Proposed Rules Title 34

TITLE 34. PUBLIC FINANCE

PART 1. COMPTROLLER OF PUBLIC ACCOUNTS

SUBCHAPTER O. STATE AND LOCAL SALES AND USE TAXES

The Comptroller of Public Accounts proposes amendments to §3.297, concerning carriers, commercial vessels, locomotives and rolling stock, and motor vehicles. The comptroller amends the section to implement the changes made to Tax Code, §160.001(2) (Definitions) by House Bill 4032, 86th Legislature, 2019 and to codify current comptroller policy regarding the taxability of components and the repair and maintenance of vessels.

The comptroller amends subsection (a)(1) "Chapter 160 boat" to update the maximum length of such a boat from 65 to 115 feet to implement House Bill 4032 and to more closely follow the statute and the definition of taxable boat in §3.741 of this title (relating to Imposition and Collection of Tax).

The comptroller amends subsection (c)(3) entitled, "component parts," by adding the phrase "or a Chapter 160 boat that meets the definition of a commercial vessel" for clarification without substantive change to the subparagraph.

The comptroller amends subsection (c)(4) entitled, "repair and maintenance," by adding the phrase "or a Chapter 160 boat that meets the definition of a commercial vessel" for clarification in accordance with STAR Accession No. 9809812L (September 15, 1998) without substantive change to the subparagraph.

Brad Reynolds, Chief Revenue Estimator, has determined that during the first five years that the proposed amended rule is in effect, the rule: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rule's applicability; and will not positively or adversely affect this state's economy.

Mr. Reynolds also has determined that the proposed amended rule would benefit the public by conforming the rule to current statute and incorporating long-standing agency policy. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses or rural communities. The proposed amended rule would have no significant fiscal impact on the state government, units of local government, or individuals. There would be no significant anticipated economic cost to the public.

You may submit comments on the proposal to Jenny Burleson, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711 or to the email address: tp.rule.comments@cpa.texas.gov. The comptroller must receive your comments no later than 30 days from the date of publication of the proposal in the Texas Register.

The comptroller proposes the amendments under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The amendments implement Tax Code, §151.329 (Certain Ships and Ship Equipment), §151.3291 (Boats and Boat Motors), and 160.001(2) (Definitions).

§3.297.Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Chapter 160 boat--A vessel not more than 115 [65] feet in length, measured from the tip of the bow in a straight line to the stern, other than a canoe, kayak, rowboat, raft, punt, or other watercraft designed to be propelled only by paddle, oar, or pole. The term includes federally documented vessels, sailboats, personal watercraft, and boats designed to accommodate an outboard motor. The term does not include seaplanes. Seaplanes, and canoes, kayaks, rowboats, rafts, punts, [~~that is not a canoe, kayak, rowboat, raft, punt, inflatable vessel,~~] or other watercraft designed to be propelled only by paddle, oar, or pole, are not "taxable boats" [~~and that is subject to tax~~] under Tax Code, Chapter 160 (Taxes On Sales And Use Of Boats And Boat Motors), but are subject to tax under Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax).

(2) Commercial vessel--A vessel that displaces eight or more tons of fresh water before being loaded with fuel, supplies, or cargo, and that is:

(A) used exclusively and directly in a commercial or business enterprise or activity, including, but not limited to, commercial fishing; or

(B) used commercially for pleasure fishing by individuals who are paying passengers.

(3) Common carrier--A person who holds out to the general public a willingness to provide transportation of persons or property from place to place for compensation in the normal course of business.

(4) Licensed and certificated common carrier--A person authorized through issuance of a license or certificate by the appropriate United States agency or by the appropriate state agency within the United States to operate a vessel, train, motor vehicle, or pipeline as a common carrier. Certificates of inspection or safety do not authorize a person to operate as a licensed and certificated common carrier.

(5) Locomotive--A self-propelled unit of railroad equipment consisting of one or more units powered by steam, electricity, diesel electric, or other fuel, designed solely to be operated on and supported by stationary steel rails or electromagnetic guideways and to move or draw one or more units of rolling stock owned or operated by a railroad. The term includes a yard locomotive operated to perform switching functions within a single railroad yard, but does not include self-propelled roadway maintenance equipment.

(6) Marine cargo container--A container that is fully or partially enclosed; is intended for containing goods; is strong enough to be suitable for repeated use; and is specially designed to facilitate the carriage of goods by one or more modes of transportation without intermediate reloading. The term includes the accessories and equipment that are carried with the container. The term does not include trailer chassis, motor vehicles, accessories, or spare parts for motor vehicles.

(7) Motor vehicle--A self-propelled vehicle designed to transport persons or property upon the public highway and a vehicle designed to be towed by a self-propelled vehicle while carrying property. The term includes, but is not limited to: automobiles; motor homes; motorcycles; trucks; truck tractors; trailers; semitrailers; house trailers or travel trailers, as defined by §3.72 of this title (relating to Trailers, Farm Machines, and Timber Machines); park models, as defined by §3.481 of this title (relating to Imposition and Collection of Manufactured Housing Tax); trailers sold unassembled in a kit; dollies; jeeps; stingers; auxiliary axles; converter gears; and truck cab/chassis. The term does not include a nonrepairable vehicle and a salvage vehicle, as defined by §3.86 of this title (relating to Destroyed and Repaired Motor Vehicles).

(8) Operating exclusively in foreign or interstate coastal commerce--Transporting persons or property between a point in Texas and a point in another state or foreign country. A vessel that travels between a point in Texas and an offshore area or fishing area on the high seas, or between two points in Texas, is not operating exclusively in foreign or interstate coastal commerce.

(9) Railroad--A form of non-highway ground transportation of persons or property in the normal course of business by means of trains solely operated on and supported by stationary steel rails or electromagnetic guideways, including but not limited to:

(A) high speed ground transportation systems that connect metropolitan areas;

(B) commuter or other short-haul rail passenger service in a metropolitan or suburban area;

(D) private industrial railroads operated on steel rails that connect directly to the national rail system of transportation, but not a private industrial railroad operated on steel rails totally inside an installation that is not connected directly to the national rail system of transportation.

(10) Rolling stock--A unit of railroad equipment that is mounted on wheels and designed to be operated in combination with one or more locomotives upon stationary steel rails or electromagnetic guideways owned or operated by a railroad. Examples include, but are not limited to, passenger coaches, baggage and mail cars, box cars, tank cars, flat cars, and gondolas. Rolling stock also includes self-propelled trackmobile rail car movers and roadway maintenance equipment. Rolling stock does not include equipment used for intra-plant transportation or other nontraditional railroad activities and that is mounted on stationary steel rails or tracks but that are not part of, or connected to, a railroad. For example, cranes operated on steel rails or tracks and used to load or unload ships are not rolling stock.

(11) Train--One or more locomotives coupled to one or more units of rolling stock that are designed to carry freight or passengers, are operated on steel rails or electromagnetic guideways, and are owned or operated by a railroad.

(12) Vessel--A watercraft, other than a seaplane on water, used, or capable of being used, for navigation and transportation of persons or property on water. The term includes a ship, boat, watercraft designed to be propelled by paddle or oar, barge, and floating dry-dock.

(b) Carriers generally.

(1) Use tax is not due on the storage or use of repair or replacement parts acquired outside of Texas and actually affixed in Texas to a self-propelled vehicle that is used by a licensed and certificated common carrier. Trailers, barges, and semitrailers are not considered to be self-propelled vehicles.

(2) Use tax is due on the storage or use of tangible personal property brought into Texas to be assembled into a vehicle used by a common carrier to transport persons or property from place to place, unless the tangible personal property is otherwise exempt from sales and use tax under this section.

(3) Sales tax is not due on the sale of tangible personal property to a common carrier if the tangible personal property is shipped to a point outside of Texas using the purchasing carrier's facilities under a bill of lading, and if the tangible personal property is to be used by the purchasing carrier in the conduct of its business outside of Texas.

(1) Chapter 160 boats. The sale or use in Texas of a Chapter 160 boat is subject to boat and boat motor sales or use tax under Tax Code, Chapter 160, even if the vessel meets the definition of a commercial vessel. The lease or rental of a Chapter 160 boat is subject to limited sales, excise, and use tax under Tax Code, Chapter 151 [~~(Limited Sales, Excise, and Use Tax)~~]. For information concerning the imposition of the boat and boat motor sales and use tax, see §3.741 of this title (relating to Imposition and Collection of Tax).

(2) Commercial vessels. Sales or use tax is not due on the sale by the builder of a commercial vessel that is not a Chapter 160 boat.

(3) Component parts. Sales and use tax is not due on the sale or use of materials, equipment, and machinery that become component parts of a commercial vessel, [or] a marine cargo container, or a Chapter 160 boat that meets the definition of a commercial vessel. A component part is tangible personal property that is actually attached to and becomes a part of a commercial vessel, [or] a marine cargo container, or a Chapter 160 boat that meets the definition of a commercial vessel. For example, items such as radios, radar equipment, navigation equipment, wenches, long-line fishing gear, and rigging equipment, that are attached to the vessel by means of bolts or brackets, or are otherwise attached to the vessel, including items required by federal or state law, are component parts. Permanent coatings such as paint and varnishes are also component parts. The term does not include furnishings of any kind that are not attached to the vessel, nor does it include consumable supplies. For example, it does not include bedding, linen, kitchenware, tables, chairs, ice for cooling, refrigerants for cooling systems, fuels, lubricants, first aid kits, tools, or polishes, waxes, glazes, or other similar temporary coatings.

(4) Repair and maintenance. Sales and use tax is not due on the labor to repair, remodel, restore, renovate, convert, or maintain a commercial vessel or a Chapter 160 boat that meets the definition of a commercial vessel, or a component part of a commercial vessel or a Chapter 160 boat that meets the definition of a commercial vessel. Sales and use tax is due on the sale or use of machinery, equipment, tools, and other items used or consumed in performing the non-taxable service. For more information about the repair, remodeling, maintenance, and restoration of vessels that are not commercial vessels, see §3.292 of this title (relating to Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property).

(5) Vessels operating exclusively in foreign or interstate coastal commerce.

(A) Sales or use tax is not due on the sale of materials and consumable supplies, including items commonly known as ships' stores and sea stores, to the owner or operator of a vessel operating exclusively in foreign or interstate coastal commerce, if the materials and consumable supplies are for use and consumption in the operation and maintenance of the vessel, or if the materials and supplies enter into and become component parts of the vessel.

(B) Operation of the vessel in a manner other than in foreign or interstate coastal commerce will result in a loss of the exemption for ships' stores and sea stores for the quarterly period in which the nonexempt operation occurs.

(C) Any owner or operator of a vessel operating exclusively in foreign or interstate coastal commerce shall, when giving an exemption certificate, include on the certificate the title or position of the person issuing the certificate and the name of the vessel on which the items are to be loaded.

(D) Sales tax is due on sales made to individual seamen operating these vessels.

(6) Closely associated service companies provide servicing operations such as stevedoring, loading, and unloading vessels. Sales or use tax is not due on the sale or use of materials and supplies purchased by a person providing stevedoring services for a vessel operating exclusively in foreign or interstate coastal commerce if the materials and supplies are loaded aboard the vessel and are not removed before its departure. This includes, but is not limited to, such items as lumber, plywood, deck lathing, turnbuckles, and lashing shackles.

(d) Taxable uses of tangible personal property purchased tax free. Sales and use tax is due when tangible personal property sold, leased, or rented tax-free under a properly completed resale or exemption certificate is subsequently put to a taxable use other than the use allowed under the certificate. For more information refer to §3.285 of this title (relating to Resale Certificate; Sales for Resale) and §3.287 of this title (relating to Exemption Certificates).

(e) Rolling stock, locomotives, and trains.

(1) Sales or use tax is not due on the sale or use of locomotives and rolling stock.

(2) Sales or use tax is not due on the sale or use of fuel or supplies essential to the operation of locomotives and trains, including items required by federal or state regulation. Examples include, but are not limited to, telecommunication and signaling equipment, rails, ballast, cross ties, and roadbed moisture barriers. Items of tangible personal property used to construct, repair, remodel, or maintain improvements to real property such as depots, maintenance facilities, loading facilities, and storage facilities are not supplies essential to the operation of locomotives and trains.

(3) Sales or use tax is not due on the amount charged for labor or incorporated materials used to repair, remodel, maintain, or restore locomotives and rolling stock. Sales or use tax is due on the sale or use of machinery, equipment, tools, and other items used or consumed in performing the non-taxable service.

(4) Sales or use tax is not due on the sale or use of electricity, natural gas, and other fuels used or consumed predominately in the repair, maintenance, or restoration of rolling stock. For more information, see §3.295 of this title (relating to Natural Gas and Electricity).

(5) Sales or use tax is not due on the amount charged for labor or incorporated materials, whether lump-sum or separately stated, used for the construction of new railroad tracks and roadbeds. For more information, see §3.291 of this title (relating to Contractors). Sales or use tax is not due on the separately stated sales price of incorporated materials used to repair, remodel, restore, or maintain existing railroad tracks and roadbeds. Sales and use tax is due on the sales price for labor to repair, remodel, restore, or maintain existing railroad tracks and roadbeds as nonresidential real property repair, remodeling, and restoration. For more information, see §3.357 of this title (relating to Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance).

(f) Motor vehicles. The sale and use of motor vehicles are taxed under the Tax Code, Chapter 152 (Taxes on Sale, Rental, and Use of Motor Vehicles). For information on repairs to motor vehicles, see §3.290 of this title (relating to Motor Vehicle Repair and Maintenance; Accessories and Equipment Added to Motor Vehicles; Moveable Specialized Equipment.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 24, 2023.

TRD-202301473

Jenny Burleson

Director, Tax Policy

Comptroller of Public Accounts

Earliest possible date of adoption: June 4, 2023

For further information, please call: (512) 475-2220

SUBCHAPTER EE. BOAT AND BOAT MOTOR SALES AND USE TAX

34 TAC §3.741

The Comptroller of Public Accounts proposes amendments to §3.741, concerning imposition and collection of tax, relating to Tax Code, Chapter 160 (Taxes on Sales and Use of Boats and Boat Motors). This proposed amendment implements House Bill 2926, 78th Legislature, 2003; House Bill 1106, 83rd Legislature, 2013; and House Bill 4032, 86th Legislature, 2019. Other amendments to the section reflect changes to existing text for consistency, clarity, and to incorporate long-standing agency policy.

The comptroller amends the section by inserting the word "sales" before the word "tax" when appropriate and replacing the terms "state" and "this state" with the term "Texas" throughout the section for uniformity with other sections of this title. The comptroller also inserts the term "taxable" before the term "boat" where appropriate to conform to the term defined in subsection (a)(12). The comptroller also replaces the term "boat" with the term "outboard" when referring to motor throughout the section to conform to the term defined in subsection (a)(13).

The comptroller amends current subsection (a), entitled "definitions," by revising certain existing definitions and by adding nine new terms in paragraphs (2), (3), (6), (7), (9), (10), (14), (15), and (18). The comptroller renumbers existing paragraphs in the subsection accordingly.

The comptroller amends subsection (a)(1) defining the term "accessories" by replacing the term "boat" with the more general term "vessel" because accessories may be attached to vessels other than taxable boats. The comptroller further amends the paragraph by adding the terms "water skis" and "tow ropes" deleted and relocated from current subsection (f)(1) and adding a statement excluding boat trailers from the definition of an accessory.

The comptroller adds a new paragraph (2) defining the term "agent of the department." The amendment is derived from the definition of the same term in Parks and Wildlife Code, §31.003(15) (Definitions).

The comptroller adds a new paragraph (3), defining the term "Application for Certificate of Title and/or Registration." The amendment derives the definition, in part, from Parks and Wildlife Code, §31.046 (Application for Certificate of Title), and §31.047 (Application; Form and Content; Fee).

The comptroller amends current paragraph (2), renumbered paragraph (4), defining the term "dealer" based on the revisions to the definition of the term in Parks and Wildlife Code, §31.003(7), and by adding a licensing requirement based on §31.041 (Duties of Dealers, Distributors, and Manufacturers; License Required).

The comptroller adds new paragraph (6) defining the term "Distributor." The definition is based on the definition of the term "distributor" in the Parks and Wildlife Code, §31.003, added by House Bill 2926.

The comptroller adds new paragraph (7) defining the term "federally documented vessel." The definition comes from information on the United States Coast Guard website at https://www.dco.uscg.mil/Our-Organization/Deputy-for-Operations-Policy-and-Capabilities-DCO-D/National-Vessel-Documentation-Center/(April 20, 2023).

The comptroller amends current paragraph (4), renumbered paragraph (8), defining the term "manufacturer." The comptroller amends the definition to incorporate revisions to Parks and Wildlife Code, §31.003(11), and to add a licensing requirement based on §31.041.

The comptroller deletes paragraph (6) defining the term "tax assessor-collector" and adds new paragraph (9) defining the term "participating county tax assessor-collector." The comptroller defines the term as a county tax assessor-collector that has an agreement with the Texas Parks & Wildlife Department (Parks & Wildlife) to title and/or register taxable boats or outboard motors in Texas. The comptroller bases the definition on guidance from STAR Accession No. 9110L1150C10 (October 3, 1991).

The comptroller adds new paragraph (10), defining the term "registered repair facility." The definition incorporates Tax Code, §160.0246 (Exemption for Certain Boats and Motors Temporarily Used in This State), added by House Bill 4032 and includes a requirement that the repair facility hold a Texas sales and use tax permit.

The comptroller amends current paragraph (5), renumbered paragraph (11), defining the term "retail sale" by incorporating the language from Tax Code, §160.001(7) (Definitions), to follow the statute more closely.

The comptroller amends current paragraph (7), renumbered paragraph (12), defining the term "taxable boat." The comptroller amends the definition of "taxable boat" by increasing the length of a taxable boat from 65 feet to 115 feet based on Tax Code, §160.001(2) revised by House Bill 4032. The comptroller further amends the paragraph to more closely follow the statutory definition of taxable boat in Tax Code, §160.001(9), by rearranging the paragraph, deleting the term "inflatable" and adding the term "punts", The comptroller also adds the word "only" when referring to the how the boat is propelled to clarify the taxability of vessels that are designed to be propelled by oars or motors, The comptroller further amends the paragraph by replacing the term "jet skis," which is a manufacturer's trade name, with the generic term "personal watercraft."

The comptroller amends current paragraph (8), renumbered paragraph (13), by changing the defined term from "taxable motor" to "outboard motor" based on Tax Code, §160.001(5) and (9), and Parks and Wildlife Code, §31.003(13). The comptroller further amends the paragraph by replacing the terms "watercraft" and "boat" with the term "vessel" used in Tax Code, §160.001(2), as amended by House Bill 4032.

The comptroller adds new paragraph (14), defining the term "temporary use permit." The comptroller derives the definition from the language in Tax Code, §160.0247 (Temporary Use Permit), added to Tax Code, Chapter 160, by House Bill 4032.

The comptroller adds new paragraph (15), defining the term "territorial boundaries of Texas." The comptroller derives the definition, in part, from the language in §3.332(c) of this title (relating to Drilling Equipment) and STAR Accession No. 200905476L (May 1, 2009).

The comptroller amends current paragraph (9), renumbered paragraph (16), defining the term "total consideration" by incorporating language from Tax Code, §160.002 (Total Consideration), and rearranging certain other terms for clarity and readability. The comptroller amends the second sentence of the paragraph by adding language explaining that total consideration includes the inventory tax due and payable by dealers under Tax Code, §23.124 (Dealer's Vessel and Outboard Motor Inventory; Value). The comptroller further amends the paragraph by including long-standing comptroller practice under STAR Accession No. 9607L1418A11 (July 11, 1996). See Comptroller's Decision No. 42,142 (2005) and §3.74 of this title (relating to Seller Responsibility).

The comptroller amends current paragraph (10), renumbered paragraph (17), defining the term "use" by adding the terms "taxable boat or outboard motor" and creating two examples describing "use" in new subparagraphs (A) and (B). The comptroller derives the example in subparagraph (A) from current subsection (a)(10). The comptroller derives the example in new subparagraph (B), in part, from the language in Tax Code, §160.0246, added by House Bill 4032.

The comptroller adds new paragraph (18), defining the term "vessel." The comptroller derives the definition from §3.297 of this title (relating to Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles), and Parks and Wildlife Code, §31.003(2).

The comptroller amends the heading for current subsection (b) entitled "general principles" to read "general principles of taxation" to better inform readers as to what the subsection contains. The comptroller amends current subsection (b)(1) by deleting the phrase "the boat and boat motor sales and use tax" and adding the title for Tax Code, Chapter 160 for clarification without substantive change.

The comptroller amends subsection (b) by adding a new paragraph (2) by relocating the second sentence from current paragraph (2) and adding the term "lease" and a statement that taxable boats or outboard motors cannot be purchased for resale. The amendment is based on Tax Code, §151.3291 (Boats and Boat Motors), and guidance from STAR Accession No. 9709824L (September 29, 1997).

The comptroller amends current subsection (b)(2), renumbered as paragraph (3), by correcting the title of Tax Code, Chapter 151, and deleting and relocating the second sentence to new paragraph (2) for clarification without substantive change. The amendment includes several minor edits to current subsection (b)(3), renumbered as paragraph (4), for consistency and clarification without substantive change.

The comptroller amends current subsection (b)(4), renumbered as paragraph (5), by inserting the titles for the Parks and Wildlife Code sections cited therein and by making several edits for clarification without substantive change. The comptroller further amends renumbered paragraph (4) and paragraph (5) by replacing the phrase "the provisions of the boat and boat motor sales and use tax" with "Tax Code, Chapter 160" for uniformity without substantive change to the paragraph.

The comptroller adds new paragraph (6) addressing the taxation of a taxable boat or outboard motor purchased at retail outside Texas and brought into Texas for use in Texas by a Texas resident or person domiciled or doing business in Texas in accordance with Tax Code, §160.022 (Use Tax). The new paragraph also adds a reference to the new resident use tax in accordance with Tax Code, §160.023 (New Resident).

The comptroller adds new paragraph (7) addressing the taxation of a boat trailer in accordance with STAR Accession No. 200109441L (September 6, 2001). The new paragraph also references §3.74 of this title and §3.72 of this title (relating to Trailers, Farm Machines, and Timber Machines).

The comptroller amends subsection (c), entitled "imposition of the tax," by creating two new subparagraphs in paragraph (1) and by moving the 6.25% tax rate referenced in current paragraph (2) to new paragraphs (1)(A) and (2)(A).

The comptroller derives new subparagraph (A) from Tax Code, §160.021 (Retail Sales Tax), and implements the amendment to Tax Code, Chapter 160, by House Bill 4032, adding Tax Code, §160.026 Limitation on Amount of Tax, limiting the amount of total sales tax due at $18,750. New subparagraph (B) restates the last two sentences in current paragraph (1) and makes several edits for clarification without substantive change.

The comptroller amends subsection (c) by deleting the language in paragraph (2) and adding new language relating to use tax due under Tax Code, §160.022. New subparagraph (A) states that tax is due on the total consideration paid or to be paid, regardless of any use or depreciation prior to entry into Texas. New subparagraph (B) makes the use tax an obligation of the person who brings the taxable boat or outboard motor into Texas in accordance with Tax Code, §160.022. New subparagraph (B) allows a credit against the Texas use tax in accordance with Tax Code, §160.025 (Credit for Other Taxes). New subparagraph (C) states that the new resident use tax imposed is $15 and is in lieu of the use tax in accordance with Tax Code, §160.023.

The comptroller further amends subsection (c)(2) by adding a new subparagraph (D) providing that use tax is not due on the use of a taxable boat or outboard motor brought into Texas if the owner of a taxable boat or outboard motor obtains a current temporary use permit. The addition of new subparagraph (D) implements the amendment to Tax Code, Chapter 160, by House Bill 4032 which added Tax Code, §160.0246 and §160.0247. The comptroller amends subsection (c)(2) by adding a new subparagraph (E) explaining that use tax is due on the use of a taxable boat or outboard motor located within the territorial boundaries of Texas after the expiration date of the temporary use permit. The amendment makes minor changes to current subsection (c)(2), renumbered (3), for clarity without substantive change.

The comptroller amends subsection (d), entitled "payment of the tax," by creating two new subparagraphs in paragraph (1) for clarity and readability. The comptroller further amends section (d)(1) by replacing the phrase "after the completion of the seller, donor, or trader's affidavit" with the phrase "the seller and purchaser must complete an Application for Certificate of Title and/or Registration" since the comptroller and Parks & Wildlife have combined the tax affidavit required under Chapter 160 with Parks and Wildlife's Application for Certificate of Title. New subparagraph (A) is drawn from the remainder of the language in current paragraph (1). The comptroller further amends the new subparagraph by deleting and replacing the term "county tax assessor-collector" with the term "participating county tax assessor-collector" at the end of the subparagraph in accordance with STAR Accession No. 9110L1150C10.

The comptroller amends subsection (d)(2) by designating it as new subparagraph (B) of paragraph (2) and amending the new subparagraph by deleting the phrase "after the completion of the seller, donor, or trader's affidavit for the sale of a boat or boat motor" based on the amendment to subsection (d)(1). The comptroller amends new subparagraph (B) by replacing the term "affidavit" with the term "Application for Certificate of Title and/or Registration" and inserting the term "an agent of the department," and deleting and replacing the term "county tax assessor-collector" with "participating county tax assessor-collector." The amendment further revises new subparagraphs (A) and (B) by replacing the numeral "20" with the numeral "45" in accordance with House Bill 4032.

The comptroller amends subsection (d) by renumbering paragraph (2) as paragraph (3) and adding language to make the paragraph consistent with the rest of the subsection. The amendment revises the paragraph by replacing the numeral "20" with the numeral "45" in accordance with the changes made to Tax Code, §160.041 (Collection Procedure), by House Bill 4032. The comptroller amends current subsection (d) by adding a new paragraph (3) giving guidance for the transfer of a taxable boat or outboard motor due to a tax exemption, even exchange, or gift of a taxable boat or outboard motor in accordance with Tax Code, Chapter 160.

The comptroller makes minor changes to current subsection (e), entitled "Failure of tax remittance by the selling dealer," for clarity and consistency within the section without substantive change.

The comptroller amends the heading for current subsection (f), entitled "purchase of accessories/components for resale," to read "purchase of tangible personal property or accessories for resale" to conform to the contents of the amended subsection. The amendment deletes the heading for paragraph (1) because no paragraphs in the current section contain a heading. The comptroller amends the subsection by inserting the words "properly completed" before the word "resale" for consistency with other sections of this title. The amendment also replaces the term "Limited Sales, Excise, and Use Tax Act" with the term "Tax Code, Chapter 151" for consistency and readability. The comptroller further amends current subsection (f)(1) by creating a new paragraph (2) from the second sentence in current paragraph (1) and by inserting the language "A properly completed resale certificate may be used in purchasing" for clarity and readability. The amendment also replaces the word "single" with the word "lump-sum" to be consistent with the last sentence in the new paragraph. The comptroller amends current paragraph (1) by deleting the sentence "These accessories include water skis and tow ropes" and relocating the terms "water skis and tow ropes" to subsection (a)(1) defining "accessories."

The amendment renumbers current paragraph (2) as paragraph (3), replaces the term "boat or boat motor" with the term "vessel" and replaces the phrase "boats over 65" with the phrase "vessels over 115" to be consistent with the changes made to Tax Code, §160.001, by House Bill 4032.

The comptroller adds new subsection (g), entitled, "exemptions and non-taxable transactions," which contains three new paragraphs.

The comptroller adds new paragraph (1) concerning an exemption from sales tax for the sale of a taxable boat or outboard motor purchased in Texas for use in another state or nation before any use in Texas. New paragraph (1) implements the amendment to Tax Code, Chapter 160, by House Bill 4032 which added Tax Code, §160.0246 and §160.0247 to Chapter 160. New paragraph (1) contains five subparagraphs (A) through (E).

Subparagraph (A) requires the purchaser to provide the seller with a signed written statement stating that the purchaser intends to remove the taxable boat or outboard motor from Texas for use in another state or nation by complying with either subparagraph (B), (C), or (D).

Subparagraph (B) requires the removal of the taxable boat or outboard motor from Texas within ten days of the sale in accordance with Tax Code, §160.0246(a)(1).

Subparagraph (C) requires the taxable boat or outboard motor be placed in a registered repair facility within 10 days of the date of sale and then removed from Texas within 20 days from the date the repairs, remodeling, maintenance, or restoration are completed in accordance with Tax Code, §160.0246(a)(2).

Subparagraph (D) requires the purchase of a temporary use permit within the time limits described in paragraph (1)(B) and (C) in accordance with Tax Code, §160.0246(a)(3) and (b).

Subparagraph (E) states that sales tax is due if the purchaser fails to meet the requirements of subparagraphs (A), (B), (C), or (D).

The comptroller adds new paragraph (2) concerning an exemption from sales tax for the sale of a taxable boat or outboard motor purchased in Texas for use by a governmental entity. New subparagraph (A) addresses the exemption for sales to the state of Texas, its agencies, instrumentalities, and political subdivisions in accordance with Tax Code, §160.024 (Exemption). New subparagraph (B) addresses the exemption for sales to the United States, its unincorporated agencies and instrumentalities, including instrumentalities chartered by the United States congress, such as the American Red Cross, in accordance with Tax Code, §160.024, and STAR Accession No. 9803362L (March 12, 1998). New subparagraph (C) addresses the exemption for volunteer fire departments in accordance with Tax Code, §160.0245 (Exemption for Emergency Service Organizations).

The comptroller adds new paragraph (3) concerning the nontaxable transfer of a taxable boat or outboard motor to an insurance company due to the settlement of an insurance claim or by a seller or lienholder due to a repossession of a taxable boat or outboard motor in accordance with STAR Accession No. 9306L1247F11 (June 28, 1993).

The comptroller adds new subsection (h), entitled, "refunds," which contains four paragraphs. New paragraph (1) informs the reader who may request a refund of any boat or boat motor sales and use tax paid in error in accordance with Tax Code, §111.104(b) (Refunds).

New paragraph (2) sets out the requirements for filing a refund claim in subparagraphs (A) through (D) in accordance with Tax Code, §111.104(c).

Subparagraph (A) requires that the request be in writing on comptroller's Form 57-200, Texas Claim for Refund of Boat and Boat Motor Tax. Subparagraph (B) requires that the request state the specific grounds upon which the claim is founded. Subparagraph (C) requires that the request be filed within four years from the date on which the tax was due and payable. Subparagraph (D) informs the reader that the comptroller can require a person to submit additional information to verify the refund under Tax Code, §111.004 (Power to Examine Records and Persons).

A new paragraph (3) states that the comptroller will notify a claimant if the comptroller determines that a refund claim cannot be granted, in part or in full, and the comptroller will also notify a claimant which requirements were not met in accordance with Tax Code, §111.1042 (Tax Refund: Informal Review). The amendment also explains that the claimant may request a refund hearing within 30 days of the denial of the refund in accordance with Tax Code, §111.105 (Tax Refund: Hearing). New paragraph (3) provides that a person may not refile a claim for the same transaction and for the same ground or reason as a refund claim previously denied in accordance with Tax Code, §111.107(b) (When Refund or Credit Is Permitted).

New paragraph (4) sets out the requirements for a person who intends to file suit under Tax Code, Chapter 112 (Taxpayers' Suits).

You may submit comments on the proposal to Jenny Burleson, Director, Tax Policy Division, P.O. Box 13528 Austin, Texas 78711 or to the email address: tp.rule.comments@cpa.texas.gov. The comptroller must receive your comments no later than 30 days from the date of publication of the proposal in the Texas Register.

The amendments implement Tax Code, §§160.001 (Definitions), 160.002 (Total Consideration), 160.021 (Retail Sales Tax), 160.022 (Use Tax), 160.023 (New Resident), 160.024 (Exemption), 160.0245 (Exemption for Emergency Service Organizations), 160.0246 (Exemption for Certain Boats and Motors Temporarily Used in This State), 160.0247 (Temporary Use Permit), 160.026 (Limitation on Amount of Tax), and 160.041 (Collection Procedure).

§3.741.Imposition and Collection of Tax.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Accessories--Nonessential tangible personal property attached to or sold with a vessel [~~a boat~~] for the convenience or comfort of the operator or passengers. The [~~For purpose of this rule, the~~] term "accessories" includes, but is not limited to, radios, mirrors, transom-mounted ladders, electric trolling motors, water skis, tow ropes, and depth finders. The term does not include a boat trailer.

(2) Agent of the Department--A dealer who is authorized by the Department under Parks and Wildlife Code, §31.006 (Appointment of Authorized Agent), to collect taxes and fees and issue certificates of number for taxable boats and outboard motors sold by that dealer in Texas.

(3) Application for Certificate of Title and/or Registration--Form PWD 143 (boats) or PWD 144 (outboard motors), an electronic equivalent, or a successor form used to apply for a certificate of title and/or registration for a taxable boat or outboard motor and/or to pay any sales or use tax due on the sale or use of a taxable boat or outboard motor in Texas. The Applications for Certificate of Title and/or Registration are available at https://tpwd.texas.gov/fishboat/boat/forms/.

(4) [~~(2)~~] Dealer--A person who holds a license issued by the Department to engage [~~or entity engaged~~] in the business of buying, selling, selling on consignment, displaying for sale, or exchanging at least five taxable boats or outboard [~~boat~~] motors in Texas during a calendar year at an established or permanent place of business in Texas [this state. At each such place of business a sign must be conspicuously displayed showing the name of the dealership so that it may be located by the public, and sufficient space must be maintained for an office, service area, and display of boats and boat motors].

(5) [~~(3)~~] Department--The Texas Parks and Wildlife Department.

(6) Distributor--A person who holds a license issued by the Department to engage in the business of selling, offering for sale, or processing for distribution new taxable boats or outboard motors to dealers in Texas.

(7) Federally documented vessel--A vessel of five net tons or more, operated on United States navigable waters that has been issued a valid marine certificate of documentation on file with the United States Coast Guard National Vessel Documentation Center.

(8) [~~(4)~~] Manufacturer--A person who holds a license issued by the Department to engage [~~or entity engaged~~] in the business of manufacturing new and unused taxable boats and outboard [~~boat~~] motors for the purpose of sale or trade.

(9) Participating county tax assessor-collector--A county tax assessor-collector in Texas that has an agreement with the Department to title and/or register taxable boats or outboard motors in Texas.

(10) Registered repair facility--A person engaged in the business of repairing, remodeling, maintaining, or restoring taxable boats or outboard motors that holds a current Texas sales and use tax permit issued under Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax).

(11) [~~(5)~~] Retail sale--An installment or credit [~~Any~~] sale of a taxable boat or outboard [~~boat~~] motor, an exchange of a taxable boat or outboard motor for property or money, or an exchange in which a taxable boat or outboard motor is transferred but the seller retains title as security for payment of the purchase price. The term does not include [~~other than~~] a sale in which the dealer, distributor, or manufacturer acquires the taxable boat or outboard [~~boat~~] motor for the exclusive purpose of resale. Dealers, distributors, and manufacturers [~~, as defined,~~] are the only persons who [~~or entities that~~] may acquire a taxable boat or outboard [~~boat~~] motor for resale.

~~[(6) Tax assessor-collector--Any of the county tax assessors-collectors in the State of Texas.]~~

(12) [~~(7)~~] Taxable boat--A vessel not more than 115 feet in length, measured from the tip of the bow in a straight line to the stern, other than a canoe, kayak, rowboat, raft, punt, or other watercraft designed to be propelled only by paddle, oar, or pole. The term [~~Any watercraft, other than a seaplane on water, not more than 65 feet in length. This~~] includes federally documented vessels [~~boats, motorboats~~], sailboats, personal watercraft [~~jet skis~~], and boats designed to accommodate an outboard motor. The term does not include seaplanes. Seaplanes, and [~~Excluded from this definition are~~] canoes, kayaks, rowboats, [~~inflatable~~] rafts, punts, or other watercraft designed to be propelled only by paddle, oar, or pole, are not "taxable boats" under Tax Code, Chapter 160 (Taxes On Sales And Use Of Boats And Boat Motors), but are subject to tax under Tax Code, Chapter 151. [~~These excluded watercraft are taxed under~~] (Limited Sales, Excise and Use Tax). [~~, unless some other exemption applies.~~]

(13) [~~(8)~~] Outboard [~~Taxable~~] motor--Any self-contained internal combustion propulsion system of any horsepower, excluding fuel supply, used to propel a vessel [~~watercraft,~~] that is detachable as a unit from the vessel [~~boat~~]. The term does not include electric [~~Electric~~] boat motors [~~are excluded~~].

(14) Temporary use permit--A non-renewable, non-transferable permit issued by the Department, an agent of the Department, or a participating county tax assessor-collector authorizing the temporary tax-free use of a taxable boat or outboard motor within the territorial boundaries of Texas for not more than 90 consecutive days from the date of issue. Only two temporary use permits may be issued for the same taxable boat or outboard motor within a calendar year. The second temporary use permit cannot be issued until 30 days after the date the first permit expires. The nonrefundable fee for the permit is $150 per taxable boat or outboard motor.

(15) Territorial boundaries of Texas--All territory within the exterior borders of Texas. The offshore border of Texas extends nine nautical miles from the coastline of Texas.

(16) [~~(9)~~] Total consideration--The amount paid or to be paid for a taxable boat or outboard [~~boat~~] motor, including all accessories attached thereto at the time of [~~or before~~] the sale. The [~~This~~] amount includes payments by the purchaser for the costs of material, labor or service, interest paid, loss, or any other expense, transportation before the sale, [ ~~and~~] any manufacturer's or importer's excise tax imposed by the United States government, and any dealer's vessel and outboard motor inventory property tax imposed on the dealer and passed through to the purchaser. The amount also includes anything of monetary value received by the seller, such as cash or the equivalent; a book entry reflecting cash received or paid; the forgiveness or assumption of debt; book entries reflecting accounts receivable or accounts payable for an item; the performance of a service; or real or tangible personal property. The [~~This~~] amount does not include any separately stated discount, finance or interest charges, documentary [~~service~~] charges, transportation charges after the sale, or [~~other interest charges. Also excluded from total consideration will be~~] the value of another [a] taxable boat or outboard [~~boat~~] motor taken by the seller as all or part of the consideration for the sale of the taxable boat or outboard [~~boat~~ ] motor. [No other tangible, intangible, or real property will be excluded from total consideration. Also excluded from total consideration are charges for transportation of the boat or boat motor after the sale.]

(17) [~~(10)~~] Use--Any storage or other exercise of rights of ownership in Texas [~~this state~~] by any person [~~or entity,~~] excluding:

(A) the storage, display, or holding of a taxable boat or outboard [~~boat~~] motor exclusively for sale by a dealer, distributor, or manufacturer; or

(B) troubleshooting or testing of a taxable boat or outboard motor being repaired, remodeled, maintained, or restored by a registered repair facility under subsection (g)(1) of this section [~~, as defined in this subsection~~].

(18) Vessel--Any watercraft, other than a seaplane on water, used or capable of being used for transportation on water. The definition includes a ship, barge, taxable boat, yacht, or any watercraft designed to be propelled by paddle, oar or pole.

(b) General principles of taxation.

(1) The purchase of a taxable boat or outboard [~~and boat~~] motor and all accessories attached thereto at the time of sale in Texas is subject to [~~the boat and boat motor sales and use tax (~~]Tax Code, Chapter 160, including the [~~). The~~] purchase of a taxable boat or outboard [~~boat~~] motor for purposes of lease or rental [~~is subject to Tax Code, Chapter 160~~].

(2) The lease or rental of a taxable boat or outboard motor in Texas is subject to Tax Code, Chapter 151, and cannot be purchased tax-free for resale.

(3) [~~(2)~~] The purchase of accessories for a taxable boat or outboard [~~and boat~~] motor attached after the time of sale of the taxable boat or outboard [~~boat~~] motor is subject to [~~the limited sales, excise, and use tax (~~]Tax Code, Chapter 151[~~). The rental of a taxable boat or boat motor is subject to Tax Code, Chapter 151~~].

(4) [~~(3)~~] The purchase of tangible personal property that cannot [~~is subject to the limited sales, excise, and use tax, if no item can~~] be identified as a taxable boat or outboard [~~boat~~] motor at the time of sale is subject to Tax Code, Chapter 151, even if the combination of items of tangible personal property later becomes a taxable boat or outboard [~~boat~~] motor. If items of tangible personal property are combined to create [~~produce~~] a taxable boat or outboard [~~boat~~] motor, the initial titling or registration of the taxable boat or outboard [~~boat~~] motor in the name of the person who created [~~produced~~] the taxable boat or outboard [~~boat~~] motor is not subject to [~~the provisions of the boat and boat motor sales and use tax~~] Tax Code, Chapter 160. If [~~, however,~~] the taxable boat or outboard [~~boat~~] motor is titled or registered in any other person's name, the taxable boat or outboard motor is considered transferred to that person and [~~transfer~~] is subject to Tax Code, Chapter 160 [~~the provisions of the boat and boat motor sales and use tax~~].

(5) [~~(4)~~] The purchase of safety [~~Safety~~] equipment required by [~~the~~] Parks and Wildlife Code, §§31.064-31.071, including life preservers and fire extinguishers, purchased with a taxable boat or outboard [~~boat~~] motor are considered to be attached to the taxable boat or outboard [~~boat~~] motor at the time of sale and subject to Tax Code, Chapter 160 [~~the provisions of the boat and boat motor sales and use tax~~].

(6) A taxable boat or outboard motor and all accessories attached thereto purchased outside of Texas and brought into Texas for use in Texas is subject to use tax under Tax Code, §160.022 (Use Tax), or in lieu of the use tax, a new resident use tax is due under Tax Code, §160.023 (New Resident), if the taxable boat or outboard motor and all accessories attached thereto are brought into Texas by a new resident of Texas.

(7) The purchase of a boat trailer is subject to motor vehicle sales and use tax under Tax Code, Chapter 152 (Taxes on Sale, Rental, and Use of Motor Vehicles). The total consideration paid or to be paid for a boat trailer must be separately stated from the total consideration paid or to be paid for a taxable boat and/or outboard motor at the time the boat trailer is registered in Texas. For more information on the taxation of boat trailers, see §3.74 of this title (relating to Seller Responsibility) and §3.72 of this title (relating to Trailers, Farm Machines, and Timber Machines).

(1) A sales tax is imposed on each retail sale of a taxable boat or outboard [~~boat~~] motor transferred for consideration within the territorial boundaries of Texas [~~in this state~~].

(A) The sales tax rate is 6.25% of the total consideration paid or to be paid for each taxable boat or outboard motor sold. The total consideration paid or to be paid for a taxable boat must be separately stated from the total consideration paid or to be paid for an outboard motor. The total amount of sales tax due may not exceed $18,750 for each taxable boat or outboard motor sold in Texas. The total amount of sales tax allowed applies separately to the taxable boat and outboard motor.

(B) The sales tax is the obligation of and shall be paid by the purchaser of the taxable boat or outboard [~~boat~~] motor. A [~~Although a boat~~] dealer who collects sales tax from the purchaser of a taxable boat or outboard motor [~~is not required to collect the tax under the Tax Code, if a dealer collects the tax~~] and does not remit the sales tax collected to either [~~a county tax assessor-collector or~~] the Department an agent of the Department, or a participating county tax assessor-collector [~~department, the dealer~~] is liable for the sales tax collected and any penalties that may apply.

(2) Use tax is imposed on the use in Texas of each taxable boat or outboard motor purchased outside of Texas and brought into Texas for use in Texas [~~The tax rate is 6.25% of total consideration paid or to be paid~~].

(A) The use tax rate is 6.25% of the total consideration paid or to be paid for the taxable boat or outboard motor, regardless of any use or depreciation of the taxable boat or outboard motor before the entry of the taxable boat or outboard motor into Texas. The total consideration paid or to be paid for a taxable boat must be separately stated from the total consideration paid or to be paid for each outboard motor.

(B) The use tax is an obligation of, and shall be paid by, the person who brings the taxable boat or outboard motor into Texas. The person obligated to pay Texas use tax may claim a credit against the use tax due at the time the taxable boat or outboard motor is titled and/or registered in Texas only for legally imposed state and local sales or use tax paid on the purchase of the taxable boat or outboard motor to another state, Puerto Rico, or a possession or territory of the United States by the purchaser of the taxable boat or outboard motor before entry into Texas. Acceptable proof of tax paid includes an out-of-state tax receipt, a seller's bill of sale, sales invoice, or sales contract identifying the amount of sales or use tax paid to another state on the sale of the taxable boat or outboard motor.

(C) A new resident use tax of $15 is due in lieu of the use tax for each taxable boat or outboard motor owned by a new resident in any other state or foreign country and brought into Texas by the new resident if the taxable boat or outboard motor is brought into Texas by the new resident within 45 working days after becoming a new resident. The tax is an obligation of, and shall be paid by, the new resident who brings the taxable boat or outboard motor into Texas. A new resident cannot claim a credit against the new resident use tax due at the time the taxable boat or outboard motor is titled and/or registered in Texas for any legally imposed state and local sales or use tax due and paid to another state on the purchase of the taxable boat or outboard motor.

(D) The use tax is not due on the use of a taxable boat or outboard motor brought into Texas for use in Texas if the taxable boat or outboard motor:

(i) is a federally documented vessel or has a current certificate of number or registration issued by a United States Coast Guard approved numbering system of another state;

(ii) is issued a temporary use permit that must be present on board the boat at all times while the taxable boat or outboard motor is located within the territorial boundaries of Texas; and

(iii) the boat or outboard motor is removed from the territorial boundaries of Texas on or before the expiration date of the temporary use permit.

(E) Subparagraphs (A) and (B) of this paragraph apply to the use of a taxable boat or outboard motor brought into Texas that remains within the territorial boundaries of Texas after the expiration date of the temporary use permit. Credit is not allowed for the $150 temporary use permit fee against any Texas use tax that may be due.

(d) Payment of the tax.

(1) The seller and purchaser must complete an Application for Certificate of Title and/or Registration for each [~~After the completion of the seller, donor, or trader's affidavit for the~~] sale of a taxable boat or outboard [~~boat~~] motor in Texas, and: [,]

(A) if the seller collects the sales tax from the purchaser, the seller must remit the tax and the Application for Certificate of Title and/or Registration to either [~~a county tax assessor-collector or to~~] the Department, an agent of the Department, or a participating county tax assessor-collector [~~department~~] within 45 [20] working days from the date the taxable boat or outboard [~~boat~~] motor is delivered to the purchaser in Texas; or [.]

(B) [~~(2)~~] if the seller gives the Application for Certificate of Title and/or Registration [~~After the completion of the seller, donor, or trader's affidavit for the sale of a boat or boat motor, the seller may give the original affidavit~~] to the purchaser, the[~~. The~~] purchaser is then required to remit the sales tax and the Application for Certificate of Title and/or Registration to either [~~a county tax assessor-collector or to~~] the Department, an agent of the Department, or a participating county tax assessor-collector [~~department~~] within 45 [20] working days from the date the taxable boat or outboard [~~boat~~] motor is delivered to the purchaser in Texas.

(2) [~~(3)~~] Persons who owe use tax must complete an Application for Certificate of Title and/or Registration and remit the use tax and the Application for Certificate of Title and/or Registration to either the Department, an agent of the Department, or a participating county tax assessor-collector [~~The payment of the boat or boat motor use tax is the responsibility of the user and is due~~] within 45 [20] working days after the date [~~that~~ ]the taxable boat or outboard [~~boat~~] motor is brought into Texas [~~this state~~].

(3) Persons transferring ownership of a taxable boat or outboard motor in Texas when no sales or use tax is due as a result of a tax exemption, even exchange, or gift of a taxable boat or outboard motor, must complete an Application for Certificate of Title and/or Registration indicating why no sales or use tax is due and file the Application for Certificate of Title and/or Registration with either the Department, an agent of the Department, or a participating county tax assessor-collector within 45 working days after the date the taxable boat or outboard motor is transferred in Texas.

(e) Failure of tax remittance by the selling dealer.

(1) If [~~Effective September 1, 1999, if~~] a purchaser paid sales [~~pays~~] tax imposed by Tax Code, §160.021 (Retail Sales Tax), to a selling dealer, and the dealer failed [~~fails~~] to remit the sales tax within 45 working days from the date of sale [~~in the time and manner required by Tax Code, §160.041(c)~~], the Department [~~department~~ ], agent of the Department [~~department~~], or participating county tax assessor-collector shall accept an application for Certificate of Title and/or Registration [~~a Texas certificate of number or certificate of title~~] for a taxable boat or outboard motor from the purchaser without payment of additional sales tax by the purchaser. The purchaser must provide proof that the sales tax was paid to the dealer. Acceptable proof includes an invoice, bill of sale, or a receipt signed by the dealer or its representative showing that the sales tax was paid to the dealer.

(2) The Department [~~department~~], agent of the Department [~~department~~], or participating county tax assessor-collector shall notify the comptroller [~~Comptroller~~] in writing of the dealer's failure to remit the tax. The notice must:

(A) be made before the 31st day after the date the application for Certificate of Title and/or Registration [~~title~~] is accepted;

(B) contain the name and address of the dealer; and

(f) Purchase of tangible personal property or accessories [~~accessories/components~~] for resale.

(1) [~~Items combined into a boat or boat motor.~~] A properly completed resale certificate as provided under Tax Code, Chapter 151, [~~for in the Limited Sales, Excise, and Use Tax Act~~] may be used to purchase [~~purchasing~~ ] tangible personal property tax-free to be combined into a taxable boat or outboard [~~boat~~] motor held for sale in the purchaser's regular course of business.

(2) A properly completed resale certificate as provided under Tax Code, Chapter 151, may be used to purchase [~~This includes all~~] accessories tax-free that are included in a lump-sum [~~single sales~~] price for the accessory and taxable [,] boat or outboard [~~, and boat~~] motor. [~~These accessories include water skis and tow ropes.~~] The lump-sum sales price is [~~will be~~] subject to the boat and boat motor sales and use tax.

(3) [~~(2)~~] Accessories purchased to be attached to a vessel [~~boat or boat motor that is~~] not subject to Tax Code, Chapter 160 [~~the boat and boat motor sales and use tax~~] (vessels over 115 [~~boats over 65~~] feet in length), are subject to Tax Code, Chapter 151 [~~the limited sales, excise, and use tax~~]. See also §3.285 of this title (relating to Resale Certificate; Sales for Resale), §3.294 of this title (relating to Rental and Lease of Tangible Personal Property), and §3.297 of this title (relating to Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles).

(g) Exemptions and non-taxable transactions.

(1) Sales tax is not due on the sale of a taxable boat or outboard motor to a purchaser in Texas for use in another state or nation before any use in Texas, if:

(A) the purchaser gives the seller a written statement signed by the purchaser stating that the purchaser intends to remove the taxable boat or outboard motor from Texas to a designated state or nation, and either;

(B) removes the taxable boat or outboard motor from the territorial boundaries of Texas within 10 days of the date of sale;

(C) places the taxable boat or outboard motor in a registered repair facility for repair, remodeling, maintenance, or restoration within 10 days of the date of sale and then removes the taxable boat or outboard motor from the territorial boundaries of Texas within 20 days from the date the repair, remodeling, maintenance, or restoration is completed; or

(D) obtains a temporary use permit within the time limits described in this paragraph. The permit must be present on board the boat at all times while the taxable boat or outboard motor is located within the territorial boundaries of Texas.

(E) Noncompliance with the requirements in this paragraph will result in the loss of the exemption and sales tax is due on the sale of the taxable boat or outboard motor. Credit is not allowed for the $150 temporary use permit fee against any sales tax that may be due.

(2) Sales or use tax is not due on the purchase or use of a taxable boat or outboard motor in Texas by:

(A) the State of Texas; its unincorporated agencies and instrumentalities; any county, city, special district or other political subdivision of the State of Texas; and any college or university created or authorized by the State of Texas;

(B) the United States; its unincorporated agencies and instrumentalities, including all independent boards, commissions, agencies, or instrumentalities chartered by the United States congress (e.g., the American Red Cross, Boy Scouts of America, Girl Scouts of America, etc.); and any incorporated agency or instrumentality of the United States wholly owned by the United States or by a corporation wholly owned by the United States; or

(C) any volunteer fire department or other department, company, or association organized for the purpose of answering fire alarms, extinguishing fires, and providing emergency medical services by members who receive no compensation or only nominal compensation for their services rendered, if the volunteer fire department or other department, company, or association uses the taxable boat or outboard motor exclusively for exempt purposes.

(3) Sales or use tax is not due on a taxable boat or outboard motor when:

(A) an insurer takes title to the taxable boat or outboard motor as a result of a total loss settlement or adjustment of an insurance claim for a damaged or stolen taxable boat or outboard motor; or

(B) a seller or lienholder takes possession of a taxable boat or outboard motor repossessed under a retail installment sales agreement, a chattel mortgage, or a security agreement.

(h) Refunds.

(1) Any person, or the person's attorney, assignee, or other successor may request from the comptroller a refund of any boat or boat motor sales and use tax paid in error.

(2) The request for a refund must:

(A) be in writing on Form 57-200, Texas Claim for Refund of Boat and Boat Motor Tax, available at comptroller.texas.gov, its electronic equivalent, or a successor form, promulgated by the comptroller;

(B) state fully and in detail the specific grounds upon which the claim is founded; and

(C) be filed within four years from the date on which the tax was due and payable and within the provisions of Tax Code, Chapter 111, Subchapter D (Limitations).

(D) The comptroller will require a person to submit additional information to verify the refund claim, including a copy of the title and tax receipt issued by the Department, agent of the Department, or participating county tax assessor-collector.

(3) The comptroller will notify the claimant if the comptroller determines that a refund claim cannot be granted in part or in full and will also notify the claimant which requirements were not met. The claimant may then request a refund hearing in accordance with Tax Code, §111.105 (Tax Refund: Hearing). A person may not refile a claim for the same transaction and for the same ground or reason as a refund claim previously denied by the comptroller.

(4) A person who intends to file suit under Tax Code, Chapter 112, Subchapter B (Suit After Protest Payment), must submit to the Department, agent of the Department, or participating county tax assessor-collector a letter of protest with the payment of the tax. The letter of protest must state fully and in detail the reason that the person contends that the assessment is unlawful or unauthorized. Upon receipt of the protest letter, the Department, agent of the Department, or participating county tax assessor-collector must immediately send the comptroller a copy of the protest letter and a copy of the tax receipt showing tax paid to the comptroller.