Texas sales and use tax benefits following Hurricane Harvey
In response to the devastation from Hurricane Harvey, the IRS, Texas and numerous other states have provided guidance on extended filing deadlines. In addition to those extensions, Texas taxpayers should consider a number of sales and use tax benefits created to help taxpayers rebuild and repair their businesses after natural disasters. Exemptions are also available to individuals and businesses for services to restore storm-damaged tangible personal property. Sales and use tax exemptions include:
- The cost of labor to repair storm-damaged, nonresidential property, including office buildings and stores. Labor charges must be separately stated in the contract or on the repair invoice. The purchaser must issue an exemption certificate to the contractor or service provider which includes the name of the natural disaster county. Texas does not impose sales tax on labor for residential repairs.
- Services used to restore storm-damaged tangible personal property, including dry cleaning of clothing and draperies, rug and carpet cleaning, and appliance repairs regardless of whether the property is residential or nonresidential. The purchaser must issue an exemption certificate to the service provider which includes the natural disaster county.
- Most purchases of taxable goods and services purchased with a Federal Emergency Management Agency (FEMA) or Red Cross debit card or voucher. While an exemption certificate is not required, the retailer must keep documentation of the purchase, such as a copy of the voucher or copy of the receipt, which is clearly marked FEMA or Red Cross, issued to the purchaser.
The Comptroller also provides a limited reprieve from registration and collection responsibilities for an out-of-state business entity, with no prior Texas activity, that enters Texas at the request of an in-state business entity under a mutual assistance agreement, or that is an affiliate of an in-state business entity. The out-of-state business is limited to performing disaster- or emergency-related work to repair or restore damaged critical infrastructure during a disaster response period in a declared disaster area. Accordingly, the out-of-state business will not be required to collect and remit Texas sales and use tax on sales of taxable items in Texas or on purchases of taxable items that are sold or transferred to its customers during the disaster response period.
Taxpayers outside of Texas also affected by Hurricanes Harvey or Irma should review their state taxing jurisdiction’s guidance on filing extensions and sales and use tax benefits, which may differ from Texas.