The merits of the conflicting interpretations are discussed in the
warehouse, or similar facility operated by a seller, then the facil-
preambles of the previous rulemakings. The issue here is the
ity is a place of business.
effect on local tax revenue, and whether the comptroller can reli-
ably estimate the effect on cities, individually or collectively. The (C) If a location that is a place of business of the seller, such
estimates of the Plaintiff cities and the fulfillment centers in those as a sales office, is in the same building as a distribution center,
cities cannot be reliably projected to other cities. The comptrol- manufacturing plant, storage yard, warehouse, or similar facility
ler does not have data to identify the "fulfillment centers" in any operated by a seller, then the entire facility is a place of business
particular jurisdiction or statewide - it is not a characteristic that of the seller."
is reported to the agency.
(41 TexReg 260, 263) (2016) (former 34 Tex. Admin. Code
And, even if agency could identify "fulfillment centers" from its §3.334(e)(2), emphasis added); (39 TexReg 9597, 9605) (2014)
data, the agency could not assume that the fulfillment centers (former 34 Tex. Admin. Code §3.334(e)(2), emphasis added).
in other cities are sourcing local tax like the Plaintiff cities' ful-
If a distribution center were automatically a "place of business"
fillment centers purportedly are sourcing. For reasons enumer-
for local tax sourcing as the Plaintiff cities contend, subpara-
ated to the Revenue Estimating Division by agency counsel, it
graphs (B) and (C) would not be required - there would be no
is comptroller's opinion that a fulfillment center could reasonably
need for a salesperson or a sales office to "then" make the dis-
reach a different conclusion, and conclude that it was not auto-
tribution center a "place of business" for local tax sourcing pur-
matically a "place of business" for local tax sourcing purposes,
poses.
as claimed by the Plaintiff cities.
Third, in addition to its rule, the comptroller distributed Publica-
First, the text of former §3.334(h)(3) indicated that a fulfillment
tion 94-105, sometimes called the "Local Sales and Use Tax
center is not automatically a "place of business" for local sourcing
Bulletin - Guidelines for Collecting Local Sales and Use Tax,"
(emphasis added):
or "Tax Topics - Guidelines of Collecting Local Sales and Use
"(3) Consummation of sale. The following rules, taken from Tax Tax" (Guidelines). These Guidelines were posted on the comp-
Code, §321.203 and §323.203, apply to all sellers engaged in troller's website and indexed in the comptroller's State Tax Au-
business in this state, regardless of whether they have a place tomated Research System. Since at least 2007, the Guidelines
of business in Texas or multiple places of business in the state. referred to a "location within the state that is not a place of busi-
ness (such as a warehouse or distribution center)." E.g., STAR
...
Accession No. 200902596L (February 2009). The Guidelines
(B) Order received at a place of business in Texas, fulfilled at were intended as a general guide and not as a comprehensive
a location that is not a place of business. When an order that resource. But, an ordinary reader would not walk away with the
is placed over the telephone, through the Internet, or by any impression that a taxpayer's fulfillment center was automatically
means other than in person is received by the seller at a place a "place of business" for purposes of local tax sourcing.
of business in Texas, and the seller fulfills the order at a loca-
Fourth, in 2016, the comptroller rewrote the Guidelines to be
tion that is not a place of business of the seller in Texas, such as
even more specific regarding fulfillment centers: "The ware-
a warehouse or distribution center, the sale is consummated at
house from which the person ships those items is not a place of
the place of business at which the order for the taxable item is
business, unless the warehouse separately qualifies as a place
received.
of business." STAR Accession No. 201606995L (June 1, 2016).
...
And, fifth, in 2019, a comptroller letter ruling discussed fulfillment
(D) Order fulfilled within the state at a location that is not a place centers, referring to the former rule, then in effect: "Scenario
of business. When an order is received by a seller at any location One: Taxpayer Retailer operates fulfillment centers in Texas that
other than a place of business of the seller in this state, and are not open to the public. ... When an order is received at a lo-
cation that is not a place of business and is fulfilled in Texas at
the seller fulfills the order at a location in Texas that is not a place
a location that is not a place of business, the sale is consum-
of business of the seller, then the sale is consummated at the
mated at the location in Texas to which the order is shipped.
location in Texas to which the order is shipped or delivered, or
See §3.334(h)(3)(D). For Scenario One, local sales and use tax
the location where it is transferred to the purchaser."
is due based on the location where the order is delivered." STAR
(41 TexReg 260, 265) (2016) (former 34 Tex. Admin. Code Accession No. 201906015L (June 13, 2019) (emphasis added).
§3.334(h)(3), emphasis added); (39 TexReg 9597, 9606) (2014)
If the Plaintiff cities and their consultant's study are right about
(former 34 Tex. Admin. Code §3.334(h)(3), emphasis added).
how the various fulfillment centers in their cities reported local
Second, the consummation rules in former §3.334(h)(3) were tax, those fulfillment centers must have either disregarded the
augmented with an explicit provision for fulfillment centers, which comptroller's prior written guidance, overlooked the guidance,
the former rule referred to as "distribution centers" (emphasis or interpreted the guidance as being the opposite of what the
added): comptroller intended. But, it cannot be assumed that fulfillment

49 TexReg 2444 April 19, 2024 Texas Register

CP Ex-38-0005 of 0018
centers in other cities have also disregarded, overlooked, or in- The City of Round Rock suggests that a single facility that con-
terpreted the prior rulings in such a way that they will have to ducts all transactions through automated shopping cart software
change their reporting as a result of the proposed rule. So, even may be affected, since a software application does not consti-
if the comptroller could identify the permitted locations that are tute a "place of business." However, the threshold for becoming
fulfillment centers, the revenue implications of the proposed rule a "place of business" is very low, including the receipt by sales
cannot be reliably extrapolated from the study conducted on be- personnel of three or more orders per year. If a vendor occa-
half of the Plaintiff cities. sionally engages with a customer directly, such as by telephone
or email, as the final step in receiving an order under subsection
Furthermore, the cities' calculations of revenue loss assume the
(c)(7), the vendor's location should be a "place of business" for
proposed rule would force fulfillment centers to begin sourcing
local tax sourcing, even if orders are ordinarily processed by the
local tax to other cities, when that is not the case. The Legisla-
vendor's automated software. To ease the burden on auditors,
ture set a low threshold for a location to be a "place of business"
and on small businesses and micro-businesses that operate out
for local tax sourcing - the receipt of three or more orders dur-
of a single location, proposed subsection (b)(6) presumes that is
ing a calendar year. A fulfillment center that is not a "place of
the case.
business" under the proposed rule could easily become one by
directly receiving three or more orders. The Plaintiff cities have Third, sales made by through a marketplace by a seller with a
alleged that it is easier to source local tax to one jurisdiction than single place of business will not be affected because those or-
to source to many. So, a fulfillment warehouse would have an ders are sourced to destination by Tax Code, §321.203(e-1).
incentive to become a "place of business." And, a fulfillment cen-
The City of Round Rock claims that Dell Technologies has a sin-
ter with a tax sharing agreement with a city would have an even
gle place of business in the city and suggests that Dell is sourc-
greater incentive to make the minor adjustments required to be-
ing all of its local sales tax collections to the City of Round Rock.
come a "place of business," so as to maintain the return on its
The city further claims that it will lose a significant amount of local
revenue sharing agreement. Therefore, even if the potential tax
sales tax revenue under the proposed rule. However, when the
revenue loss from fulfillment centers could be reliably measured,
comptroller served third party discovery on Dell to understand
it is unreasonable to assume that no fulfillment center would take
how Dell's current business operations would be affected by the
remedial efforts to continue its sourcing procedures.
proposed rule, both Round Rock and Dell objected. Dell insisted
The City of Round Rock has asserted claims that are different that the inquiry should only be "conducted under the applicable
from or in addition to the claims of the other Plaintiff cities. The sections of the Texas Tax Code" in Chapter 111 -- in other words,
City has suggested that the proposed rule will radically change an audit.
the way that Texas retailers with one place of business in
This discovery dispute illustrates the impracticability of preparing
Texas will source local tax. However, for enumerated reasons,
a revenue impact estimate for the City of Round Rock - it would
agency counsel advises that it should be assumed that in most
require the audit of Dell and any other vendors from whom the
instances, the proposed rule will not change the sourcing of
city thinks there will be a revenue loss. A local sales tax audit
products sold by Texas retailers with one place of business in
of Dell would have to examine all the business locations of Dell
Texas.
to determine which, if any of the locations were a "place of busi-
First, the proposed rule does not change the comptroller's previ- ness" for local tax sourcing purposes. And, if the comptroller
ous application of the statute, which does not recognize special verified that Dell in fact operated a single "place of business" in
treatment for vendors with a "single place of business" for pur- Texas, the comptroller would still have to audit the sourcing of
poses of local tax sourcing. Proposed subsection (c) states in Dell's sales to determine which sales were compliant and which
relevant part: sales were noncompliant with the proposed rule. For example,
Dell purports to have a sales force in Round Rock. Assuming
"The following rules, taken from Tax Code, §321.203 and
that orders generated by that sales force are received in Round
§323.203, apply to all sellers engaged in business in Texas,
Rock and not fulfilled from a "place of business" elsewhere in
regardless of whether they have no place of business in Texas, a
Texas, those sales would still be sourced to Round Rock. And,
single place of business in Texas, or multiple places of business
any orders fulfilled from Dell's "place of business" in Round Rock
in Texas."
would still be sourced to Round Rock. And, any orders delivered
The language in the proposed rule has the same effect as the in Round Rock would still be sourced to Round Rock. Therefore,
language in the prior 2014 and 2016 versions of the rule - no to meaningfully determine the revenue impact of the proposed
special treatment for vendors with a single "place of business": rule on the City of Round Rock, the comptroller would have to
thoroughly audit Dell and any other vendors from whom Round
"The following rules, taken from Tax Code, §321.203 and
Rock thinks there will be a revenue loss.
§323.203, apply to all sellers engaged in business in this state,
regardless of whether they have a place of business in Texas or Repeating this audit exercise on a jurisdiction-by-jurisdiction ba-
multiple places of business in the state." sis across the state is infeasible. Audits are not quick or easy.
Considerable time and effort is required to acquire and analyze
(41 TexReg 260, 265) (2016) (former 34 Tex. Admin. Code
taxpayer data. Taxpayers are understandably reluctant to furnish
§3.334(h)(3); (39 TexReg 9597, 9606) (2014) (former 34 Tex.
confidential business data. And, the data varies in degree of ac-
Admin. Code §3.334(h)(3)).
cessibility. The average duration of an audit in fiscal year 2023
Second, the proposed rule should have little impact on most was 450 days, and the average number auditor hours spent on
businesses that are a single place of business in the ordinary an audit was 80.5 hours.
sense of the word - i.e., all operations are conducted at a single
It is also possible that an audit of Dell or other vendors would
location. If orders are received and fulfilled in a single facility,
identify noncompliance with sourcing provisions that are not in-
local sales tax will continue to be sourced to that location. A typ-
volved in the disputed rulemaking. For example, if Dell were
ical example would be a retail store.
sourcing marketplace sales to the City of Round Rock rather than

PROPOSED RULES April 19, 2024 49 TexReg 2445

CP Ex-38-0006 of 0018
to the delivery location specified by statute, Dell would have to 2023 rulemaking, the comptroller explained how the reference
change its sourcing methods and the City of Round Rock would to sales personnel is a logical extension of prior comptroller
suffer a revenue loss. But, that revenue loss should be attributed statements, including prior statements regarding fulfillment
to the marketplace statute enacted by the Legislature, not the warehouses and computer servers. See (48 TexReg 391, 398)
proposed comptroller rule. (2023).
This possibility is real. During the 2020 rulemaking, the City Agency counsel has advised that there are several instances in
of San Marcos filed comments claiming that the proposed rule which the rule proposed for readoption is substantively different
would cause the city to lose $7-8 million in local sales tax rev- than the 2016 version of the rule. Subsection (c)(2)(B)(ii) pro-
enue generated by a Best Buy call center, with the net effect of vides that a seller required to collect state use tax must also
economic development incentive revenue loss estimated at $3.4 collect local use tax. This provision expands the collection re-
million. Best Buy also filed comments stating that it created a sponsibilities of sellers, which, formerly were obligated to collect
subsidiary called Best Buy Texas.com LLC and sourced the lo- local use tax only if they were engaged in business in the local
cal tax for all of its Internet and telephone sales to the City of San jurisdiction. This provision should have a positive, but indeter-
Marcos. This would mean that if a resident of the City of Houston minant revenue effect on all local jurisdictions.
placed an online order from Houston and picked up the item at an
The proposed rule, as compared with the 2016 version, adds
affiliated Best Buy Stores outlet in Houston, Best Buy Texas.com
provisions that the sourcing of marketplace sales is based on
LLC would collect local sales tax for the City of San Marcos.
destination, because the consummation statute was amended
However, it appears that the Best Buy website was actually op-
in 2019 by House Bill 1525 to require that result. The fiscal note
erated by a different Best Buy affiliate, which would make it a
for House Bill 1525 estimated a probable revenue gain for local
marketplace provider as defined in Tax Code, §151.0242(a)(2).
governments. However, because House Bill 1525 was already
Under the marketplace statute, local tax is sourced to the loca-
in effect, and rulemaking is not required to effectuate the legisla-
tion where the item is shipped or delivered or at which posses-
tion, the comptroller is assigning no fiscal implication to the rule
sion is taken by the purchaser. Thus, any loss to the City of San
revision incorporating House Bill 1525, other than a potential in-
Marcos of local sales tax revenue from the sale to the Houston
crease in compliance with the statute.
resident would be the result of compliance with the marketplace
statute. And the loss of tax revenue would not be attributable The proposed rule, as compared with the 2016 version, also
to the rule. The loss resulting from compliance with the statute adds provisions for remote sellers to apply a single local tax rate,
would occur without regard to whether the proposed rule was as authorized by House Bill 2153 in 2019. The fiscal note for
adopted. House Bill 2153 stated:
The comptroller has considered various other comments of the "There would be no significant fiscal implications for local gov-
Plaintiff cities and others to the effect that the proposed rule ernments in the aggregate; there could be some variance in dis-
will dramatically change local tax sourcing and concluded that tribution of revenue among jurisdictions compared with the distri-
the comments do not accurately apply the proposed rule. The bution that would occur were all remote sellers required to collect
comptroller disagrees with the allegation that the proposed rule and remit tax at applicable local combined rates, but the extent of
will "dramatically change where a sale is consummated if the such variance cannot be determined and would not be expected
Comptroller interprets the change to require destination sourc- to be significant in relation to the total allocations of local sales
ing when a sale is made online using a retailer's website, even and use tax revenues."
if the retailer has only one place of business." And, the comp-
The comptroller is assigning no fiscal implication to the rule re-
troller disagrees with the allegation that "sales made by way of
vision incorporating House Bill 2153, since the statute went into
websites using the Internet are treated as having been consum-
effect before the rulemaking, and rulemaking was not required
mated where the taxable item is delivered to the buyer instead
to implement the statute.
of where the order for the item is received and fulfilled by the
seller." The consummation hierarchy in subsection (c) does not The proposed rule, as compared with the 2016 version, alters
require the alleged results. the treatment of a "traveling salesperson," which was previously
defined as: "A seller, or an agent or employee of a seller, who
The comptroller has amended the definition of "place of business
visits potential purchasers in person to solicit sales, and who
of the seller" in subsection (a)(18) to provide that the term does
does not carry inventory ready for immediate sale, but who may
not include a computer server, Internet protocol address, domain
carry samples or perform demonstrations of items for sale." For-
name, website, or software application. While the discussion of
mer §3.334(h)(4) provided: "Orders taken by traveling sales-
computer servers was added to the rule in 2020, the comptroller
persons are received by the seller at the administrative office
had previously advised taxpayers that the location of the server
or other place of business from which the traveling salesperson
does not create a "place of business" for purposes of the local tax
operates." (41 TexReg 260, 265) (2016) (former 34 Tex. Admin.
collection and that orders placed on a website or though applica-
Code §3.334(h)(4)). The former rule did not further explain the
tions and processed and routed by servers are not "received at" a
location from which the traveling salesperson operates.
place of business. See STAR Accession Nos. 200510723L (Oc-
tober 6, 2005), 200605592L (May 17, 2006), and 201906015L Subsection (b)(4) of the proposed rule replaces the traveling
(June 13, 2019). salesperson language with a provision for an order that is re-
ceived by a salesperson who is not at a place of business when
The comptroller has also amended the definition of "place of
the salesperson receives the order. Subsection (b)(4) provides
business of the seller" in subsection (a)(18) to provide that
that the order is treated as being received at the location from
staffing by one or more sales personnel is usually required.
which the salesperson operates. Subsection (b)(4) further
The statement is not a requirement, but an objective criterion
provides that the location from which the salesperson operates
that will often be an important factor in determining whether an
is the principal fixed location where the salesperson conducts
outlet, office, or location is a "place of business." In the January
work-related activities.

49 TexReg 2446 April 19, 2024 Texas Register

CP Ex-38-0007 of 0018
Commenters have reported that the orders from some traveling Public benefits and costs.
salespersons have been sourced to the location to which the
Brad Reynolds, Chief Revenue Estimator, has determined the
traveling salesperson is "assigned," even though the traveling
following for each year of the first five years that the rule will be
salesperson may conduct principal work-related activities from
in effect.
another location. In these situations, the proposed rule might
result in a change to local tax sourcing. However, the signifi- The public will benefit from greater clarity regarding the consum-
cance of this change is indeterminant. The comptroller does not mation standards, making compliance easier.
have data to identify traveling salespersons as defined under the
There may be additional economic costs to a person required to
former rule, and does not have data to identify the instances in
comply with the rule. It is conceivable that the rule may cause
which a traveling salesperson has been "assigned" to a location
some vendors to realize that they are noncompliant. If the ven-
from which the salesperson does not conduct principal work-re-
dors come into compliance by changing from single-location re-
lated activities. And, if the agency could identify those instances,
porting to multiple-location reporting, their compliance burden
without conducting extensive audits, the agency would still not
may increase. And if vendors change from multiple-location re-
know which instances would result in a change of sourcing. For
porting to single-location reporting, their compliance burden may
example, if the order is fulfilled from a "place of business," the
diminish.
location of the salesperson is irrelevant.
Local employment impact statement.
In summary, due to both to the number of taxing jurisdictions
and lack of pertinent, detailed information regarding the specific For the first five years that the rule will be in effect, the effect on
circumstances of the myriad businesses reporting local sales local economies and employment, if any, cannot be determined.
and use taxes, estimation of fiscal effects of the proposed rule, To the extent that the proposed rule leads to greater awareness
whether of dollar amounts or merely sign of change, on an indi- and compliance with the local tax consummation standards,
vidual jurisdiction by jurisdiction basis is infeasible of execution. some vendors may change their reporting methods, which
might positively or negatively affect the tax revenue of particular
The comptroller recognizes that compliance with the proposed
local tax jurisdictions. Whether a change in local tax revenue
rule could result in changes to the local tax reporting methods
might increase or decrease the provision of local government
of some vendors. As a result, there could be loss or increase in
services to an extent that would affect local economic activity
revenue to individual local governments. A revenue loss to one
or employment would depend on discretionary actions of the
local government will often but not always be a revenue gain to
governing body or the electorate of an affected jurisdiction, and
others. There will also be revenue gains experienced by all lo-
cannot be determined.
cal tax jurisdictions from the expansion of the use tax collection
obligations of remote, out-of-state sellers. For the reasons pre- Government growth impact statement.
viously stated, the aggregate net gain or loss cannot be reliably
Brad Reynolds, Chief Revenue Estimator, has determined the
estimated by the comptroller from available or reasonably acces-
following for each year of the first five years that the rule will be
sible data.
in effect: the amendment will not create or eliminate a govern-
The comptroller has been provided with estimates that some ment program; will not require the creation or elimination of em-
cities will experience net revenue losses. However, the comp- ployee positions; will not require an increase or decrease in fu-
troller has not been provided with sufficient information to verify ture legislative appropriations to the comptroller; will not require
the estimates, and the data from the estimates cannot be extrap- an increase or decrease in fees paid to the comptroller; will not
olated to other local tax jurisdictions. That said, the estimates of create a new regulation; will increase the number of individuals
anticipated revenue losses provided by Plaintiffs and others in subject to the rule's applicability because sellers without a phys-
comments to proposed rulemakings are accepted as valid good ical presence in a local tax jurisdiction will be required to collect
faith estimates and may serve as a basis for estimating a min- local use tax if they are required to collect state use tax; and will
imum amount of revenue from online sales associated with lo- not positively or adversely affect this state's economy.
cations that are not places of business as defined in the rule,
Economic impact statement and regulatory flexibility analysis.
that will be subject to different sourcing if the affected sales tax
permittees cannot or choose not to modify their procedures in or- A statement of fiscal implications for small businesses or rural
der to qualify such business locations as places of business for communities under Government Code, Chapter 2006 is normally
purposes of local sales tax sourcing. As those estimates were not required for a comptroller rule because the rule is proposed
constructed from 2020 data and there has been significant infla- under Tax Code, Title 2. In this instance, the rule is proposed
tion as well as real economic growth since then, they are scaled under both Title 2 (State Taxation) and Title 3 (Local Taxation).
up by a factor of 1.35 to yield a minimum estimate of $110 million So, the comptroller provides the following statement.
on a current annual basis that may be lost to those cities, plus
A "rural community" is a municipality with a population of less
another $80 million that may be lost to the other local taxing juris-
than 25,000. The comptroller estimates that there are 1,098
dictions imposing tax at the affected locations, for a total of $190
such rural communities, of which 1,017 impose a sales tax and
million of gross revenue reductions, of which 85% or $161.5 mil-
may have revenue affected by compliance with the rule.
lion would be estimated gains to other local taxing jurisdiction,
and 15% or $28.5 million would be reduction in aggregate local A "small business" is a legal entity, including a corporation, part-
sales tax levies sourced to unincorporated areas without local nership, or sole proprietorship, that: (A) is formed for the pur-
sales tax or with cumulative local county and special district tax pose of making a profit; (B) is independently owned and oper-
rates less than the cumulative local rates that applied at the lo- ated; and (C) has fewer than 100 employees or less than $6
cations where the taxable transactions were formerly sourced. A million in annual gross receipts. The Comptroller estimates that
$28.5 million reduction in aggregate local tax levies would result there are 470,000 businesses with fewer than 100 employees,
in reduced state service charge revenue of $570,000. and 377,000 businesses with annual gross receipts less than $6
million; the sum of these two estimates would overstate the num-

PROPOSED RULES April 19, 2024 49 TexReg 2447

CP Ex-38-0008 of 0018
ber of small businesses, as many businesses would be expected ers charge less sales or use tax than the small businesses in
to have both fewer than 100 employees and less than $6 million Texas.
in annual gross receipts.
Since the comptroller initiated its rulemaking in 2020, the agency
To the extent that the proposed rule leads to greater awareness has considered ways to minimize the potential adverse impact on
and compliance with the local tax consummation standards, small businesses. In the fall of 2020, the agency added a multi-
some vendors may change their reporting methods, which address search capability to its local sales tax rate locator. And
might positively or negatively affect the tax revenue of particular in the spring of 2021, the agency added downloadable address
local tax jurisdictions. As previously explained, the comptroller files to determine local tax rates. And, in the winter of 2023, the
does not have sufficient data on the business operations of agency added map search and latitude/longitude search options.
each business to identify and quantify the businesses and
In addition, the comptroller is proposing to add subsection (b)(6):
transactions that might be affected, and the positive or negative
revenue impact on each tax jurisdiction. "If a small business or a micro-business operates a single lo-
cation out of which it conducts all of its business activities, the
Although the fiscal implications for local tax jurisdictions can-
comptroller will presume that the location is a place of business
not be quantified without additional information, several obser-
of the seller."
vations can be made. First, the cities asserting that the clarifica-
tions provided by the rule will result in changes in sourcing and The comptroller cannot make a location a "place of business"
reporting of local taxes, with consequent reductions in their rev- by rule if the statute does not allow it. But, the agency can pre-
enues, tend to be cities with Local Government Code, Chapter sume that a location is a "place of business" based on indicative
380 agreements involving rebates of local sales and use tax rev- facts, such as a small, independent business that conducts all of
enues. And, cities with Government Code, Chapter 380 agree- its business operations out of a single location. If extraordinary
ments involving distribution or fulfillment centers tend to be larger facts are presented to the agency, the presumption may be re-
than rural communities. Of the 1,017 rural communities impos- butted.
ing sales tax, 45 have Chapter 380 agreements involving sales
The agency has considered other alternatives to reduce the ad-
tax on file with the comptroller. Almost all of those involve re-
verse impact on small businesses and micro-businesses, such
bates of sales tax to physical shopping centers or restaurants, or
as allowing small or micro-businesses to source local sales tax
of sales tax paid on equipment or building materials, and would
to their principal place of business, or establishing a single lo-
unlikely be affected by a change in sourcing of online sales as-
cal sales tax rate for small or micro-businesses that would be
sociated with locations that are not places of business; two of
distributed similar to the distribution of the single local sales tax
the 45 communities that are not party to the suit against the
collected by remote sellers. However, because these proposals
comptroller appear to involve distribution or fulfillment centers
would require amendments to the consummation statutes, the
and could be affected if the centers will not qualify as places
comptroller does not have the regulatory flexibility to implement
of business (in Grand Prairie and Waxahachie). Five of the six
these proposed methods.
cities currently suing the Comptroller have populations greater
than 25,000. The comptroller has not verified the assertions of Public hearing
revenue shifting. But, if the assertions are correct, the revenue
The comptroller will hold a hearing to take public comments, on
shifting away from cities with Chapter 380 agreements may re-
May 9, 2024, at 9:00 a.m. in Room 2.034 of the Barbara Jordan
sult in positive revenues for the smaller rural communities from
Building, 1601 Congress Avenue, Austin, Texas 78701. Inter-
whom the revenues have been diverted.
ested persons may sign up to testify beginning at 8:30 a.m. and
Second, although the comptroller does not have sufficient infor- testimony will be heard beginning at 9:00 a.m. on a first come
mation to determine the number of small businesses that may first serve basis. All persons will have 10 minutes to present their
change their local tax reporting as a result of greater awareness testimony and shall also provide their testimony in writing prior
and compliance with the local tax consummation standards, it is to their oral testimony.
reasonable to assume that many small businesses will not be
Comments
affected. A small business that has all of its operations at a sin-
gle location in Texas, including sales and fulfillment, is probably You may submit comments on the proposal to Jenny
reporting local sales tax to the taxing jurisdiction where it is lo- Burleson, Director, Tax Policy Division, P.O. Box 13528
cated, and it will continue that reporting. Non-marketplace or- Austin, Texas 78711 or to the email address: tp.rule.com-
ders fulfilled from that location will continue to be consummated ments@cpa.texas.gov. The comptroller must receive your
at that location pursuant to §3.334(c)(1) or (c)(2)(A). And, sales comments no later than 30 days from the date of publication of
of a small business that are through a marketplace are already the proposal in the Texas Register.
subject to destination sourcing performed by the marketplace
Statement of the statutory or other authority under which the rule
provider. Nevertheless, in some circumstances, it is conceivable
is proposed to be adopted.
that the rule may cause some vendors, small or large, to realize
that they are noncompliant. If the vendors come into compli- Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei-
ance by changing from single-location reporting to multiple-loca- ture), 321.306 (Comptroller's Rules), 322.203 (Comptroller's
tion reporting, their compliance burden may increase. Rules), and 323.306 (Comptroller's Rules) authorize the comp-
troller to adopt rules to implement the tax statutes.
Third, the proposed rule expands the local tax collection obliga-
tions of remote sellers - out-of-state sellers that collect state use Sections or articles of the code affected.
tax must also collect local sales tax. The expansion of the remote
Tax Code, §151.0595 (Single Local Tax Rate for Remote Sell-
seller local tax collection obligation may benefit small businesses
ers); Tax Code, Chapter 321, Subchapters A, B, C, D, and F; Tax
in Texas by reducing the perception of customers that purchases
Code, Chapter 322; and Tax Code, Chapter 323 are affected.
from out-of-state sellers are preferable because out-of-state sell-

49 TexReg 2448 April 19, 2024 Texas Register

CP Ex-38-0009 of 0018
§3.334. Local Sales and Use Taxes. sells items through vending machines is also an itinerant vendor. A
(a) Definitions. The following words and terms, when used salesperson that operates out of a place of business in this state is not
in this section, shall have the following meanings, unless the context an itinerant vendor.
clearly indicates otherwise.
(12) Kiosk--A small stand-alone area or structure:
(1) Cable system--The system through which a cable ser-
(A) that is used solely to display merchandise or to sub-
vice provider delivers cable television or bundled cable service, as
mit orders for taxable items from a data entry device, or both;
those terms are defined in §3.313 of this title (relating to Cable Televi-
sion Service and Bundled Cable Service). (B) that is located entirely within a location that is a
place of business of another seller, such as a department store or shop-
(2) City--An incorporated city, municipality, town, or vil-
ping mall; and
lage.
(C) at which taxable items are not available for imme-
(3) City sales and use tax--The tax authorized under Tax
diate delivery to a purchaser.
Code, §321.101(a), including the additional municipal sales and use
tax authorized under Tax Code, §321.101(b), the municipal sales and (13) Local taxes--Sales and use taxes imposed by any local
use tax for street maintenance authorized under Tax Code, §327.003, taxing jurisdiction.
the Type A Development Corporation sales and use tax authorized un-
(14) Local taxing jurisdiction--Any of the following:
der Local Government Code, §504.251, the Type B Development Cor-
poration sales and use tax authorized under Local Government Code, (A) a city that imposes sales and use tax as provided
§505.251, a sports and community venue project sales and use tax under paragraph (3) of this subsection;
adopted by a city under Local Government Code, §334.081, and a mu-
(B) a county that imposes sales and use tax as provided
nicipal development corporation sales and use tax adopted by a city un-
under paragraph (5) of this subsection;
der Local Government Code, §379A.081. The term does not include
the fire control, prevention, and emergency medical services district (C) a special purpose district created under the Special
sales and use tax authorized under Tax Code, §321.106, or the munic- District Local Laws Code or other provisions of Texas law that is autho-
ipal crime control and prevention district sales and use tax authorized rized to impose sales and use tax by the Tax Code or other provisions
under Tax Code, §321.108. of Texas law and as governed by the provisions of Tax Code, Chapters
321 or 323 and other provisions of Texas law; or
(4) Comptroller's website--The comptroller's
website concerning local taxes located at: https://comptrol- (D) a transit authority that imposes sales and use tax as
ler.texas.gov/taxes/sales/. authorized by Transportation Code, Chapters, 451, 452, 453, 457, or
460 and governed by the provisions of Tax Code, Chapter, 322.
(5) County sales and use tax--The tax authorized under
Tax Code, §323.101, including a sports and community venue project (15) Marketplace provider--This term has the meaning
sales and use tax adopted by a county under Local Government Code, given in §3.286 of this title.
§334.081. The term does not include the county health services sales
(16) Micro-business--A legal entity, including a corpora-
and use tax authorized under Tax Code, §324.021, the county landfill
tion, partnership, or sole proprietorship, that:
and criminal detention center sales and use tax authorized under Tax
Code, §325.021, or the crime control and prevention district sales and (A) is formed for the purpose of making a profit;
use tax authorized under Tax Code, §323.105.
(B) is independently owned and operated; and
(6) Drop shipment--A transaction in which an order is re-
(C) has not more than 20 employees.
ceived by a seller at one location, but the item purchased is shipped by
the seller from another location, or is shipped by the seller's third-party (17) Order placed in person--An order placed by a pur-
supplier, directly to a location designated by the purchaser. chaser with the seller while physically present at the seller's place of
business regardless of how the seller subsequently enters the order.
(7) Engaged in business--This term has the meaning given
in §3.286 of this title (relating to Seller's and Purchaser's Responsibil- (18) Place of business of the seller - general definition--A
ities). place of business of the seller must be an established outlet, office, or
location operated by a seller for the purpose of receiving orders for
(8) Extraterritorial jurisdiction--An unincorporated area
taxable items from persons other than employees, independent con-
that is contiguous to the corporate boundaries of a city as defined in
tractors, and natural persons affiliated with the seller. An "established
Local Government Code, §42.021.
outlet, office, or location" usually requires staffing by one or more
(9) Fulfill--To complete an order by transferring possession sales personnel. The term does not include a computer server, Inter-
of a taxable item to a purchaser, or to ship or deliver a taxable item net protocol address, domain name, website, or software application.
to a location designated by the purchaser. The term does not include The "purpose" element of the definition may be established by proof
receiving or tracking an order, determining shipping costs, managing that the sales personnel of the seller receive three or more orders for
inventory, or other activities that do not involve the transfer, shipment, taxable items at the facility during the calendar year. Additional crite-
or delivery of a taxable item to the purchaser or a location designated ria for determining when a location is a place of business of the seller
by the purchaser. are provided in subsection (b) of this section for distribution centers,
manufacturing plants, storage yards, warehouses and similar facilities;
(10) Independently owned and operated business--A self-
kiosks; and purchasing offices. An outlet, office, facility, or any loca-
controlling entity that is not a subsidiary of another entity or otherwise
tion that contracts with a retail or commercial business to process for
subject to control by another entity, and that is not publicly traded.
that business invoices, purchase orders, bills of lading, or other equiva-
(11) Itinerant vendor--A seller who travels to various loca- lent records onto which sales tax is added, including an office operated
tions for the purpose of receiving orders and making sales of taxable for the purpose of buying and selling taxable goods to be used or con-
items and who has no place of business in this state. A person who sumed by the retail or commercial business, is not a place of business

PROPOSED RULES April 19, 2024 49 TexReg 2449

CP Ex-38-0010 of 0018
of the seller if the comptroller determines that the outlet, office, facil- county transit authority (CTA), regional mobility authority (RMA) or
ity, or location functions or exists to avoid the tax legally due under Tax coordinated county transportation authority created under Transporta-
Code, Chapters 321, 322, and 323 or exists solely to rebate a portion of tion Code, Chapters 370, 451, 452, 453, 457, or 460.
the tax imposed by those chapters to the contracting business. An out-
(27) Two percent cap--A reference to the general rule that,
let, office, facility, or location does not exist to avoid the tax legally due
except as otherwise provided by Texas law and as explained in this
under Tax Code, Chapters 321, 322, and 323 or solely to rebate a por-
section, a seller cannot collect, and a purchaser is not obligated to pay,
tion of the tax imposed by those chapters if the outlet, office, facility,
more than 2.0% of the sales price of a taxable item in total local sales
or location provides significant business services, beyond processing
and use taxes for all local taxing jurisdictions.
invoices, to the contracting business, including logistics management,
purchasing, inventory control, or other vital business services. (28) Use--This term has the meaning given in §3.346 of
this title.
(19) Purchasing office--An outlet, office, facility, or any lo-
cation that contracts with a retail or commercial business to process for (29) Use tax--A tax imposed on the storage, use or other
that business invoices, purchase orders, bills of lading, or other equiva- consumption of a taxable item in this state.
lent records onto which sales tax is added, including an office operated
(b) Determining the place of business of a seller.
for the purpose of buying and selling taxable goods to be used or con-
sumed by the retail or commercial business. (1) Distribution centers, manufacturing plants, storage
yards, warehouses, and similar facilities.
(20) Remote Seller--As defined in §3.286 of this title, a re-
mote seller is a seller engaged in business in this state whose only ac- (A) A distribution center, manufacturing plant, storage
tivity in the state is: yard, warehouse, or similar facility operated by a seller for the purpose
of selling taxable items where sales personnel of the seller receive three
(A) engaging in regular or systematic solicitation of
or more orders for taxable items during the calendar year from persons
sales of taxable items in this state by the distribution of catalogs,
other than employees, independent contractors, and natural persons af-
periodicals, advertising flyers, or other advertising, by means of print,
filiated with the seller is a place of business of the seller. Forwarding
radio, or television media, or by mail, telegraphy, telephone, computer
previously received orders to the facility for fulfilment does not make
data base, cable, optic, microwave, or other communication system
the facility a place of business.
for the purpose of effecting sales of taxable items; or
(B) If a location that is a place of business of the seller,
(B) soliciting orders for taxable items by mail or
such as a sales office, is in the same building as a distribution center,
through other media including the Internet or other media that may be
manufacturing plant, storage yard, warehouse, or similar facility op-
developed in the future.
erated by a seller, then the entire facility is a place of business of the
(21) Seller--This term has the meaning given in §3.286 of seller.
this title and also refers to any agent or employee of the seller.
(2) Kiosks. A kiosk is not a place of business of the seller
(22) Small business--A legal entity, including a corpora- for the purpose of determining where a sale is consummated for local
tion, partnership, or sole proprietorship, that: tax purposes. A seller who owns or operates a kiosk in Texas is, how-
ever, engaged in business in this state as provided in §3.286 of this title.
(A) is formed for the purpose of making a profit;
(3) Purchasing offices.
(B) is independently owned and operated; and
(A) A purchasing office is not a place of business of the
(C) has fewer than 100 employees or less than $6 mil-
seller if the purchasing office exists solely to rebate a portion of the lo-
lion in annual gross receipts.
cal sales and use tax imposed by Tax Code, Chapters 321, 322, or 323
(23) Special purpose district--A local governmental entity to a business with which it contracts; or if the purchasing office func-
authorized by the Texas legislature for a specific purpose, such as crime tions or exists to avoid the tax legally due under Tax Code, Chapters
control, a local library, emergency services, county health services, or 321, 322, or 323. A purchasing office does not exist solely to rebate
a county landfill and criminal detention center. a portion of the local sales and use tax or to avoid the tax legally due
under Tax Code, Chapters 321, 322, or 323 if the purchasing office pro-
(24) Storage--This term has the meaning given in §3.346
vides significant business services to the contracting business beyond
of this title (relating to Use Tax).
processing invoices, including logistics management, purchasing, in-
(25) Temporary place of business of the seller--A location ventory control, or other vital business services.
operated by a seller for a limited period of time for the purpose of sell-
(B) In making a determination under subparagraph (A)
ing and receiving orders for taxable items and where the seller has in-
of this paragraph, as to whether a purchasing office provides signif-
ventory available for immediate delivery to a purchaser. For example,
icant business services to the contracting business beyond processing
a person who rents a booth at a weekend craft fair or art show to sell
invoices, the comptroller will compare the total value of the other busi-
and take orders for jewelry, or a person who maintains a facility at a
ness services to the value of processing invoices. If the total value of
job site to rent tools and equipment to a contractor during the construc-
the other business services, including logistics management, purchas-
tion of real property, has established a temporary place of business. A
ing, inventory control, or other vital business services, is less than the
temporary place of business of the seller includes a sale outside of a
value of the service to process invoices, then the purchasing office will
distribution center, manufacturing plant, storage yard, warehouse, or
be presumed not to be a place of business of the seller.
similar facility of the seller in a parking lot or similar space sharing
the same physical address as the facility but not within the walls of the (C) If the comptroller determines that a purchasing of-
facility. fice is not a place of business of the seller, the sale of any taxable item
is deemed to be consummated at the place of business of the seller from
(26) Transit authority--A metropolitan rapid transit author-
whom the purchasing office purchased the taxable item for resale and
ity (MTA), advanced transportation district (ATD), regional or subre-
local sales and use taxes are due according to the following rules.
gional transportation authority (RTA), city transit department (CTD),

49 TexReg 2450 April 19, 2024 Texas Register

CP Ex-38-0011 of 0018
(i) When taxable items are purchased from a Texas (i) Order fulfilled at a place of business of the seller
seller, local sales taxes are due based on the location of the seller's place in Texas. When an order is received at a place of business of the seller
of business where the sale is deemed to be consummated, as determined in Texas and is fulfilled at a place of business of the seller in Texas, the
in accordance with subsection (c) of this section. sale is consummated at the place of business where the order is fulfilled.
(ii) When the sale of a taxable item is deemed to be (ii) Order not fulfilled at a place of business of the
consummated at a location outside of this state, local use tax is due seller in Texas. When an order is received at a place of business of the
based on the location where the items are first stored, used or consumed seller in Texas and is fulfilled at a location that is not a place of business
by the entity that contracted with the purchasing office in accordance of the seller in Texas, the sale is consummated at the place of business
with subsection (d) of this section. where the order is received.
(4) An order that is received by a salesperson who is not (2) Consummation of sale - order not received at a place of
at a place of business of the seller when the salesperson receives the business of the seller in Texas.
order is treated as being received at the location from which the sales-
(A) Order fulfilled at a place of business of the seller
person operates. Examples include orders that a salesperson receives
in Texas. When an order is received at a location that is not a place
by mail, telephone, including Voice over Internet Protocol and cellular
of business of the seller in Texas or is received outside of Texas, and
phone calls, facsimile, and email while traveling. The location from
is fulfilled from a place of business of the seller in Texas, the sale is
which the salesperson operates is the principal fixed location where the
consummated at the place of business where the order is fulfilled.
salesperson conducts work-related activities. The location from which
a salesperson operates will be a place of business of the seller only if (B) Order not fulfilled from a place of business of the
the location meets the definition of a "place of business of a seller" in seller in Texas.
subsection (a)(16) of this section on its own, without regard to the or-
(i) Order fulfilled in Texas. When an order is re-
ders imputed to that location by this paragraph.
ceived at a location that is not a place of business of the seller in Texas
(5) A facility without sales personnel is usually not a "place and is fulfilled from a location in Texas that is not a place of business
of business of the seller." A vending machine is not "an established of the seller, the sale is consummated at the location in Texas to which
outlet, office, or location," and does not constitute a "place of business the order is shipped or delivered, or at which the purchaser of the item
of the seller." Instead, a vending machine sale is treated as a sale by takes possession.
an itinerant vendor. See subsections (a)(10) and (c)(6) of this section.
(ii) Order not fulfilled in Texas. When an order is
However, a walk-in retail outlet with a stock of goods available for im-
received by a seller at a location that is not a place of business of the
mediate purchase through a cashier-less point of sale terminal at the
seller in Texas, and is fulfilled from a location outside of Texas, the
outlet would be "an established outlet, office, or location" so as to con-
sale is not consummated in Texas. However, a use is consummated
stitute a "place of business of the seller" even though sales personnel
at the first point in Texas where the item is stored, used, or consumed
are not required for every sale. A computer that operates an automated
after the interstate transit has ceased. A taxable item delivered to a
shopping cart software program is not an established outlet, office, or
point in Texas is presumed to be for storage, use, or consumption at that
location," and does not constitute a "place of business of the seller."
point until the contrary is established. Local use tax should be collected
A computer that operates an automated telephone ordering system is
as provided in subsection (d) of this section. Except as provided in
not "an established outlet, office, or location," and does not constitute
subsection (i)(3) of this section, a remote seller required to collect state
a "place of business of the seller."
use tax under §3.286(b)(2) of this title must also collect local use tax.
(6) If a small business or a micro-business operates a sin-
(3) Exception for qualifying economic development
gle location out of which it conducts all of its business activities, the
agreements entered into before January 1, 2009, pursuant to Tax Code,
comptroller will presume that the location is a place of business of the
§321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is
seller.
effective until September 1, 2024. If applicable, the local sales tax due
(c) Local sales tax - Consummation of sale - determining the on the sale of a taxable item is based on the location of the qualifying
local taxing jurisdictions to which sales tax is due. Except for the spe- warehouse, which is a place of business of the seller, from which the
cial rules applicable to remote sellers in subsection (i)(3) of this section, item is shipped or delivered or at which the purchaser of the item takes
direct payment permit purchases in subsection (j) of this section, and possession.
certain taxable items, including taxable items sold by a marketplace
(4) Local sales taxes are due to each local taxing jurisdic-
provider, as provided in subsection (k) of this section, each sale of a
tion with sales tax in effect where the sale is consummated. Local use
taxable item is consummated at the location indicated by the provisions
tax may also be due if the total amount of local sales taxes due does not
of this subsection. The following rules, taken from Tax Code, §321.203
reach the two percent cap, and the item purchased is shipped or deliv-
and §323.203, apply to all sellers engaged in business in Texas, regard-
ered to a location in one or more different local taxing jurisdictions, as
less of whether they have no place of business in Texas, a single place
provided in subsection (d) of this section.
of business in Texas, or multiple places of business in Texas.
(5) Multiple special purpose district taxes, multiple transit
(1) Consummation of sale - order received at a place of
authority sales taxes, or a combination of the two may apply to a single
business of the seller in Texas.
transaction. If the sale of a taxable item is consummated at a location
(A) Order placed in person. Except as provided by within the boundaries of multiple special purpose districts or transit
paragraph (3) of this subsection, when an order for a taxable item is authorities, local sales tax is owed to each of the jurisdictions in effect
placed in person at a seller's place of business in Texas, including at a at that location. For example, a place of business of the seller located in
temporary place of business of the seller in Texas, the sale of that item the city of San Antonio is within the boundaries of both the San Antonio
is consummated at that place of business of the seller, regardless of Advanced Transportation District and the San Antonio Metropolitan
the location where the order is fulfilled. Transit Authority, and the seller is required to collect sales tax for both
transit authorities. Similarly, a place of business of the seller in Flower
(B) Order not placed in person.
Mound is located within the boundaries of two special purpose districts,

PROPOSED RULES April 19, 2024 49 TexReg 2451

CP Ex-38-0012 of 0018
the Flower Mound Crime Control District and the Flower Mound Fire with the earliest effective date, until the two percent cap is met. The
Control District, and the seller is responsible for collecting sales tax for effective dates of all special purpose district taxes are available on the
both special purpose districts. comptroller's website. However, if the collection or accrual of use tax
for the district with the earliest effective date would exceed the two
(6) Itinerant vendors; vending machines.
percent cap, the tax for that district is not due and the seller or purchaser
(A) Itinerant vendors. Sales made by itinerant vendors should determine, following the criteria in subparagraphs (A) - (C) of
are consummated at, and itinerant vendors must collect sales tax based this paragraph, whether use tax is due for the district that next became
upon, the location where the item is delivered or at which the purchaser effective.
of the item takes possession. Itinerant vendors do not have any respon-
(i) If the competing special purpose district taxes be-
sibility to collect use tax.
came effective on the same date, the special purpose district taxes are
(B) Vending machines. Sales of taxable items made due in the order of the earliest date for which the election in which the
from a vending machine are consummated at the location of the vend- district residents authorized the imposition of sales and use tax by the
ing machine. See §3.293 of this title (relating to Food; Food Prod- district was held.
ucts; Meals; Food Service) for more information about vending ma-
(ii) If the elections to impose the local taxes were
chine sales.
held on the same date, the special purpose district taxes are due in the
(7) The location where the order is received by or on be- order of the earliest date for which the enabling legislation under which
half of the seller means the physical location of a seller or third party each district was created became effective.
such as an established outlet, office location, or automated order re-
(E) Collection or accrual of use tax for multiple transit
ceipt system operated by or on behalf of the seller where an order is
authorities. If more than one transit authority use tax is in effect at
initially received by or on behalf of the seller and not where the order
the location where use of an item occurs, and the two percent cap has
may be subsequently accepted, completed or fulfilled. An order is re-
not been met, the transit authority taxes are due in the order of their
ceived when all of the information from the purchaser necessary to the
effective dates, beginning with the earliest effective date, until the two
determination whether the order can be accepted has been received by
percent cap is met. The effective dates of all transit authority taxes
or on behalf of the seller. The location from which a product is shipped
are available on the comptroller's website. However, if the collection
shall not be used in determining the location where the order is received
or accrual of use tax for the authority with the earliest effective date
by the seller.
would exceed the two percent cap, the tax for that authority is not due
(d) Local use tax. The provisions addressing the imposition and the seller or purchaser should determine, following the criteria in
of state use tax in §3.346 of this title also apply to the imposition of subparagraphs (A) - (D) of this paragraph, whether use tax is due for
local use tax. For example, consistent with §3.346(e) of this title, all the authority that next became effective.
taxable items that are shipped or delivered to a location in this state that
(i) If the competing transit authorities became effec-
is within the boundaries of a local taxing jurisdiction are presumed to
tive on the same date, the transit authority taxes are due in the order of
have been purchased for use in that local taxing jurisdiction as well as
the earliest date for which the election in which the authority residents
presumed to have been purchased for use in the state.
authorized the imposition of sales and use tax by the authority was held.
(1) General rules.
(ii) If the elections to impose local taxes were held
(A) When local use taxes are due in addition to local on the same date, the transit authority use taxes are due in the order of
sales taxes as provided by subsection (c) of this section, all applicable the earliest date for which the enabling legislation under which each
use taxes must be collected or accrued in the following order until the authority was created became effective.
two percent cap is reached: city, county, special purpose district, and
(2) General use tax rules applied to specific situations. The
transit authority. If more than one special purpose district use tax is due,
following fact patterns explain how local use tax is to be collected or
all such taxes are to be collected or accrued before any transit authority
accrued and remitted to the comptroller based on, and subject to, the
use tax is collected or accrued. See subparagraphs (D) and (E) of this
general rules in paragraph (1) of this subsection.
paragraph.
(A) Sale consummated outside the state, item delivered
(B) If a local use tax cannot be collected or accrued at
from outside the state or from a location in Texas that is not operated by
its full rate without exceeding the two percent cap, the seller cannot
the seller - local use tax due. Except as provided in subsection (i)(3) of
collect it, or any portion of it, and the purchaser is not responsible for
this section, if a sale is consummated outside of this state according to
accruing it.
the provisions of subsection (c) of this section, and the item purchased
(C) If a seller collects a local sales tax on an item, or a is either shipped or delivered to a location in this state as designated
purchaser accrues a local sales tax on an item, a use tax for the same by the purchaser from a location outside of the state, or if the order
type of jurisdiction is not due on the same item. For example, after a is drop shipped directly to the purchaser from a third-party supplier,
city sales tax has been collected or accrued for an item, no use tax is local use tax is owed based upon the location in this state to which
due to that same or a different city on that item, but use tax may be due the order is shipped or delivered or at which the purchaser of the item
to a county, special purpose district, or transit authority. Similarly, if takes possession. The seller is responsible for collecting the local use
one or more special purpose district sales taxes have been collected or tax due on the sale. If the seller does not collect the local use taxes due
accrued for an item, no special purpose district use tax is due on that on the sale, the purchaser is responsible for accruing such taxes and
item, and if one or more transit authority sales taxes have been collected remitting them directly to the comptroller according to the provisions in
or accrued for an item, no transit authority use tax is due on that item. paragraph (1) of this subsection. For example, if an order for a taxable
item is received by a seller at a location outside of Texas, and the order
(D) Collection or accrual of use tax for multiple special
is shipped to the purchaser from a location outside of the state, local
purpose districts. If more than one special purpose district use tax is in
use tax is due based upon the location to which the order is shipped or
effect at the location where use of an item occurs, the special purpose
delivered or at which the purchaser of the item takes possession.
district taxes are due in the order of their effective dates, beginning

49 TexReg 2452 April 19, 2024 Texas Register

CP Ex-38-0013 of 0018
(B) Sale consummated in Texas outside a local taxing cal taxes to the comptroller shall also apply to a purchaser if the seller
jurisdiction, item delivered into one or more local taxing jurisdictions - does not collect local taxes that are due. The comptroller may proceed
local use tax due. If a sale is consummated at a location in Texas that is against the seller or purchaser for the local tax owed by either.
outside of the boundaries of any local taxing jurisdiction according to
(f) Tax rates. Except as otherwise provided by law, no local
the provisions of subsection (c) of this section, and the order is shipped
governmental entity may adopt or increase a sales and use tax if, as a
or delivered to the purchaser at a location in this state that is within the
result of the adoption or increase of the tax, the combined rate of all
boundaries of one or more local taxing jurisdictions, local use tax is
sales and use taxes imposed by local taxing jurisdictions having terri-
due based on the location to which the items are shipped or delivered
tory in the local governmental entity would exceed 2.0% at any location
or at which the purchaser of the item takes possession. The seller is
within the boundaries of the local governmental entity's jurisdiction.
responsible for collecting the local use taxes due on the sale, regardless
The following are the local tax rates that may be adopted.
of the location of the seller in Texas. If the seller fails to collect any
local use taxes due, the purchaser is responsible for accruing such taxes (1) Cities. Cities may impose sales and use tax at a rate of
and remitting them directly to the comptroller. up to 2.0%.
(C) Sale consummated in any local taxing jurisdictions (2) Counties. Counties may impose sales and use tax at
imposing less than 2.0% in total local taxes - local sales taxes and use rates ranging from 0.5% to 1.5%.
taxes due. If a sale is consummated at a location in Texas where the
(3) Special purpose districts. Special purpose districts may
total local sales tax rate imposed by the taxing jurisdictions in effect at
impose sales and use tax at rates ranging from 0.125% to 2.0%.
that location does not equal 2.0% according to the provisions of sub-
section (c) of this section, and the item is shipped or delivered to the (4) Transit authorities. Transit authorities may impose
purchaser at a location in this state that is inside the boundaries of a sales and use tax at rates ranging from 0.25% to 1.0%.
different local taxing jurisdiction, additional local use tax may be due
(g) Jurisdictional boundaries, combined areas, and city tax im-
based on the location to which the order is shipped or delivered or at
posed through strategic partnership agreements.
which the purchaser of the item takes possession, subject to the two
percent cap. The seller is responsible for collecting any additional lo- (1) Jurisdictional boundaries.
cal use taxes due on the sale, regardless of the location of the seller in
(A) City boundaries. City taxing jurisdictional bound-
Texas. See subsection (i) of this section. If the seller fails to collect the
aries cannot overlap one another and a city cannot impose a sales and
additional local use taxes due, the purchaser is responsible for accruing
use tax in an area that is already within the jurisdiction of another city.
such taxes and remitting them directly to the comptroller.
(B) County boundaries. County tax applies to all loca-
(i) Example one - if an order is received in person at
tions within that county.
a place of business of the seller, such that the sale is consummated at
the location where the order is received as provided under subsection (C) Special purpose district and transit authority bound-
(c)(1)(A) of this section, and the local sales tax due on the sale does aries. Special purpose districts and transit authorities may cross or
not meet the two percent cap, additional local use taxes are due based share boundaries with other local taxing jurisdictions and may encom-
on the location to which the order is shipped or delivered or at which pass, in whole or in part, other local taxing jurisdictions, including
the purchaser of the item takes possession, subject to the provisions in cities and counties. A geographic location or address in this state may
paragraph (1) of this subsection. lie within the boundaries of more than one special purpose district or
more than one transit authority.
(ii) Example two - if a seller receives an order for a
taxable item at a seller's place of business in Texas, and the seller ships (D) Extraterritorial jurisdictions. Except as otherwise
or delivers the item from an out-of-state location to a location in this provided by paragraph (3) of this subsection concerning strategic part-
state as designated by the purchaser, local sales tax is due based upon nership agreements and subsection (l)(5) of this section concerning the
the location of the place of business of the seller where the order is City of El Paso and Fort Bliss, city sales and use tax does not apply to
received. If the local sales tax due on the item does not meet the two taxable sales that are consummated outside the boundaries of the city,
percent cap, use taxes, subject to the provisions in paragraph (1) of this including sales made in a city's extraterritorial jurisdiction. However,
subsection, are due based upon the location where the items are shipped an extraterritorial jurisdiction may lie within the boundaries of a spe-
or delivered or at which the purchaser of the item takes possession. cial purpose district, transit authority, county, or any combination of
the three, and the sales and use taxes for those jurisdictions would ap-
(e) Effect of other law.
ply to those sales.
(1) Tax Code, Title 2, Subtitles A (General Provisions) and
(2) Combined areas. A combined area is an area where the
B (Enforcement and Collection), Tax Code, Chapter 141 (Multistate
boundaries of a city overlap the boundaries of one or more other local
Tax Compact) and Tax Code, Chapter 151 (Limited Sales, Excise, and
taxing jurisdictions as a result of an annexation of additional territory
Use Tax) apply to transactions involving local taxes. Related sections
by the city, and where, as the result of the imposition of the city tax
of this title and comptroller rulings shall also apply with respect to local
in the area in addition to the local taxes imposed by the existing tax-
taxes. This includes authorities such as court cases and federal law
ing jurisdictions, the combined local tax rate would exceed 2.0%. The
that affect whether an item is taxable or is excluded or exempt from
comptroller shall make accommodations to maintain a 2.0% rate in any
taxation.
combined area by distributing the 2.0% tax revenue generated in these
(2) Permits, exemption certificates, and resale certificates combined areas to the local taxing jurisdictions located in the combined
required by Tax Code, Chapter 151, shall also satisfy the requirements areas as provided in Tax Code, §321.102 or Health and Safety Code,
for collecting and remitting local taxes, unless otherwise indicated by §775.0754. Combined areas are identified on the comptroller's web-
this section or other sections of this title. For example, see subsection site. Sellers engaged in transactions on which local sales or use taxes
(n) of this section concerning prior contract exemptions. are due in a combined area, or persons who must self-accrue and re-
mit tax directly to the comptroller, must use the combined area local
(3) Any provisions in this section or other sections of this
code when reporting the tax rather than the codes for the individual
title related to a seller's responsibilities for collecting and remitting lo-

PROPOSED RULES April 19, 2024 49 TexReg 2453

CP Ex-38-0014 of 0018
city, county, special purpose districts, or transit authorities that make real property repair and remodeling job sites, refer to §3.357 of this
up the combined area. title (relating to Nonresidential Real Property Repair, Remodeling,
and Restoration; Real Property Maintenance).
(3) City tax imposed through strategic partnership agree-
ments. (i) Sellers' and purchasers' responsibilities for collecting or ac-
cruing local taxes.
(A) The governing bodies of a district, as defined in
Local Government Code, §43.0751, and a city may enter into a lim- (1) Sale consummated in Texas; seller responsible for col-
ited-purpose annexation agreement known as a strategic partnership lecting local sales taxes and applicable local use taxes. When a sale
agreement. Under this agreement, the city may impose sales and use of a taxable item is consummated at a location in Texas as provided by
tax within all or part of the boundaries of a district. Areas within a dis- subsection (c) of this section, the seller must collect each local sales tax
trict that are annexed for this limited purpose are treated as though they in effect at the location. If the total rate of local sales tax due on the sale
are within the boundaries of the city for purposes of city sales and use does not reach the two percent cap, and the seller ships or delivers the
tax. item into another local taxing jurisdiction, then the seller is required to
collect additional local use taxes due, if any, based on the location to
(B) Counties, transit authorities, and special purpose
which the item is shipped or delivered or at which the purchaser of the
districts may not enter into strategic partnership agreements. Sales
item takes possession, regardless of the location of the seller in Texas.
and use taxes imposed by those taxing jurisdictions do not apply in
For more information regarding local use taxes, refer to subsection (d)
the limited-purpose annexed area as part of a strategic partnership
of this section.
agreement between a city and an authorized district. However, a
county, special purpose district, or transit authority sales and use tax, or (2) Out-of-state sale; seller engaged in business in Texas.
any combination of these three types of taxes, may apply at locations Except as provided in paragraph (3) of this subsection, when a sale is
included in a strategic partnership agreement between a city and an not consummated in Texas, a seller who is engaged in business in this
authorized district if the tax is imposed in that area by the applicable state is required to collect and remit local use taxes due, if any, on orders
jurisdiction as allowed under its own controlling authorities. of taxable items shipped or delivered at the direction of the purchaser
into a local taxing jurisdiction in this state based upon the location in
(C) Prior to September 1, 2011, the term "district" was
this state to which the item is shipped or delivered or at which the
defined in Local Government Code, §43.0751 as a municipal utility
purchaser of the item takes possession as provided in subsection (d)
district or a water control and improvement district. The definition
of this section.
was amended effective September 1, 2011, to mean a conservation and
reclamation district operating under Water Code, Chapter 49. (3) Local use tax rate for remote sellers.
(h) Places of business of the seller and job sites crossed by (A) A remote seller required to collect and remit one or
local taxing jurisdiction boundaries. more local use taxes in connection with a sale of a taxable item must
compute the amount using:
(1) Places of business of the seller crossed by local taxing
jurisdiction boundaries. If a place of business of the seller is crossed by (i) the combined tax rate of all applicable local use
one or more local taxing jurisdiction boundaries so that a portion of the taxes based on the location to which the item is shipped or delivered or
place of business of the seller is located within a taxing jurisdiction and at which the purchaser of the item takes possession; or
the remainder of the place of business of the seller lies outside of the
(ii) at the remote seller's election, the single local use
taxing jurisdiction, tax is due to the local taxing jurisdictions in which
tax rate published in the Texas Register.
the sales office is located. If there is no sales office, sales tax is due to
the local taxing jurisdictions in which any cash registers are located. (B) A remote seller that is storing tangible personal
property in Texas to be used for fulfillment at a facility of a market-
(2) Job sites.
place provider that has certified that it will assume the rights and duties
(A) Residential repair and remodeling; new construc- of a seller with respect to the tangible personal property, as provided
tion of an improvement to realty. When a contractor is improving real for in §3.286 of this title, may elect the single local use tax rate under
property under a separated contract, and the job site is crossed by the subparagraph (A)(ii) of this paragraph.
boundaries of one or more local taxing jurisdictions, the local taxes due
(C) Notice to the comptroller of election and revocation
on any separately stated charges for taxable items incorporated into the
of election.
real property must be allocated to the local taxing jurisdictions based on
the total square footage of the real property improvement located within (i) Before using the single local use tax rate, a re-
each jurisdiction, including the square footage of any standalone struc- mote seller must notify the comptroller of its election using a form pre-
tures that are part of the construction, repair, or remodeling project. scribed by the comptroller. A remote seller may also notify the comp-
For more information about tax due on materials used at residential troller of the election on its use tax permit application form. The remote
and new construction job sites, refer to §3.291 of this title (relating to seller must use the single local use tax rate for all of its sales of taxable
Contractors). items until the election is revoked as provided in clause (ii) of this sub-
paragraph.
(B) Nonresidential real property repair and improve-
ment. When taxable services are performed to repair, remodel, or (ii) A remote seller may revoke its election by filing
restore nonresidential real property, including a pipeline, transmission a form prescribed by the comptroller. If the comptroller receives the
line, or parking lot, that is crossed by the boundaries of one or more notice by October 1, the revocation will be effective January 1 of the
local taxing jurisdictions, the local taxes due on the taxable services, following year. If the comptroller receives the notice after October 1,
including materials and any other charges connected to the services the revocation will be effective January 1 of the year after the follow-
performed, must be allocated among the local taxing jurisdictions ing year. For example, a remote seller must notify the comptroller by
based upon the total mileage or square footage, as appropriate, of the October 1, 2020, for the revocation to be effective January 1, 2021. If
repair, remodeling, or restoration project located in each jurisdiction. the comptroller receives the revocation on November 1, 2020, the re-
For more information about tax due on materials used at nonresidential vocation will be effective January 1, 2022.

49 TexReg 2454 April 19, 2024 Texas Register

CP Ex-38-0015 of 0018
(D) Single local use tax rate. (5) Local tax is due on the sales price of a taxable item, as
defined in Tax Code, §151.007, in the report period in which the taxable
(i) The single local use tax rate in effect for the pe-
item is purchased or the period in which the taxable item is first stored,
riod beginning October 1, 2019, and ending December 31, 2019, is
used, or otherwise consumed in a local taxing jurisdiction.
1.75%.
(6) A purchaser is not liable for additional local use tax if
(ii) The single local use tax rate in effect for the pe-
the purchaser pays local use tax using the rate elected by an eligible re-
riod beginning January 1, 2020, and ending December 31, 2020, is
mote seller according to paragraph (3) of this subsection. The remote
1.75%.
seller must be identified on the comptroller's website as electing to use
(E) Annual publication of single local use tax rate. Be- the single local use tax rate. A purchaser must verify that the remote
fore the beginning of a calendar year, the comptroller will publish no- seller is listed on the comptroller's website. If the remote seller is not
tice of the single local use tax rate in the Texas Register that will be in listed on the comptroller's website, the purchaser will be liable for ad-
effect for that calendar year. ditional use tax due in accordance to paragraph (4) of this subsection.
(F) Calculating the single local use tax rate. The single (j) Items purchased under a direct payment permit.
local use tax rate effective in a calendar year is equal to the estimated
(1) When taxable items are purchased under a direct pay-
average rate of local sales and use taxes imposed in this state during the
ment permit, local use tax is due based upon the location where the
preceding state fiscal year. As soon as practicable after the end of a state
permit holder first stores the taxable items, except that if the taxable
fiscal year, the comptroller must determine the estimated average rate
items are not stored, then local use tax is due based upon the location
of local sales and use taxes imposed in this state during the preceding
where the taxable items are first used or otherwise consumed by the
state fiscal year by:
permit holder.
(i) dividing the total amount of net local sales and
(2) If, in a local taxing jurisdiction, storage facilities con-
use taxes remitted to the comptroller during the state fiscal year by the
tain taxable items purchased under a direct payment exemption certifi-
total amount of net state sales and use tax remitted to the comptroller
cate and at the time of storage it is not known whether the taxable items
during the state fiscal year;
will be used in Texas, then the taxpayer may elect to report the use tax
(ii) multiplying the amount computed under clause either when the taxable items are first stored in Texas or are first re-
(i) of this subparagraph by the rate provided in Tax Code, §151.051; moved from inventory for use in Texas, as long as use tax is reported
and in a consistent manner. See also §3.288(i) of this title (relating to Direct
Payment Procedures and Qualifications) and §3.346(g) of this title.
(iii) rounding the amount computed under clause (ii)
of this subparagraph to the nearest .0025. (3) If local use tax is paid on stored items that are subse-
quently removed from Texas before they are used, the tax may be re-
(G) Direct refund. A purchaser may request a refund
covered in accordance with the refund and credit provisions of §3.325
based on local use taxes paid in a calendar year for the difference be-
of this title and §3.338 of this title (relating to Multistate Tax Credits
tween the single local use tax rate paid by the purchaser and the amount
and Allowance of Credit for Tax Paid to Suppliers).
the purchaser would have paid based on the combined tax rate for all
applicable local use taxes. Notwithstanding the refund requirements (k) Special rules for certain taxable goods and services. Sales
under §3.325(a)(1) of this title (relating to Refunds and Payments Un- of the following taxable goods and services are consummated at, and
der Protest), a non-permitted purchaser may request a refund directly local tax is due based upon, the location indicated in this subsection.
from the comptroller for the tax paid in the previous calendar year, no
(1) Amusement services. Local tax is due based upon the
earlier than January 1 of the following calendar year within the statute
location where the performance or event occurs. For more information
of limitation under Tax Code, 111.104 (Refunds).
on amusement services, refer to §3.298 of this title (relating to Amuse-
(H) Marketplace providers. Notwithstanding subpara- ment Services).
graph (A) of this paragraph, marketplace providers may not use the
(2) Cable services. When a service provider uses a cable
single local use tax rate and must compute the amount of local use tax
system to provide cable television or bundled cable services to cus-
to collect and remit using the combined tax rate of all applicable local
tomers, local tax is due as provided for in §3.313 of this title. When
use taxes.
a service provider uses a satellite system to provide cable services to
(4) Purchaser responsible for accruing and remitting local customers, no local tax is due on the service in accordance with the
taxes if seller fails to collect. Telecommunications Act of 1996, §602.
(A) If a seller does not collect the state sales tax, any (3) Florists. Local sales tax is due on all taxable items sold
applicable local sales taxes, or both, on a sale of a taxable item that by a florist based upon the location where the order is received, regard-
is consummated in Texas, then the purchaser is responsible for filing less of where or by whom delivery is made. Local use tax is not due on
a return and paying the tax. The local sales taxes due are based on deliveries of taxable items sold by florists. For example, if the place of
the location in this state where the sale is consummated as provided in business of the florist where an order is taken is not within the bound-
subsection (c) of this section. aries of any local taxing jurisdiction, no local sales tax is due on the
item and no local use tax is due regardless of the location of delivery.
(B) A purchaser who buys an item for use in Texas from
If a Texas florist delivers an order in a local taxing jurisdiction at the
a seller who does not collect the state use tax, any applicable local use
instruction of an unrelated florist, and if the unrelated florist did not
taxes, or both, is responsible for filing a return and paying the tax. The
take the order within the boundaries of a local taxing jurisdiction, local
local use taxes due are based on the location where the item is first
use tax is not due on the delivery. For more information about florists'
stored, used, or consumed by the purchaser.
sales and use tax obligations, refer to §3.307 of this title (relating to
(C) For more information about how to report and pay Florists).
use tax directly to the comptroller, see §3.286 of this title.

PROPOSED RULES April 19, 2024 49 TexReg 2455

CP Ex-38-0016 of 0018
(4) Landline telecommunications services. Local taxes due §321.105, any city that adopted a local sales and use tax effective Oc-
on landline telecommunications services are based upon the location of tober 1, 1979, or later is prohibited from imposing tax on the residential
the device from which the call or other transmission originates. If the use of natural gas and electricity. See §3.295 of this title.
seller cannot determine where the call or transmission originates, local
(B) Imposition of tax allowed in certain cities. Cities
taxes due are based on the address to which the service is billed. For
that adopted local sales tax prior to October 1, 1979, may, in accor-
more information, refer to §3.344 of this title (relating to Telecommu-
dance with the provisions in Tax Code, §321.105, choose to repeal the
nications Services).
exemption for residential use of natural gas and electricity. The comp-
(5) Marketplace provider sales. Local taxes are due on troller's website provides a list of cities that impose tax on the residen-
sales of taxable items through a marketplace provider based on the lo- tial use of natural gas and electricity, as well as a list of those cities that
cation in this state to which the item is shipped or delivered or at which do not currently impose the tax, but are eligible to do so.
the purchaser takes possession. For more information, refer to §3.286
(C) Effective January 1, 2010, a fire control, preven-
of this title.
tion, and emergency medical services district organized under Local
(6) Mobile telecommunications services. Local taxes due Government Code, Chapter 344 that imposes sales tax under Tax Code,
on mobile telecommunications services are based upon the location of §321.106, or a crime control and prevention district organized under
the customer's place of primary use as defined in §3.344(a)(8) of this Local Government Code, Chapter 363 that imposes sales tax under Tax
title, and local taxes are to be collected as indicated in §3.344(h) of this Code, §321.108, that is located in all or part of a municipality that im-
title. poses a tax on the residential use of natural gas and electricity as pro-
vided under Tax Code, §321.105 may impose tax on residential use of
(7) Motor vehicle parking and storage. Local taxes are due
natural gas and electricity at locations within the district. A list of the
based on the location of the space or facility where the vehicle is parked.
special purpose districts that impose tax on residential use of natural
For more information, refer to §3.315 of this title (relating to Motor
gas and electricity and those districts eligible to impose the tax that do
Vehicle Parking and Storage).
not currently do so is available on the comptroller's website.
(8) Natural gas and electricity. Any local city and special
(2) Telecommunication services. Telecommunications ser-
purpose taxes due are based upon the location where the natural gas
vices are exempt from all local sales taxes unless the governing body
or electricity is delivered to the purchaser. As explained in subsection
of a city, county, transit authority, or special purpose district votes
(l)(1) of this section, residential use of natural gas and electricity is
to impose sales tax on these services. However, since 1999, under
exempt from all county sales and use taxes and all transit authority sales
Tax Code, §322.109(d), transit authorities created under Transporta-
and use taxes, most special purpose district sales and use taxes, and
tion Code, Chapter 451 cannot repeal the exemption unless the repeal
many city sales and use taxes. A list of the cities and special purpose
is first approved by the governing body of each city that created the
districts that do impose, and those that are eligible to impose, local
local taxing jurisdiction. The local sales tax is limited to telecommuni-
sales and use tax on residential use of natural gas and electricity is
cations services occurring between locations within Texas. See §3.344
available on the comptroller's website. For more information, also refer
of this title. The comptroller's website provides a list of local taxing
to §3.295 of this title (relating to Natural Gas and Electricity).
jurisdictions that impose tax on telecommunications services.
(9) Nonresidential real property repair and remodeling ser-
(3) Emergency services districts.
vices. Local taxes are due on services to remodel, repair, or restore
nonresidential real property based on the location of the job site where (A) Authority to exclude territory from imposition of
the remodeling, repair, or restoration is performed. See also subsection emergency services district sales and use tax. Pursuant to the provi-
(h)(2)(B) of this section and §3.357 of this title. sions of Health and Safety Code, §775.0751(c-1), an emergency ser-
vices district wishing to enact a sales and use tax may exclude from the
(10) Residential real property repair and remodeling and
election called to authorize the tax any territory in the district where the
new construction of a real property improvement performed under a
sales and use tax is then at 2.0%. The tax, if authorized by the voters
separated contract. When a contractor constructs a new improvement
eligible to vote on the enactment of the tax, then applies only in the
to realty pursuant to a separated contract or improves residential real
portions of the district included in the election. The tax does not apply
property pursuant to a separated contract, the sale is consummated at
to sales made in the excluded territories in the district and sellers in the
the job site at which the contractor incorporates taxable items into the
excluded territories should continue to collect local sales and use taxes
customer's real property. See also subsection (h)(2)(A) of this section
for the local taxing jurisdictions in effect at the time of the election un-
and §3.291 of this title.
der which the district sales and use tax was authorized as applicable.
(11) Waste collection services. Local taxes are due on
(B) Consolidation of districts resulting in sales tax
garbage or other solid waste collection or removal services based on
sub-districts. Pursuant to the provisions of Health and Safety Code,
the location at which the waste is collected or from which the waste is
§775.018(f), if the territory of a district proposed under Health and
removed. For more information, refer to §3.356 of this title (relating
Safety Code, Chapter 775 overlaps with the boundaries of another
to Real Property Service).
district created under that chapter, the commissioners court of each
(l) Special exemptions and provisions applicable to individual county and boards of the counties in which the districts are located may
jurisdictions. choose to create a consolidated district in the overlapping territory. If
two districts that want to consolidate under Health and Safety Code,
(1) Residential use of natural gas and electricity.
§775.024 have different sales and use tax rates, the territory of the
(A) Mandatory exemptions from local sales and use tax. former districts located within the consolidated area will be designated
Residential use of natural gas and electricity is exempt from most lo- as sub-districts and the sales tax rate within each sub-district will
cal sales and use taxes. Counties, transit authorities, and most special continue to be imposed at the rate the tax was imposed by the former
purpose districts are not authorized to impose sales and use tax on the district that each sub-district was part of prior to the consolidation.
residential use of natural gas and electricity. Pursuant to Tax Code,
(4) East Aldine Management District.

49 TexReg 2456 April 19, 2024 Texas Register

CP Ex-38-0017 of 0018
(A) Special sales and use tax zones within district; (B) pursuant to the obligation of a bid or bids submitted
separate sales and use tax rate. As set out in Special District Local prior to the effective date of any local tax if the bid or bids and contract
Laws Code, §3817.154(e) and (f), the East Aldine Management entered into pursuant thereto are at a fixed price and not subject to
District board may create special sales and use tax zones within the withdrawal, change, or modification because of the tax.
boundaries of the District and, with voter approval, enact a special
(2) Annexations. Any annexation of territory into an exist-
sales and use tax rate in each zone that is different from the sales and
ing local taxing jurisdiction is also a basis for claiming the exemption
use tax rate imposed in the rest of the district.
provided by this subsection.
(B) Exemptions from special zone sales and use tax.
(3) Local taxing jurisdiction rate increase; partial exemp-
The sale, production, distribution, lease, or rental of; and the use, stor-
tion for certain contracts and bids. When an existing local taxing ju-
age, or other consumption within a special sales and use tax zone of; a
risdiction raises its sales and use tax rate, the additional amount of tax
taxable item sold, leased, or rented by the entities identified in clauses
that would be due as a result of the rate increase is not due on the sale,
(i) - (vi) of this subparagraph are exempt from the special zone sales
use, storage, or other consumption in this state of taxable items used:
and use tax. State and all other applicable local taxes apply unless oth-
erwise exempted by law. The special zone sales and use tax exemption (A) for the performance of a written contract executed
applies to: prior to the effective date of the tax rate increase if the contract may
not be modified because of the tax; or
(i) a retail electric provider as defined by Utilities
Code, §31.002; (B) pursuant to the obligation of a bid or bids submitted
prior to the effective date of the tax rate increase if the bid or bids and
(ii) an electric utility or a power generation company
contract entered into pursuant thereto are at a fixed price and not subject
as defined by Utilities Code, §31.002;
to withdrawal, change, or modification because of the tax.
(iii) a gas utility as defined by Utilities Code,
(4) Three-year statute of limitations.
§101.003 or §121.001, or a person who owns pipelines used for
transportation or sale of oil or gas or a product or constituent of oil or (A) The exemption in paragraph (1) of this subsection
gas; and the partial exemption in paragraph (3) of this subsection have no
effect after three years from the date the adoption or increase of the tax
(iv) a person who owns pipelines used for the trans-
takes effect in the local taxing jurisdiction.
portation or sale of carbon dioxide;
(B) The provisions of §3.319 of this title apply to this
(v) a telecommunications provider as defined by
subsection to the extent they are consistent.
Utilities Code, §51.002; or
(C) Leases. Any renewal or exercise of an option to
(vi) a cable service provider or video service
extend the time of a lease or rental contract under the exemptions pro-
provider as defined by Utilities Code, §66.002.
vided by this subsection shall be deemed to be a new contract and no
(5) Imposition of city sales tax and transit tax on certain exemption will apply.
military installations; El Paso and Fort Bliss. Pursuant to Tax Code,
(5) Records. Persons claiming the exemption provided by
§321.1045 (Imposition of Sales and Use Tax in Certain Federal Military
this subsection must maintain records which can be verified by the
Installations), for purposes of the local sales and use tax imposed under
comptroller or the exemption will be lost.
Tax Code, Chapter 321, the city of El Paso includes the area within the
boundaries of Fort Bliss to the extent it is in the city's extraterritorial (6) Exemption certificate. An identification number is re-
jurisdiction. However, the El Paso transit authority does not include quired on the prior contract exemption certificates furnished to sellers.
Fort Bliss. See Transportation Code, §453.051 concerning the Creation The identification number should be the person's 11-digit Texas tax-
of Transit Departments. payer number or federal employer's identification (FEI) number.
(m) Restrictions on local sales tax rebates and other economic The agency certifies that legal counsel has reviewed the pro-
incentives. Pursuant to Local Government Code, §501.161, Section 4A posal and found it to be within the state agency's legal authority
and 4B development corporations may not offer to provide economic to adopt.
incentives, such as local sales tax rebates authorized under Local Gov-
ernment Code, Chapters 380 or 381, to persons whose business consists Filed with the Office of the Secretary of State on April 8, 2024.
primarily of purchasing taxable items using resale certificates and then TRD-202401427
reselling those same items to a related party. A related party means a
Jenny Burleson
person or entity which owns at least 80% of the business enterprise to
which sales and use taxes would be rebated as part of an economic in- Director, Tax Policy
centive. Comptroller of Public Accounts
Earliest possible date of adoption: May 19, 2024
(n) Prior contract exemptions. The provisions of §3.319 of this For further information, please call: (512) 475-2220
title (relating to Prior Contracts) concerning definitions and exclusions
apply to prior contract exemptions. ♦ ♦ ♦
(1) Certain contracts and bids exempt. No local taxes are TITLE 43. TRANSPORTATION
due on the sale, use, storage, or other consumption in this state of tax-
able items used: PART 3. MOTOR VEHICLE CRIME
(A) for the performance of a written contract executed PREVENTION AUTHORITY
prior to the effective date of any local tax if the contract may not be
modified because of the tax; or

PROPOSED RULES April 19, 2024 49 TexReg 2457

CP Ex-38-0018 of 0018
TAB
I
TITLE 34. PUBLIC FINANCE Jenny Burleson
Director, Tax Policy Division
PART 1. COMPTROLLER OF PUBLIC Comptroller of Public Accounts
ACCOUNTS Effective date: July 4, 2024
Proposal publication date: April 19, 2024
CHAPTER 3. TAX ADMINISTRATION For further information, please call: (512) 475-2220
SUBCHAPTER O. STATE AND LOCAL SALES ♦ ♦ ♦
AND USE TAXES 34 TAC §3.334
34 TAC §3.334 The Comptroller of Public Accounts adopts new §3.334, con-
The Comptroller of Public Accounts adopts the repeal of §3.334, cerning local sales and use taxes, without changes to the pro-
concerning local sales and use taxes, without changes to the posed text as published in the April 19, 2024, issue of the Texas
proposed text as published in the April 19, 2024, issue of the Register (49 TexReg 2442). The rule will not be republished. The
Texas Register (49 TexReg 2440). The rule will not be repub- comptroller adopts new §3.334 to replace the existing §3.334
lished. The comptroller repeals existing §3.334 to replace it with that the comptroller is repealing. The new §3.334 includes the
new §3.334. The repeal of §3.334 will be effective the date the text of existing §3.334, with the addition of subsection (b)(6) and
new §3.334 takes effect. supporting definitions.

Brief explanation of the rulemaking. In addition to soliciting written comments, the comptroller held
a public hearing on May 9, 2024. The comptroller received oral
It has been called to the comptroller's attention that the October and/or written comments regarding adoption of the rule from the
27, 2023, notice of proposed rulemaking did not contain a state- following persons:
ment of fiscal implications for small businesses or rural commu-
nities as required by Government Code, Chapter 2006. See (48 John Christian, Ryan, LLC, against the rule.
TexReg 6340) (October 27, 2023). Therefore, the comptroller re- TJ Gilmore, Mayor of the City of Lewisville, against the rule.
peals the adopted rule as proposed in the October 27, 2023, no-
tice of proposed rulemaking. The comptroller is simultaneously Jim Harris, on behalf of the Coalition for Appropriate Sales
readopting the text of the rule effective on January 5, 2024, with Tax Law Enactment (CASTLE) and its members, the cities
amendments, under the same number and title, with the repeal of Coppell, Farmers Branch, Grand Prairie, Humble, Kilgore,
to be effective as of the date the adopted rule. Lancaster, and Lewisville, against the rule.

Comments John Kroll, HMWK, against the rule.

The comptroller received comments from James Harris on behalf Mike Land, City Manager of the City of Coppell, against the rule.
of the Coalition for Appropriate Sales Tax Law and its members, Wes Mays, Mayor of the City of Coppell, against the rule.
the cities of Coppell, Carrollton, Desoto, Farmers Branch, Hum-
ble, Kilgore, Lancaster, and Lewisville, in favor of the repeal of Stephan L. Sheets, Attorney for the City of Round Rock, against
all revisions to the rule, starting with the version adopted in May the rule.
2020. The comptroller addresses the criticisms of the revisions Rich Whitehead, Mayor of the City of Helotes, against the rule.
in §3.334 in the preamble of the new §3.334, which the comp-
troller will adopt to be effective concurrently with this repeal. Summary of the Principal Reasons For and Against Adoption of
the Rule
Statement of the statutory or other authority under which the rule-
making is adopted. The comptroller's principal reason for adoption of the rule is to
provide guidance to taxpayers and auditors regarding the appli-
The repeal is adopted under Tax Code, §§111.002 (Comp- cation of the local sales and use tax consummation statutes.
troller's Rule; Compliance; Forfeiture), 321.306 (Comptroller's
Rules), 322.203 (Comptroller's Rules), and 323.306 (Comptrol- The principal reasons alleged against adoption are: that the rule
ler's Rules), which authorize the comptroller to adopt rules to is not needed, that the rule will hurt cities and taxpayers, that the
implement the tax statutes. rule is a departure from prior comptroller policy, that the stated
reasons for adoption have no factual basis, that the rule is incon-
Sections or articles of the code affected. sistent with the local sales and use tax consummation statutes,
The repeal affects Tax Code, §151.0595 (Single Local Tax Rate and that the notice of rulemaking did not comply with the require-
for Remote Sellers); Tax Code, Chapter 321, Subchapters A, B, ments of the Administrative Procedure Act.
C, D, and F; Tax Code, Chapter 322; and Tax Code, Chapter The subsequent discussion provides the reasons for adopting
323. the rule without changes related to the comments received.
The agency certifies that legal counsel has reviewed the adop- Summary of the Factual Bases for the Rule - Background
tion and found it to be a valid exercise of the agency's legal au-
thority. In January 2020, the comptroller initiated rulemaking to update
its local sales and use tax rule. The comptroller subsequently
Filed with the Office of the Secretary of State on June 14, 2024. adopted amendments in 2020, 2023, and 2024. (49 TexReg
53) (January 5, 2024), (48 TexReg 391) (January 27, 2023), (45
TRD-202402640 TexReg 3499) (May 22, 2020). The amendments implemented
House Bill 1525, 86th Legislature, 2019, which placed local sales
D-1-GN-21-003198 and use tax collection responsibilities on marketplace providers.
TRIAL EXHIBIT

CP Ex-40 ADOPTED RULES June 28, 2024 49 TexReg 4797

CP Ex-40-0001 of 0012
The amendments also implemented House Bill 2153, 86th Leg- Ultimately, the statutory test is a combination of elements --
islature, 2019, which set a single local use tax rate that remote whether a facility is an established outlet, office, or location op-
sellers may elect to use. The amendments also expanded the erated by a seller for the purpose of receiving orders for taxable
local sales tax collection responsibilities of sellers based on the items. The statutory references to an "established outlet, office,
United States Supreme Court decision in South Dakota v. Way- or location," operation "by the retailer or the retailer's agent or
fair, Inc., 138 S. Ct. 2080 (June 21, 2018). These amendments employee," and "receiving orders for taxable items" all suggest
have been noncontroversial. that the presence of sales personnel is a reasonable criterion
for evaluating whether a facility is a "place of business."
The rulemaking made other revisions to the text, which are now
the subject of litigation in Cause No. D-1-GN-21-003198, City of Subsection (a)(18) defines "place of business of the seller" as
Coppell, Texas, et al. v. Glenn Hegar, in the 201st District Court follows:
of Travis County Texas. The Plaintiff cities claim that the agency
"(18) Place of business of the seller - general definition--A place
did not comply with the rulemaking procedures in Government
of business of the seller must be an established outlet, office, or
Code, §2001.024 and Government Code, Chapter 2006. The
location operated by a seller for the purpose of receiving orders
comptroller initiated this rulemaking to address those claims by
for taxable items from persons other than employees, indepen-
proposing the readoption of the rule, with amendments, along
dent contractors, and natural persons affiliated with the seller. An
with a more complete statement of the elements required by
'established outlet, office, or location' usually requires staffing by
Government Code, §2001.024 and Government Code, Chapter
one or more sales personnel. The term does not include a com-
2006.
puter server, Internet protocol address, domain name, website,
The comptroller is addressing comments received in the current or software application. The 'purpose' element of the definition
rulemaking, as well as the prior local tax rulemakings in 2020, may be established by proof that the sales personnel of the seller
2023, and 2024. The orders adopting the prior rulemakings are receive three or more orders for taxable items at the facility dur-
available for inspection in the Texas Register, and contain addi- ing the calendar year. Additional criteria for determining when a
tional explanations that augment this document. location is a place of business of the seller are provided in sub-
section (b) of this section for distribution centers, manufacturing
Summary of the Factual Bases for the Rule - Subsection (a)(18)
plants, storage yards, warehouses and similar facilities; kiosks;
- The definition of "place of business of the seller."
and purchasing offices. An outlet, office, facility, or any location
Local sales and use taxes are generally sourced to where a sale that contracts with a retail or commercial business to process
or use is "consummated." Tax Code, §321.203 and §321.205. for that business invoices, purchase orders, bills of lading, or
There are about three dozen sourcing provisions. Id. And, there other equivalent records onto which sales tax is added, including
are three potential locations where local sales tax can be soured: an office operated for the purpose of buying and selling taxable
the location where the order was received, the location where the goods to be used or consumed by the retail or commercial busi-
order was fulfilled, and the location where the order was deliv- ness, is not a place of business of the seller if the comptroller
ered to the customer. Id. The sourcing outcome can be affected determines that the outlet, office, facility, or location functions or
by whether an order is placed in person at, received at, or ful- exists to avoid the tax legally due under Tax Code, Chapters 321,
filled at a seller's "place of business" in Texas. 322, and 323 or exists solely to rebate a portion of the tax im-
posed by those chapters to the contracting business. An outlet,
Tax Code, §321.002(3)(A) uses 82 words to define "place of busi-
office, facility, or location does not exist to avoid the tax legally
ness of the retailer":
due under Tax Code, Chapters 321, 322, and 323 or solely to
"(3)(A) 'Place of business of the retailer' means an established rebate a portion of the tax imposed by those chapters if the out-
outlet, office, or location operated by the retailer or the retailer's let, office, facility, or location provides significant business ser-
agent or employee for the purpose of receiving orders for taxable vices, beyond processing invoices, to the contracting business,
items and includes any location at which three or more orders are including logistics management, purchasing, inventory control,
received by the retailer during a calendar year. A warehouse, or other vital business services."
storage yard, or manufacturing plant is not a 'place of business
The first sentence of subsection (a)(16) states: "A place of busi-
of the retailer' unless at least three orders are received by the
ness of the seller must be an established outlet, office, or lo-
retailer during the calendar year at the warehouse, storage yard,
cation operated by a seller for the purpose of receiving orders
or manufacturing plant."
for taxable items from persons other than employees, indepen-
The term "place of business of the retailer" is a term of art be- dent contractors, and natural persons affiliated with the seller."
cause the term is more limited than its plain and ordinary mean- This definition tracks the statutory definition but adds a qualifier
ing. Many business activities can be conducted at a location from the prior rule that allows a facility to make in-house cour-
without that location becoming a "place of business" for local tesy sales without becoming a place of business.
tax sourcing. The definition specifically includes the concept of
The second sentence of the definition of "place of business of
receiving orders for taxable items. For example, the corporate
the seller" in subsection (a)(16) states: "An 'established out-
headquarters of a company may not be a "place of business" if no
let, office, or location' usually requires staffing by one or more
orders are received there. Additionally, a location is not a "place
sales personnel." The word "usually" clarifies that the presence
of business" simply because it receives orders. If that were the
of sales personnel is not an absolute requirement, but rather,
case, the legislature could have defined the phrase with those
an important factor that will often determine whether an outlet,
very few words, which can be counted on one hand. And, the
office, or location is a "place of business." In subsequent sub-
final sentence indicates that business locations such as ware-
sections of the rule, the comptroller describes some examples.
houses, storage yards, and manufacturing plants may not be
"places of business." The comptroller is adding the sales personnel language to pro-
vide an objective criterion for buyers, sellers, and auditors to con-
sider. Does a facility have sales personnel? If it does, it is likely

49 TexReg 4798 June 28, 2024 Texas Register

CP Ex-40-0002 of 0012
a "place of business" -- an established outlet, office, or location order. The physical locations of computer servers that receive
operated by a seller for the purpose of receiving orders for tax- website orders are often random, variable, and uncertain. The
able items. If the facility does not have sales personnel, it is likely best way to treat computer servers consistently and coherently
not a "place of business." is to uniformly recognize that they are not "established" places
of business of the seller.
The reference to sales personnel is also consistent with the gen-
eral objectives of the local tax statute. "It is a fundamental prin- The fourth sentence of the definition of "place of business of the
ciple of statutory construction and indeed of language itself that seller" in subsection (a)(16) states: "The 'purpose' element of
words' meanings cannot be determined in isolation but must be the definition may be established by proof that sales personnel
drawn from the context in which they are used." TGS-NOPEC of the seller received three or more orders for taxable items at the
Geophysical Co. v. Combs, 340 S.W.3d 432, 441 (Tex. 2011). facility during the calendar year." This language is consistent with
The context for the "place of business" definition is not limited to the statutory language that a "'place of business of the retailer' ...
the consummation statutes. It also extends to the sales tax per- includes any location at which three or more orders are received
mit requirement. The requirement of a sales tax permit for each by the retailer during a calendar year."
"place of business" suggests that presence of sales personnel is
The remaining sentences of the definition of "place of business
a reasonable factor to consider.
of the seller" are noncontroversial.
The third sentence in the definition of "place of business" in
Mr. Gilmore, Mr. Kroll, Mr. Land, and Mr. Mays do not be-
subsection (a)(16) states: "The term does not include a com-
lieve that this definition simplifies local tax sourcing. However,
puter server, Internet protocol address, domain name, website,
the comptroller is under no illusions that the definition will elim-
or software application." This sentence is consistent with the
inate all ambiguities. In some instances, the determination will
concept that a "place of business" usually requires the presence
depend upon the particular facts. But in many instances, it will
of personnel to receive the order. Even a broad, every-day us-
be clear. And, the rule also makes clear that mere hardware
age of the term "place of business" does not include computer
installations are not "places of business of the seller." To that ex-
servers, Internet protocol addresses, and websites. Many sell-
tent, the rule will help taxpayers understand how the comptroller
ers house their computer servers at a co-location facility or rent
interprets and intends to apply the statute.
computer server space at a managed hosting site. An ordinary
person would not consider the physical locations of these com- Summary of the Factual Bases for the Rule - Subsection (b)(5) -
puter servers to be places of business of the seller. Similarly, A facility without sales personnel is usually not a "place of busi-
an ordinary person would not perceive an Internet protocol ad- ness of the seller."
dress, a domain name, or a website as an "established outlet,
Subsection (b)(5) provides:
office, or location" so as to constitute a place of business in or-
dinary usage. And, in this statutory context, which is narrower "(5) A facility without sales personnel is usually not a 'place of
than ordinary usage, the comptroller has concluded that the leg- business of the seller.' A vending machine is not an 'established
islature could not have intended that the receipt of an order by outlet, office, or location,' and does not constitute a 'place of busi-
an automated mechanical device would make the device an "es- ness of the seller.' Instead, a vending machine sale is treated as
tablished outlet, office or location operated by the retailer." a sale by an itinerant vendor. See subsections (a)(10) and (c)(6)
of this section. However, a walk-in retail outlet with a stock of
In addition to being a reasonable interpretation of the statute and
goods available for immediate purchase through a cashier-less
consistent with precedent, the comptroller's interpretation that
point of sale terminal at the outlet would be an 'established out-
computer servers and the software applications that run on the
let, office, or location' so as to constitute a 'place of business of
servers are not places of business, is a practical interpretation
the seller' even though sales personnel are not required for ev-
that will facilitate uniformity and ease of administration for tax-
ery sale. A computer that operates an automated shopping cart
payers and auditors. Website orders can be received at multiple
software program is not an 'established outlet, office, or location,'
physical addresses - any locations that have Internet access. A
and does not constitute a 'place of business of the seller.' A com-
website order is sent to an Internet protocol (IP) address. An
puter that operates an automated telephone ordering system is
IP address is not a permanent physical address. It is a series of
not an 'established outlet, office, or location,' and does not con-
numbers assigned to a device, such as a computer server. Web-
stitute a 'place of business of the seller.'"
sites may use dynamic IP addresses that are assigned by the
network upon connection and that change over time. The public Subsection (b)(5) provides examples of the application of the
IP address of a website may simply be routing orders to differ- definition of "place of business of the seller," and the factual
ent, private IP addresses. Load balancers may change the IP bases for subsection (b)(5) are the same as the for the definition.
addresses that communicate with customers. Conversely, mul- In addition, the treatment of vending machines is consistent with
tiple websites may be hosted at a single IP address. the treatment of vending machines in prior versions of the rule.
The computer server receiving an order may belong to the seller Reasons Why the Comptroller Disagrees With Commenters'
or it may belong to a third party. The computer server may be sit- Submissions and Proposals - Subsections (a)(10) and (b)(5).
uated on the seller's premises, it may be situated at a co-location
Some commenters asserted that a "place of business" does not
facility operated by a third party, or it may be situated at a web
have to be operated for the purpose of receiving orders for tax-
hosting facility operated by a third party. The computer server
able items. According to the comments submitted by CASTLE:
may be one of multiple servers that serve the same website from
different physical addresses as part of a cloud distribution net- "The statutory definition of 'place of business,' Tax Code,
work. The computer server may route the order to multiple other §321.002(3)(A), describes five different place of business cat-
servers for load balancing purposes. Conversely, a single com- egories: established outlets; established offices; established
puter server may serve multiple websites. Also, the seller may locations operated by the retailer or the retailer's agent or
or may not know the physical address of the server receiving the employee for the purpose of receiving orders for taxable items;

ADOPTED RULES June 28, 2024 49 TexReg 4799

CP Ex-40-0003 of 0012
any location at which three or more orders are received by the retailer's employee in the definition of "place of business of the
retailer during a calendar year; and warehouses, storage yards, retailer."
or manufacturing plants that receive three or more orders in
As previously stated, the comptroller is adding the sales person-
a calendar year. Tax Code, §321.002(a)(3)(A). The first two
nel language to provide an objective criterion for buyers, sellers,
categories need not have as a purpose receipt of orders and do
and auditors to consider. Does a facility have sales personnel?
not need to receive orders to be a place of business."
If it does, it is likely a "place of business" -- an established outlet,
CASTLE further commented that the function of an "established office, or location operated by a seller for the purpose of receiv-
office" is "business." This interpretation would mean that any fa- ing orders for taxable items. If the facility does not have sales
cility operated by a seller for a business purpose would be a personnel, it is likely not a "place of business." This objective cri-
"place of business" -- executive offices, administrative offices, terion is supported by the previously explained legislative history
research and development laboratories, maintenance facilities, of the statute.
vehicle garages, etc. The comptroller rejects this interpretation
Mr. Sheets, citing former §3.334(h)(3)(B), commented that "the
as unreasonable. The 1979 legislation, which adopted the def-
prior version of Rule 3.334 recognized that an Internet order is
inition of "place of business," required each "place of business"
received at a place of business while the proposed amendments
to have a sales tax permit. See 66th Legislature, 1979, Ch. 624,
cause Internet orders to be received nowhere."
§3. That requirement is now in Tax Code, §321.303. It is unrea-
sonable to think that the legislature intended that a maintenance The comptroller responds that the comment overstates the effect
facility would be required to have a sales tax permit. A more of the prior rule and misunderstands the effect of the adopted
reasonable interpretation is that a "place of business," whether rule. Prior to the 2020 amendments, §3.334(h)(3)(B) provided:
it is an outlet, office, or location, "must be operated by a seller
"(B) Order received at a place of business in Texas, fulfilled at
for the purpose of receiving orders for taxable items," as the rule
a location that is not a place of business. When an order that
requires.
is placed over the telephone, through the Internet, or by any
Mr. Mays and other commenters also alleged that there is no means other than in person is received by the seller at a place
reason for the comptroller to amend its rule. But, CASTLE's in- of business in Texas, and the seller fulfills the order at a loca-
terpretation of the "purpose" requirement illustrates the need for tion that is not a place of business of the seller in Texas, such as
clarification. The CASTLE interpretation may work at cross-pur- a warehouse or distribution center, the sale is consummated at
poses with other commenters who claim the right to source all the place of business at which the order for the taxable item is
their sales to their "single place of business." If every taxpayer received."
facility with a business purpose is in fact a "place of business" as
(41 TexReg 260, 265) (2016) (former 34 TAC §3.334(h)(3), em-
CASTLE suggests, many of these commenters may have mul-
phasis added); (39 TexReg 9597, 9606) (2014) (former 34 TAC
tiple places of businesses. The adopted rule states the comp-
§3.334(h)(3), emphasis added).
troller's interpretation, and sets the stage for a definitive court
resolution of the conflict between competing commenters. The former language only meant that a place of business may
receive an order through the Internet, or any other method of
Mr. Christian commented on the portion of the definition of "place
communication except in-person communication. For example,
of business" that excludes orders from "employees, independent
a sales representative at a place of business in Texas could re-
contractors, and natural persons affiliated with the seller." He
ceive an order through the Internet in the form of a VOIP call or
commented that the language was "extra-statutory." The comp-
an email. But, the former language did not mean that every In-
troller disagrees. The language has been in the rule since 2014,
ternet order is automatically received at a place of business, as
when it was adopted without adverse comment. It allows a fa-
illustrated by the following comptroller rulings before and after
cility to make in-house courtesy sales to workers at the facility
the comptroller adopted §3.334 in 2014.
without the facility becoming a place of business. Courtesy sales
to workers are insufficient to conclude that a facility was estab- Comptroller Letter Ruling (STAR Accession No.) 200510723L
lished for the purpose of receiving orders. (2005) stated:
Mr. Christian and other commenters observed that the statutory "The location of the server does not create a 'place of business'
definition of "place of business" does not mention sales person- for purposes of local tax collection."
nel. However, an agency rule need not be limited to parroting the
And Comptroller Letter Ruling (STAR Accession No.)
words of the statute. The courts have said that a rule may not
200605592L (2006) similarly stated:
impose additional burdens, conditions, or restrictions in excess
of or inconsistent with the relevant statutory provisions. State "The location of the server does not create a 'place of business'
Office of Pub. Util. Counsel v. Pub. Util. Comm'n of Tex., 131 for purposes of local tax collection."
S.W.3d 314, 321 (Tex. App.--Austin 2004, pet. denied). The
And Comptroller Letter Ruling (STAR Accession No.)
implication of that statement is that a rule may impose burdens,
201906015L (2019) similarly stated:
conditions, or restrictions that are consistent with the relevant
statutory provisions. E.g., id. at 342 (court approved "formulaic "COMPANY operates **************'s online marketplace (Web-
means" not specified in the statute). Previous tax cases have ap- site) and various apps used by Texas customers to make online
proved comptroller rules that articulated requirements that were orders. ... Orders placed on the Website or through COMPANY's
not explicitly stated in the statute. Perry Homes v. Strayhorn, apps and processed and routed by servers are not received at a
108 S.W.3d 444, 448 (Tex. App.--Austin 2003, no pet.); DuPont place of business."
Photomasks, Inc. v. Strayhorn, 219 S.W.3d 414, 422 (Tex.
Furthermore, the adopted rule does not mean that Internet or-
App.--Austin 2006, pet. denied). The reference to sales per-
ders are received "nowhere." Internet orders, such and VOIP
sonnel in the rule is consistent with the statutory reference to a
calls and emails may be received at a place of business. And
under subsection (b)(5), an Internet order received by an auto-

49 TexReg 4800 June 28, 2024 Texas Register

CP Ex-40-0004 of 0012
mated shopping cart is received somewhere - at the computer general standard that is applicable to all situations, as well as to
server -- but, that somewhere is not a "place of business of the automated website orders and fulfillment warehouses.
seller."
The adopted standard comports with the ordinary usage of the
Summary of the Factual Bases for the Rule - Subsections (b)(1) terms, as evidenced by the fact that the standard has been
and (c)(7) - Distributions centers, manufacturing plants, storage approved by twenty-four states under the Streamlined Sales Tax
yards, and warehouses, and when and where an order is "re- Agreement. The adopted standard will also promote uniformity
ceived." with those states that have elected or will elect origin-based
sourcing.
Subsection (b)(1) provides:
Reasons Why the Comptroller Disagrees With Commenters'
"(1) Distribution centers, manufacturing plants, storage yards,
Submissions and Proposals - Subsections (b)(1) and (c)(7).
warehouses, and similar facilities.
Most of the commenters are concerned with the effect of the sub-
(A) A distribution center, manufacturing plant, storage yard,
sections on fulfillment warehouses and similar facilities. Sub-
warehouse, or similar facility operated by a seller for the pur-
section (b)(1)(A) provides: "Forwarding previously received or-
pose of selling taxable items where sales personnel of the
ders to a facility for fulfillment does not make the facility a place
seller receive three or more orders for taxable items during the
of business." Subsection (c)(7) similarly provides: "The location
calendar year from persons other than employees, independent
where an order is received ... means the physical location ...
contractors, and natural persons affiliated with the seller is a
where an order is initially received ... and not where the order
place of business of the seller. Forwarding previously received
may be subsequently accepted, completed or fulfilled."
orders to the facility for fulfilment does not make the facility a
place of business. Subsection (c)(7) explicitly limits receipt to the location where the
order is initially received, ruling out intermediate and final loca-
(B) If a location that is a place of business of the seller, such as
tions where an order might be accepted, completed, or fulfilled.
a sales office, is in the same building as a distribution center,
Subsection (c)(7) also explicitly states the criteria for determining
manufacturing plant, storage yard, warehouse, or similar facility
when an order is received: "An order is received when all of the
operated by a seller, then the entire facility is a place of business
information from the purchaser necessary to the determination
of the seller."
whether the order can be accepted has been received by or on
And subsection (c)(7) provides: behalf of the seller."
"(7) The location where the order is received by or on behalf of CASTLE commented that the modifier "initially" is not present in
the seller means the physical location of a seller or third party the portion of definition of "place of business" that refers to the lo-
such as an established outlet, office location, or automated order cation at which orders are "received." CASTLE, and Kyle Kasner
receipt system operated by or on behalf of the seller where an in a previous rulemaking proceeding, also commented that the
order is initially received by or on behalf of the seller and not consummation statute in Tax Code, §321.203 sometimes refers
where the order may be subsequently accepted, completed or to where the retailer "first receives" the order, implying that an
fulfilled. An order is received when all of the information from order can be "received" at more than one place.
the purchaser necessary to the determination whether the order
CASTLE also argued that the dictionary defines "receive" as "to
can be accepted has been received by or on behalf of the seller.
take into one's possession, to take delivery of a thing, to get, or
The location from which a product is shipped shall not be used
to come by," and a fulfillment warehouse cannot fulfill an order
in determining the location where the order is received by the
unless it gets or comes by the order. This argument may seem
seller."
reasonable in the abstract, but not in context. When the statute
The text of subsection (c)(7) is taken from Section and its legislative history are considered as a whole, the proper
3.10.1C5 of the Streamlined Sales and Use Tax Agreement construction is the opposite - a fulfillment warehouse does not re-
(SSUTA). See https://www.streamlinedsalestax.org/docs/de- ceive an order for purposes of the local sales tax statutes merely
fault-source/agreement/ssuta/ssuta-as-amended-through-05- because fulfillment information has been sent to the warehouse.
24-23-with-hyperlinks-and-compiler-notes-at-end.pdf.
With regard to statutory construction, the Texas Supreme Court
In its 2014 rulemaking, the comptroller proposed a definition has stated: "We must analyze statutory language in its context,
of "receive," but deleted the proposed definition in response to considering the specific sections at issue as well as the statute
concerns stated in oral and written comments. See (39 TexReg as a whole. {Citation omitted}. While 'it is not for courts to un-
4179) (May 30, 2014) (proposed rule amendment) and (39 dertake to make laws "better" by reading language into them,'
TexReg 9598) (December 5, 2014) (adopted rule amendment). we must make logical inferences when necessary 'to effect clear
legislative intent or avoid an absurd or nonsensical result that
In its January 2023 rulemaking, the comptroller again declined
the Legislature could not have intended.'" Castleman v. Internet
to adopt a definition of "receive" and instead, addressed the two
Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018), quoting Cadena
circumstances that were most prominently debated - automated
Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n, 518
website orders and fulfillment warehouses. Subsection (b) of
S.W.3d 318, 338 (Tex. 2017).
the adopted rule articulated the comptroller's interpretation that
an automated website "receives" the order and that a fulfillment Considering the local sales tax statute sections as a whole, the
warehouse does not "receive" the order when it is forwarded from term "received" must be limited to the location where an order
the website to the warehouse. See (48 TexReg 400) (January is initially received. This construction effects the clear legislative
27, 2023). intent and avoids an absurd or nonsensical result that the legis-
lature could not have intended.
Since then, it has become apparent that other circumstances
also require a clear articulation of the comptroller's interpreta- The legislature did not define "receiving," "received," or "order."
tion of the term "received." Thus, the comptroller is adopting a So, the terms must be construed in the context in which they

ADOPTED RULES June 28, 2024 49 TexReg 4801

CP Ex-40-0005 of 0012
are used. One context is the definition of "place of business of location where an order is received - the initial location where
the retailer" in Tax Code, §321.002(3)(A). A "place of business all the information necessary for acceptance has been received.
of a retailer" is a location operated "for the purpose of receiving With this clarification, the consummation statute can be applied
orders." One might say, as CASTLE does, that a purpose of a with greater certainty.
fulfillment warehouse is to receive the order because receipt is a
CASTLE commented: "For all practical purposes an order
necessary step in fulfillment. However, one might also reason-
placed on a website is typically received at the same time at
ably say that while a sales office is operated for the "purpose
various locations, including fulfillment centers." However, for
of receiving orders," a fulfillment warehouse without sales per-
the practical purpose of sourcing local tax, there is a single
sonnel is not operated for such a purpose - the purpose is only
location where a website order is initially received - the Web
fulfillment, which does not require the receipt of the entire order
server. According to a report from the group's own expert, Amit
containing price and payment terms. The only necessary infor-
Basu: "...the Buyer places the online order by communicating
mation is delivery information - the product description, quantity,
with a Web server that manages the Seller's Web site. ... The
and delivery location. Because there are at least two reasonable
Web server transmits the order electronically to the Seller's
interpretations, the terms in this context are ambiguous.
e-Commerce software program."
In another context the meaning becomes clearer. That context
Mr. Kroll commented that it may be impossible to determine the
is the consummation statute in Tax Code, §321.203. Consider
location of initial receipt: "Some companies will have multiple
Tax Code, §321.203(d):
redundant server/data center operations spread across multiple
"(d) If the retailer has more than one place of business in this geographic locations." The comptroller agrees. As pointed out
state and Subsections (c) and (c-1) do not apply, the sale is con- in the 2020 rulemaking, a computer server may be situated on
summated at: the seller's premises, it may be situated at a co-location facility
operated by a third party, or it may be situated at a web hosting
(1) the place of business of the retailer in this state where the
facility operated by a third party. The computer server may be
order is received; or
one of multiple servers that serve the same website from different
(2) if the order is not received at a place of business of the retailer, physical addresses as part of a cloud distribution network. The
the place of business from which the retailer's agent or employee computer server may route the order to multiple other servers for
who took the order operates." load balancing purposes. Conversely, a single computer server
may serve multiple websites. The seller may or may not know
Assume a situation in which the retailer has multiple retail stores
the physical address of the server receiving the order. If the
in Texas (more than one place of business in the state), but a
seller does not even know the physical location of the server,
customer calls in an order to a Texas sales office and the order
an ordinary person would not consider the physical location of
is fulfilled from a location outside of Texas, so that Tax Code,
the computer server to be a place of business of the seller. So,
§321.203(c) and (c-1) indisputably do not apply. Also assume
the best way to treat these orders consistently and coherently
that information from the order is forwarded to the retailer's ex-
is to treat them uniformly as being received at locations that are
ecutive office in Texas for approval, to the retailer's Texas credit
not places of business of the seller. If a server is not a "place
office for a credit check, to the retailer's Texas manufacturing fa-
of business" of the seller, then the exact location of the server
cility for assembly, to the retailer's Texas storage lot for bundled
does not have to be determined because the location will not
shipping to a fulfillment center, to the retailer's fulfillment center
determine the sourcing of local sales tax.
for fulfillment to the customer, to the retailer's Texas accounting
office for billing, and to the retailer's Texas controller for collec- The comptroller's application of the statute to fulfillment centers
tion on the account. is also supported by statutory history. Prior to 1979, the consum-
mation statute had no provision for sourcing to where an "order"
In the sense proposed by CASTLE, all these locations "received"
was "received," and the statute provided:
the "order" to complete their assigned tasks. But this interpre-
tation leads to absurd results. If the "order" was "received" at "If the retailer has more than one place of business in the State,
multiple locations, so that each location became a "place of busi- the place or places at which retail sales, leases, and rentals are
ness," it would be impossible to identify the particular location consummated shall be the retailer's place or places where the
where the local tax should be sourced. purchaser or lessee takes possession and removes from the
retailer's premises the articles of tangible personal property, or
Furthermore, Tax Code, §321.203(d) refers to "the place of busi-
if the retailer delivers the tangible personal property to a point
ness ... where the order is received," indicating that there is a
designated by the purchaser or lessee, then the sales, leases,
singular location where the order is received. The most reason-
or rentals are consummated at the retailer's place or places of
able singular location, and perhaps the only reasonable singular
business from which tangible personal property is delivered to
location, is where the information necessary to accept the order
the purchaser or lessee." Acts 1969, 61st Leg., 2nd C.S., Ch. 1.
is initially received as provided in subsection (c)(7). In the ex-
Art. 1 §42.
ample above, the location where the order is received would be
the Texas sales office. In 1979, the Texas Legislature added a definition of "place of
business of the retailer," which was previously undefined. The
This example regarding Tax Code, §321.203(d) also illustrates
definition required that the location be operated "for the purpose
the need for additional clarity. Subsection (b)(1)(A) explicitly pro-
of receiving orders." Acts 1979, 66th Legislature, Ch. 624, Art.
vides that a fulfillment center is not a "place of business" simply
1, §3 (amended Article 1066c(B)(1)). The legislature also added
because orders may be forwarded to the facility for fulfillment.
a sourcing provision based on where the order is received, com-
But subsection (b)(1)(A) does not explicitly eliminate the possibil-
parable to current Tax Code, §321.203(d):
ity that other locations are "places of business," such as locations
where orders are accepted or otherwise completed. Subsection "If neither possession of tangible personal property is taken at
(c)(7) explicitly eliminates those possibilities. There is a single nor shipment or delivery of the tangible personal property is

49 TexReg 4802 June 28, 2024 Texas Register

CP Ex-40-0006 of 0012
made from the retailer's place of business within this State, the facturing plant may not be considered a 'place of business of the
sale, lease, or rental is consummated at the retailer's place of retailer' unless three or more orders are received by the retailer
business within the State where the order is received or if the in a calendar year at such warehouse, storage yard, or manufac-
order is not received at a place of business of the retailer, at the turing plant." Acts 1979, 66th Legislature, Ch. 624, Art. 1, §3. A
place of business from which the retailer's salesman who took typical warehouse, storage yard, or manufacturing plant would
the order operates." almost certainly process more than three orders in a calendar
year. So, this explicit threshold requirement is an additional in-
Acts 1979, 66th Legislature, Ch. 624, Art. 1, §3 (amended Ar-
dication that the legislature did not intend for these facilities to
ticle 1066c(B)(1)(c)). Like current Tax Code, §321.203(d), the
automatically be "places of business" simply because they pro-
legislature referred to "the place of business ... where the order
cessed order information that was previously received at other
is received," contemplating a single location, and not multiple lo-
locations. Instead, the legislature set a low threshold yet still ex-
cations. And like the current statute, the 1979 sourcing statute
pected these facilities to engage in at least some sales activities.
would be unworkable if an "order" could be "received" at multiple
locations where order information might be sent for processing. Mr. Gilmore commented: "This is a major revision to a state
practice that has been in place for more than 50 years." CAS-
The 1979 amendments were originally set to expire on August
TLE commented that the amendment is "inconsistent with his
31, 1981. But, following an October 2, 1980, Interim Report of
{the comptroller's} pre-2019 application of the statutory defini-
the House Ways and Means Committee, the legislature made
tion of 'place of business.'" The comptroller disagrees with these
the 1979 amendments permanent. Acts 1981, 67th Legislature,
comments.
Ch. 838, §1.
First, the comptroller's treatment of fulfillment warehouses goes
Mr. Kroll commented that the comptroller "misremembers
as far back as Comptroller's Decision No. 15,654 (1985), which
the legislative history." The comptroller disagrees. During the
stated (emphasis added):
1979 session of the legislature, a House Study Group analysis
stated that the "bill is necessary to protect the state from pos- "But it seems to the administrative law judge that the legislature
sible consequences of the pending court suits." The analysis was amending the law if not entirely in reaction to the then-pend-
specifically referenced "Dunigan Tool and Supply v. Bullock" as ing case of Bullock v. Dunigan Tool & Supply Co., 588 S.W.2d
one of those suits. The analysis is available at the Legislative 633 (Tex. Civ. App.-Texarkana, writ ref'd n.r.e.), at least partly in
Reference Library website at https://lrl.texas.gov/scanned/hro- reaction to that case. And if that be so, then the legislature did
BillAnalyses/66-0/SB582.pdf. not want warehousing and storage facilities (many of which are
outside city limits) to be the places where sales were consum-
In the Dunigan litigation, sales personnel took orders that were
mated for local sales tax purposes unless orders were actually
forwarded to pipe storage facilities where the orders were ful-
received there by personnel working there, but wanted the of-
filled. At the time of the 1979 legislation, the district court had
fice location out of which the salesman operated to be the place
ruled that the transactions should be sourced to the pipe stor-
where the sales were consummated."
age facilities. Bullock v. Dunigan Tool & Supply Co., 588 S.W.2d
633, 635 (Tex. Civ. App. - Austin, Sept. 6, 1979, writ ref'd CASTLE commented: "The Comptroller misreads the decision."
n.r.e.). Therefore, when the 1979 House Study Group bill anal- But, the text of the decision speaks for itself: "the legislature ...
ysis stated that the bill was intended to protect the state from wanted the office location out of which the salesman operated to
the consequences of the Dunnigan litigation, the analysis meant be the place where the sales were consummated."
that the legislation was intended to reduce the circumstances in
Second, the text of former §3.334(h)(3) indicated that a fulfill-
which transactions would be sourced to fulfillment warehouses,
ment center is not automatically a "place of business" for local
which at the time were often located in rural areas not subject to
sourcing (emphasis added):
local sales tax. The legislature accomplished this objective by
adding a definition of "place of business" that was limited to a "(3) Consummation of sale. The following rules, taken from Tax
location operated "for the purpose of receiving orders," and by Code, §321.203 and §323.203, apply to all sellers engaged in
adding a provision for sourcing transactions to where the order business in this state, regardless of whether they have a place
was received. Acts 1979, 66th Legislature, Ch. 624, Art. 1, §3. of business in Texas or multiple places of business in the state.
Mr. Kasner in a previous rulemaking proceeding commented ...
that the proposed rule reverses the effect of the Dunigan de-
(B) Order received at a place of business in Texas, fulfilled at
cision. He is correct, because the rule attempts to follow the
a location that is not a place of business. When an order that
subsequent legislation, which was intended to reverse the effect
is placed over the telephone, through the Internet, or by any
of the Dunigan decision.
means other than in person is received by the seller at a place
In the subsequent October 2, 1980, Interim Report of the House of business in Texas, and the seller fulfills the order at a loca-
Ways and Means Committee, the committee considered whether tion that is not a place of business of the seller in Texas, such as
to allow the recently adopted statutory definition of "place of busi- a warehouse or distribution center, the sale is consummated at
ness" to expire. The committee described the consequence: the place of business at which the order for the taxable item is
"The location of sale would no longer be tied to permitted outlets, received.
salesmen's locations, or sales offices." Interim Report at 20. The
...
committee understood that the phrase "operated for the purpose
of receiving orders" meant sales activities and not ancillary ac- (D) Order fulfilled within the state at a location that is not a place
tivities necessary to subsequently effectuate the sale. of business. When an order is received by a seller at any location
other than a place of business of the seller in this state, and the
To be clear, under the 1979 legislation and today, a fulfillment
seller fulfills the order at a location in Texas that is not a place
warehouse could be and can be a "place of business." The legis-
of business of the seller, then the sale is consummated at the
lature set a low threshold: "A warehouse, storage yard, or manu-

ADOPTED RULES June 28, 2024 49 TexReg 4803

CP Ex-40-0007 of 0012
location in Texas to which the order is shipped or delivered, or sale is consummated at the location in Texas to which the order
the location where it is transferred to the purchaser." is shipped. See §3.334(h)(3)(D). For Scenario One, local sales
and use tax is due based on the location where the order is
(41 TexReg 260, 265) (2016) (former 34 TAC §3.334(h)(3), em-
delivered." STAR Accession No. 201906015L (June 13, 2019)
phasis added); (39 TexReg 9597, 9606) (2014) (former 34 TAC
(emphasis added).
§3.334(h)(3), emphasis added).
Each of these documents, which predate the rulemaking, and
Third, the consummation rules in former §3.334(h)(3) were aug-
which the comptroller indexed and made available for public in-
mented with an explicit provision for fulfillment centers, which
spection on the State Tax Automated Research (STAR) System,
the former rule referred to as "distribution centers" (emphasis
is consistent with the statement in the rule that the location from
added):
which a product is shipped shall not be used in determining the
"(2) Distribution centers, manufacturing plants, storage yards, location where the order is received by the seller.
warehouses, and similar facilities.
Reasons Why the Comptroller Disagrees With Commenters'
(A) A distribution center, manufacturing plant, storage yard, Submissions and Proposals - The use of language from the
warehouse, or similar facility operated by a seller at which the SSUTA in subsection (c)(7).
seller receives three or more orders for taxable items during the
In the rulemaking that adopted subsection (c))(7), the comptroller
calendar year is a place of business.
received comments that are discussed below.
(B) If a salesperson who receives three or more orders for tax-
Mr. Kroll commented: "The Texas Legislature, (the entity with
able items within a calendar year is assigned to work from, or to
constitutional responsibility for the state's Tax Policy), has had
work at, a distribution center, manufacturing plant, storage yard,
nine regular sessions to adopt the SSUTA's preferred origin
warehouse, or similar facility operated by a seller, then the facil-
sourcing model found in SSUTA 3.10.1. The Legislature has
ity is a place of business.
not acted, even in 2013 when then Senator Hegar was chairing
(C) If a location that is a place of business of the seller, such the Senate Finance, Subcommittee on Fiscal Matters with Tax
as a sales office, is in the same building as a distribution center, policy responsibility."
manufacturing plant, storage yard, warehouse, or similar facility
CASTLE similarly commented: "the Legislature, in general, re-
operated by a seller, then the entire facility is a place of business
jected the Comptroller's efforts to become a member and be sub-
of the seller."
ject to the Agreement, and, more specifically, declined to adopt
(41 TexReg 260, 263) (2016) (former 34 TAC §3.334(e)(2), em- the language of 3.10.1 and change the definition of what is a
phasis added); (39 TexReg 9597, 9605) (2014) (former 34 TAC 'place of business.'"
§3.334(e)(2), emphasis added).
Mr. Land commented: "By not adopting the agreement, the
If a distribution center were automatically a "place of business" legislature was rejecting the very language the Comptroller pro-
for local tax sourcing as the Plaintiff cities contend, subpara- poses to adopt..."
graphs (B) and (C) would not be required - there would be no
Clyde Hairston, Mayor of the City of Lancaster, commented:
need for a salesperson or a sales office to "then" make the dis-
"Rule changes refer to the Streamline Sales and Use Tax Agree-
tribution center a "place of business" for local tax sourcing pur-
ment. States participating in this agreement do not seem to have
poses.
similar economic issues as the State of Texas. If the intent of the
Fourth, in addition to its rule, the comptroller distributed Publi- rule change is to position the state to participate in the Sales and
cation 94-105, sometimes called the "Local Sales and Use Tax Use Tax Agreement, further research is needed to better support
Bulletin - Guidelines for Collecting Local Sales and Use Tax," the rationale for this action."
or "Tax Topics - Guidelines of Collecting Local Sales and Use
And, Rolin McPhee, City Manager of the City of Longview, com-
Tax" (Guidelines). These Guidelines were posted on the comp-
mented: "This sentiment runs counter to the story of Texas. Yes,
troller's website and indexed in the comptroller's State Tax Au-
we should look to and learn from other states, but Texas should
tomated Research System. Since at least 2007, the Guidelines
lead and not follow. We should not implement statewide policies
referred to a "location within the state that is not a place of busi-
because 'everyone else is doing it.'"
ness (such as a warehouse or distribution center)." E.g., STAR
Accession No. 200902596L (February 2009). The Guidelines David Bristol, Mayor of the City of Prosper, had similar com-
were intended as a general guide and not as a comprehensive ments.
resource. But, an ordinary reader would not walk away with the
Although the legislature declined to adopt the SSUTA, it would
impression that a taxpayer's fulfillment center was automatically
be an overstatement to suggest that the legislature specifically
a "place of business" for purposes of local tax sourcing.
rejected the language of a single subsection of the SSUTA. As
Fifth, in 2016, the comptroller rewrote the Guidelines to be even CASTLE pointed out: "Therefore, prior to December 31, 2007,
more specific regarding fulfillment centers: "The warehouse from the Legislature had to agree to the quoted 3.10.1 language, as a
which the person ships those items is not a place of business, step in allowing Texas to be subject to the Agreement. But doing
unless the warehouse separately qualifies as a place of busi- so would have required not only that the Legislature radically re-
ness." STAR Accession No. 201606995L (June 1, 2016). vise the statutory definition of 'place of business' but make many
other changes to the sections of the Tax Code addressing sales
And, sixth, in 2019, a comptroller letter ruling discussed ful-
and use tax."
fillment centers, referring to the former rule, then in effect:
"Scenario One: Taxpayer Retailer operates fulfillment centers Texas has a unique, composite consummation statute, in which
in Texas that are not open to the public. ... When an order sales are sometimes sourced to where the order is received,
is received at a location that is not a place of business and is sometimes sourced to where the order is fulfilled, and sometimes
fulfilled in Texas at a location that is not a place of business, the sourced to where the order is delivered. Adoption of the SSUTA

49 TexReg 4804 June 28, 2024 Texas Register

CP Ex-40-0008 of 0012
would require fundamental changes to this composite consum- Tax Code, §321.203 establishes a hierarchy among places
mation statute, which the comptroller is not advocating or pro- of business involved in a transaction, subject to certain ex-
moting. However, there is one area of overlap. Both systems ceptions. The hierarchy is described in a summary chart in
use the receipt of an order as a factor in sourcing. In this area the Comptroller's Guide for Sellers. See https://comptrol-
of overlap, it is entirely appropriate to consider how the SSUTA ler.texas.gov/taxes/publications/94-105.php (Local Sales and
does it. Use Tax Collection - A Guide for Sellers). If an order is fulfilled
from a place of business of the seller in Texas, the sale is
The comptroller has considered the language in the SSUTA and
consummated at that location even if the order is received at
concluded that it is a reasonable and practical method of deter-
another place of business in Texas (except for orders received
mining where and when an order is received. And, the SSUTA
in person). Conversely, an order is consummated at the place
language has the added benefit of being a concept that other
of business of the seller in Texas where the order is received
states have acknowledged, and a concept with which many tax-
only if the order was not fulfilled from a place of business in
payers will already be familiar.
Texas (except for orders received in person). Subsection (c) of
Summary of the Factual Bases for the Rule - Subsection (c) - the comptroller rule reflects this hierarchy.
Application of the consummation rules.
The statutory provision in Tax Code, §321.203(b), for a seller
Subsection (c) states in relevant part: with a single place of business in Texas, is simply a recogni-
tion that the hierarchy is not required in those circumstances.
"The following rules, taken from Tax Code, §321.203 and
The outcome will be the same regardless of whether the order
§323.203, apply to all sellers engaged in business in Texas,
is received, fulfilled, or received and fulfilled from that place of
regardless of whether they have no place of business in Texas, a
business, and regardless of whether the order is placed at that
single place of business in Texas, or multiple places of business
location in person - the sale will be consummated at that place
in Texas."
of business.
The language of subsection (c) tracks the language in the prior
But the place of business must have a discrete connection
2014 and 2016 versions of the rule:
to the sale for the sale to be consummated there. Tax Code,
"The following rules, taken from Tax Code, §321.203 and §321.203(b) cannot reasonably be interpreted to mean that a
§323.203, apply to all sellers engaged in business in this state, sale is consummated at the seller's single place of business in
regardless of whether they have a place of business in Texas or Texas, even if that place of business did not receive the order
multiple places of business in the state." from the customer, did not fulfill the order to the customer, and
was not the location where the order was delivered.
(41 TexReg 260, 265) (2016) (former 34 TAC §3.334(h)(3); (39
TexReg 9597, 9606) (2014) (former 34 TAC §3.334(h)(3)). Suppose a reseller has a single place of business, located in
City A, that consists only of a sales office. The reseller also has
Reasons Why the Comptroller Disagrees With Commenters'
a fully-automated shopping website hosted by a server in City
Submissions and Proposals - Subsection (c).
B that receives and processes an order from a customer in City
Mr. Sheets commented that the rule changes how Internet or- C. The order is then fulfilled from a third-party manufacturer's
ders are sourced for retailers with a single place of business in warehouse in City D and shipped to the customer in City C. To
Texas. However, the language of subsection (c) has the same make the customer in City C pay local sales tax to City A, a ju-
effect as the language in the prior 2014 and 2016 versions of risdiction that had no relation to the customer or the transaction,
the rule - no special treatment for vendors with a single "place of would be an unreasonable reading of the statute that the Leg-
business." islature could not have intended. See, Castleman v. Internet
Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018) (making "logical
Mr. Sheets commented that the rule conflicts with Tax Code,
inferences" necessary "to avoid an absurd or nonsensical result
§321.203(b), which provides:
that the Legislature could not have intended.").
"(b) If a retailer has only one place of business in this state, all
Another rule of statutory construction is that compliance with
of the retailer's retail sales of taxable items are consummated at
the constitutions of this State and the United States is intended.
that place of business except as provided by Subsection (e)."
Government Code, §311.021(a). In the tax arena, as elsewhere,
Tax Code, §321.203(b) describes the consummation principles the United States Constitution requires due process. In tax
for a seller that has only one place of business in the state. In cases, the United States Supreme Court has stated that due
the comptroller's view, those principles are consistent with the process "centrally concerns the fundamental fairness of govern-
treatment of other sellers and do not require special treatment in mental activity." N. Carolina Dep't of Revenue v. The Kimberley
the rule. Rice Kaestner 1992 Family Tr., 139 S. Ct. 2213, 2219, (2019),
quoting Quill v. North Dakota, 504 U.S. 298, 312 (1992).
As a matter of statutory construction, Tax Code, §321.203(b)
should be viewed in the context of the statute as a whole. Castle- The "due course of law" provision of the Texas constitution
man v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018). provides protections similar to, and in some instances, greater
When the statute is considered as a whole, the only reasonable than the protections in the federal due process clause. Patel
interpretation is that all retail sales associated with a single place v. Tex. Dep't of Licensing & Regulation, 469 S.W.3d 69, 86-87
of business are consummated at that single place of business, (Tex. 2015) ("the Texas due course of law protections in Article
regardless of whether the order was placed in person there, the I, §19, for the most part, align with the protections found in the
order was received there from a purchaser at another location, or Fourteenth Amendment to the United States Constitution. But,
the order was fulfilled there. But, the statute cannot reasonably ... Section 19's substantive due course provisions undoubtedly
mean that an order with no connection to that place of business were intended to bear at least some burden for protecting indi-
would be consummated there. vidual rights that the United States Supreme Court determined
were not protected by the federal Constitution.").

ADOPTED RULES June 28, 2024 49 TexReg 4805

CP Ex-40-0009 of 0012
A statute violates the Texas due course of law protection if the business of the seller. But if a person performs contract tele-
"statute's actual, real-world effect as applied to the challenging marketing from the person's residence, the person will not be
party could not arguably be rationally related to, or is so burden- operating out of a place of business of the seller because the
some as to be oppressive in light of, the governmental interest." residence is not "operated by the seller," as required by subsec-
Id. at 87. tion (a)(16).
The actual, real-world effect of Mr. Sheet's interpretation could Reasons Why the Comptroller Disagrees With Commenters'
not arguably be rationally related to, or is so burdensome as to Submissions and Proposals - Subsection (b)(4).
be oppressive to taxpayers in light of, the governmental inter-
In the rulemaking that adopted subsection (b)(4), Mr. Kroll com-
est in local taxation. Specifically, there is no rational connection
mented that subsection (b)(4) "no longer imputes the order to
or sufficient government interest to make a purchaser in City C
the place of business where the employee is assigned, and that
pay sales tax to City A simply because the vendor arranged its
the new policy does not accurately or easily reflect the mobile
business such that it had a single sales office in City A that had
workforce of today." And Brian Pannell, North America Tax Di-
nothing to do with the transaction.
rector for Dell Inc., commented that subsection (b)(4) deviates
Mr. Sheets commented that procedural due process require- from Tax Code, §321.203(d)(2) and "effectively changes sourc-
ments do not apply because Tax Code, §321.203(b) is the result ing rules for salespersons who are assigned to regional places
of legislative action. However, the comptroller's statutory inter- of business but do their principal work-related activities at other
pretation is based on substantive due process. See, Patel, 469 locations."
S.W.3d at 75.
The comptroller disagrees with these comments. Tax Code,
Mr. Sheets also proposes to add a "special" exception for sell- §321.203(d) does not impute an order to the location where a
ers with a single place of business in Texas. The comptroller salesperson is "assigned." Instead, the statute provides that in
declines to make the proposed revisions for the reasons stated certain circumstances, an order may be imputed to the "place of
in the preceding paragraphs. The City of Round Rock is chal- business from which the retailer's agent or employee who took
lenging the comptroller's interpretation in the pending litigation. the order operates." And, although an order may be imputed to
Again, it is appropriate to state the comptroller's interpretation in a place of business of the retailer if the agent or employee oper-
the rule so that those who disagree may challenge the interpre- ates out of that place of business, the statute does not mandate
tation in court. that an agent or employee be assigned to, or operate out of, a
place of business. If an agent or employee does not operate out
Summary of the Factual Bases for the Rule - Subsection (b)(4)
of a place of business, Tax Code, §321.203(d) has no applica-
- Order received by a salesperson who is not at a place of busi-
tion. And, it would be unreasonable to allow a vendor to source
ness when the salesperson receives the order.
sales to a place of business by merely "assigning" a salesperson
Subsection (b)(4) provides: to that location in the absence of any physical connection.
"(4) An order that is received by a salesperson who is not at a Summary of the Factual Bases for the Rule - Subsection (b)(6)
place of business of the seller when the salesperson receives -small and micro-businesses.
the order is treated as being received at the location from which
The comptroller adds subsection (b)(6) to the former rule:
the salesperson operates. Examples include orders that a sales-
person receives by mail, telephone, including Voice over Internet "If a small business or a micro-business operates a single lo-
Protocol and cellular phone calls, facsimile, and email while trav- cation out of which it conducts all of its business activities, the
eling. The location from which the salesperson operates is the comptroller will presume that the location is a place of business
principal fixed location where the salesperson conducts work-re- of the seller."
lated activities. The location from which a salesperson operates
The comptroller also adds following supporting definitions to sub-
will be a place of business of the seller only if the location meets
section (a):
the definition of a 'place of business of a seller' in subsection
(a)(16) of this section on its own, without regard to the orders "Independently owned and operated business--a self-controlling
imputed to that location by this paragraph." entity that is not a subsidiary of another entity or otherwise sub-
ject to control by another entity, and that is not publicly traded."
Tax Code, §321.203(d) provides for consummation of a local
sale at the place of business "from which the retailer's agent "Micro-business--a legal entity, including a corporation, partner-
or employee who took the order operates." Prior to the 2020 ship, or sole proprietorship, that:
amendment, the rule did not define the location from which a
(A) is formed for the purpose of making a profit;
salesperson operates. The third sentence of subsection (b)(4)
now provides in part: "The location from which the salesperson (B) is independently owned and operated; and
operates is the principal fixed location from which the salesper-
(C) has not more than 20 employees."
son conducts work-related activities..." A physical connection be-
tween the salesperson and the place of business is a reasonable "Small business--a legal entity, including a corporation, partner-
interpretation of the location from which a salesperson operates. ship, or sole proprietorship, that:
The final sentence of subsection (b)(4) clarifies that the princi- (A) is formed for the purpose of making a profit;
pal fixed location from which the salesperson conducts work-re-
(B) is independently owned and operated; and
lated activities may or may not be a place of business of the
seller, depending upon whether the location meets the defini- (C) has fewer than 100 employees or less than $6 million in an-
tional requirements of subsection (a)(16). For example, if an nual gross receipts."
entrepreneur conducts sales operations from the entrepreneur's
The definition of "independently owned and operated business"
residence, the entrepreneur will be operating out of a place of
is taken from Government Code, Chapter 2006, Small Busi-

49 TexReg 4806 June 28, 2024 Texas Register

CP Ex-40-0010 of 0012
nesses and Rural Communities Impact Guidelines, updated in Subsection (i)(3) implements House Bill 2153, 86th Legislature,
December 2017. 2019, which sets a single local use tax rate that remote sellers
may elect to use.
The definitions of "micro-business" and "small business" are
taken from Government Code, Chapter 2006. The comptroller received no negative submissions or proposals
regarding this subsection.
The comptroller cannot make a location a "place of business" by
rule if the statute does not allow it. But, the agency can presume Summary of the Factual Bases for the Rule - Subsection (k)(5) -
that a location is a "place of business" based on indicative facts, Marketplace sales.
such as a small, independent business that conducts all of its
Subsection (k)(5) implemented House Bill 1525, 86th Legisla-
business operations out of a single location.
ture, 2019, which places local sales and use tax collection re-
Reasons Why the Comptroller Disagrees With Commenters' sponsibilities on marketplace providers.
Submissions and Proposals - Subsection (b)6).
The comptroller received no negative submissions or proposals
Mr. Sheets commented that the subsection does nothing to regarding this subsection.
reduce the adverse economic effects on small and microbusi-
Reasons Why the Comptroller Disagrees With Commenters'
nesses. Mr. Land commented that there is no rational policy
Submissions and Proposals - Public benefits and costs.
reason for treating businesses differently based upon size or
revenue, and Mr. Gilmore questioned the reasoning behind the Mr. Christian commented that there will be a significant fiscal im-
differentiation. CASTLE commented that the presumption is plication for businesses that must invest in reprogramming soft-
contrary to the law and factually unsupported. And, Mr. Chris- ware for enhanced local tax compliance, and the economic cost
tian commented that the presumption should be expanded. to the public must be estimated. Mr. Gilmore, Mr. Land, Mr.
Sheets, and Mr. Mays also commented that the rule will increase
The comptroller responds that the agency routinely uses pre-
business compliance costs.
sumptions in applying statutes, and the courts have honored
them. A word search of the Texas Administrative Code produces The comptroller acknowledges that there may be additional com-
over 60 instances in which the comptroller rules use presump- pliance costs, since it is conceivable that the rule may cause
tions. For example, the Austin Court of Appeals recognized that some vendors to realize that they are noncompliant. If the ven-
"repainting is presumed to be a taxable activity unless the tax- dors come into compliance by changing from single-location re-
payer affirmatively shows that the repainting meets the specific porting to multiple-location reporting, their compliance burden
requisites of maintenance as set out in the rule." GATX Termi- may increase. And if vendors change from multiple-location re-
nals Corp. v. Rylander, 78 S.W.3d 630, 635 (Tex. App. - Austin porting to single-location reporting, their compliance burden may
2002, no pet.); 34 TAC §3.357(b)(8). diminish.
The rational policy reason for special treatment, and the size and The total net economic cost cannot be reliably estimated for
revenue requirements have been mandated by the Texas Legis- reasons explained in the preamble to the proposed rule. The
lature in Government Code, Chapter 2006. And, the parameters comptroller cannot determine the number of vendors that would
are appropriate for the presumption. It is reasonable to assume change from single-location report to multiple-location reporting.
that a small business or a micro-business that operates a single Furthermore, the cost of compliance with the statute cannot be
location out of which it conducts all of its business activities will a factor in the rulemaking because compliance with the statute
receive three or more orders per calendar year at that location, is required with or without the rule.
making that location a place of business of the seller. It is less
Reasons Why the Comptroller Disagrees With Commenters'
reasonable to make that assumption if the business operates
Submissions and Proposals - Revenue Effect
out of more than one location, or if the business is an affiliate of
another, creating the possibility that the order receipt and order The preamble to the proposed rule explained the methodology
fulfillment may occur in different locations. that the comptroller used to estimate the revenue effect. Mr.
Mays, Mr. Sheets, Mr. Gilmore, Mr. Land, and CASTLE all
Summary of the Factual Bases for the Rule - Subsections
commented that the analysis of the revenue impact on cities was
(c)(2)(B)(ii), (d)(2), and (i) - Seller's obligation to collect local
insufficient, but did not identify any errors in the assumptions that
use tax.
the agency used in the estimate.
Subsection (c)(2)(B)(ii) provides that a remote seller that is re-
CASTLE contends that "there must be a dollar amount specific
quired to collect state use tax must also collect local use tax.
to each local government or a dollar amount that can be easily
Subsection (d)(2) and subsection (i) provide that a non-remote
calculated from the methodology used by the Comptroller to gen-
seller is responsible for collecting local use tax regardless of the
erate an estimate." The comptroller responds that Government
location of the seller in Texas. Physical presence in the local ju-
Code, §2001.024 has never been interpreted by any agency or
risdiction is no longer required. These expansions of the local
any court to require individual estimates. There are over 1,700
sales tax collection responsibilities of sellers are based on the
local governments in Texas with a local sales tax. In all prior
United States Supreme Court decision in South Dakota v. Way-
rulemakings, the comptroller has never estimated the loss of or
fair, Inc., 138 S. Ct. 2080 (June 21, 2018).
increase in local sales tax revenue for each local government in
The comptroller received no negative submissions or proposals Texas with a local sales tax. And, the comptroller is unaware of
regarding these subsections. any other agency that has made individual estimates for each
local government.
Summary of the Factual Bases for the Rule - Subsection (i)(3) -
Single local tax option for remote sellers. Furthermore, the statute does not require the comptroller to ar-
ticulate a methodology for individual estimates that the agency
is not required to make. If an individual jurisdiction wants to con-

ADOPTED RULES June 28, 2024 49 TexReg 4807

CP Ex-40-0011 of 0012
duct its own investigation, the preamble to the proposed rule ex- applicable where the transactions were formerly sourced, there
plained the data that the jurisdiction would have to obtain, and would be a reduction in aggregate local sales tax levies and con-
the preamble explained how a consultant used the data in his sequent reduction in state service charge revenues under Tax
study. See, (49 TexReg 2440, 2443) (April 19, 2024). Code, §§321.503, 322.303, and 323.503.
CASTLE suggests that the comptroller could develop a sample Statement of the statutory or other authority under which the rule
of local governments. The comptroller responds that Govern- is adopted.
ment Code, §2001.024 does not require sampling. Furthermore,
Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei-
an aggregate estimate based on sample of individual jurisdic-
ture), 321.306 (Comptroller's Rules), 322.203 (Comptroller's
tions would do little to tell individual jurisdictions how they would
Rules), and 323.306 (Comptroller's Rules) authorize the comp-
be affected.
troller to adopt rules to implement the tax statutes.
Mr. Sheets suggested that the comptroller could have under-
Sections or articles of the code affected.
taken alternatives, such as making estimates for the top twenty
most populated jurisdictions or making estimates for the cities Tax Code, §151.0595 (Single Local Tax Rate for Remote Sell-
involved in the lawsuit. The comptroller responds that Govern- ers); Tax Code, Chapter 321, Subchapters A, B, C, D, and F; Tax
ment Code, §2001.024 does not require selective, individual es- Code, Chapter 322; and Tax Code, Chapter 323 are affected.
timates.
The agency certifies that legal counsel has reviewed the adop-
The Administrative Procedure Act only requires a fiscal note tion and found it to be a valid exercise of the agency's legal au-
showing "the estimated loss or increase in revenue to the state thority.
or to local governments as a result of enforcing or administering
the rule." Government Code, §2001.024(a)(4)(C). The comp- Filed with the Office of the Secretary of State on June 14, 2024.
troller has done that. In addition, the rulemaking process has TRD-202402641
disclosed the types of cities and taxpayers that may be most
Jenny Burleson
affected - cities receiving substantial tax revenues from fulfill-
ment centers, such as the CASTLE group, and cities receiving Director, Tax Policy Division
substantial tax revenues from taxpayers sourcing all their sales Comptroller of Public Accounts
to a single location, such as the City of Round Rock. Effective date: July 4, 2024
Proposal publication date: April 19, 2024
Reasons Why the Comptroller Disagrees With Commenters'
For further information, please call: (512) 475-2220
Submissions and Proposals - Local employment impact state-
ment. ♦ ♦ ♦
CASTLE commented that the comptroller "fails to provide a
non-conclusory explanation of why the impact cannot be deter-
CHAPTER 5. FUNDS MANAGEMENT
mined." The comptroller disagrees. The explanation is stated in (FISCAL AFFAIRS)
the preamble of the proposed rule.
SUBCHAPTER D. CLAIMS PROCESSING--
Reasons Why the Comptroller Disagrees With Commenters'
Submissions and Proposals - Government growth impact state-
PAYROLL
ment. 34 TAC §5.46
CASTLE comments that the preamble to the proposed rule "fails The Comptroller of Public Accounts adopts amendments to
to discuss in any meaningful way" the government growth state- §5.46 concerning deductions for paying membership fees to
ment required by Government Code, §2001.0221. Comptroller certain state employee organizations, without changes to the
Rule 11.1(d) states that an agency shall "reasonably describe" proposed text as published in the May 3, 2024, issue of the
the effect on government growth. 34 TAC §11.1(d). Historically, Texas Register (49 TexReg 2985). The rule will not be repub-
the reasonable descriptions published by the comptroller, as well lished.
as other agencies, consist of statements of no effect without ex-
planation, and statements of effect with brief explanations. The The amendments add a definition of CAPPS in new subsection
comptroller followed the historical approach in this rulemaking. (a)(1) and renumber the subsequent provisions accordingly.

CASTLE comments that the rule will create or eliminate a gov- The amendments to subsections (b)(1)(C) and (b)(2)(B) add a
ernment program if a local government loses significant local second method of establishing, changing or cancelling a pay-
sales tax revenue. The comptroller responds that the rule it- roll deduction for state employee organization membership fees.
self does not create or eliminate a government program. The These provisions currently allow a state employee to establish,
creation or elimination of local government programs is at the change or cancel a payroll deduction by submitting a written au-
discretion of local governments. thorization form to the employer's human resource officer or pay-
roll officer. The amendments to these provisions also allow a
CASTLE also comments that "the Comptroller has already ad- state employee to establish, change or cancel a payroll deduc-
mitted that there will be a decrease in the fees he receives." The tion by submitting an electronic authorization through CAPPS.
comptroller acknowledges that to the extent that transactions
previously sourced within an incorporated municipality would be The amendments to subsection (b)(2)(D) make a conforming
sourced to an unincorporated area without a cumulative local tax change to require state agencies to notify the affected eligible
rate levied by municipal (pursuant to a limited purpose annexa- organization if a state employee submits an electronic authoriza-
tion agreement), county, and/or special purpose taxing authori- tion form through CAPPS cancelling a payroll deduction for state
ties commensurate with the cumulative local tax rate levied by employee organization membership fees.
the municipal, county, and/or special purpose taxing authorities

49 TexReg 4808 June 28, 2024 Texas Register

CP Ex-40-0012 of 0012
TAB
J
2024 STATUTORY DEFINITION OF
PLACE OF BUSINESS
HOW THE STATUTORY DEFINITION OF PLACE OF BUSINESS OF THE RETAILER READS
UNDER THE 2024 VERSION OF RULE 3.334
"Place of business of the retailer" means an established outlet, office, or location
operated by the retailer or the retailer's agent or employee for the purpose of having
sales personnel receive orders for taxable items and includes any location at which
three or more orders are received by sales personnel of the retailer during a calendar
year. Any such established outlet, office, or location operated by the retailer or the
retailer's agent or employee cannot include a computer server, Internet protocol
address, domain name, website, or software application and must be the location
where an order is initially received by or on behalf of the seller and not where the
order may be subsequently forwarded, accepted, completed or fulfilled. An order is
received when all of the information from the purchaser necessary to the
determination whether the order can be accepted has been received by or on behalf of
the seller by sales personnel. The location from which a product is shipped shall not be
used in determining the location where the order is received by the seller. A
warehouse, storage yard, or manufacturing plant is not a "place of business of the
retailer" unless at least three orders are received by the retailer as set forth above
during the calendar year at the warehouse, storage yard, or manufacturing plant.

14
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Richard Phillips on behalf of Richard Phillips Jr.
Bar No. 24032833
Rich.Phillips@hklaw.com
Envelope ID: 106158677
Filing Code Description: Brief Requesting Oral Argument
Filing Description: Coppell Parties' Opening Brief as Appellants
Status as of 9/29/2025 7:24 AM CST

Case Contacts

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