Ezel / Tax Rulings / TX
TX 9007L1031B01 Sales and/or Use Tax (State,Local,MTA) 1990-07-10

Did automatically renewing 30-day contracts qualify for Texas's prior-contract exemption from the 0.25% state sales-tax rate increase effective July 1, 1990?

Short answer: No. The contracts lacked the definite ending date required by Rule 3.319(c)(3) and renewed as new 30-day contracts each month. An annual seasonal calendar, projected annual cost, and planned color changes did not turn them into annual contracts, so renewals on or after July 1, 1990 were subject to the increase.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The automatically renewing contracts did not qualify for the prior-contract exemption from Texas's 0.25% state sales-tax rate increase effective July 1, 1990.

Each agreement was a 30-day contract that renewed monthly and lacked the definite ending date required by Rule 3.319(c)(3). An annual seasonal color calendar, projected annual cost, and specified color changes did not make the arrangement an annual contract.

Renewals on or after July 1, 1990 were therefore subject to the higher rate.

Common questions

Did automatic renewal preserve the old rate? No.

Why not? Each renewal was a new 30-day contract without a definite final date.

Did annual projections make it an annual contract? No.

Citations and references

  • Comptroller Rule 3.319(c)(3).

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller

July 10, 1990

Dear **:

Thank you for your letter of June 15, 1990, concerning the ap-
plication of the prior contract exemption to your contracts.

The contract submitted will not qualify for the prior contract
exemption. The 1/4% state sales tax rate increase will apply
to all contracts that automatically renew on or after the July
1, 1990 effective date of the sales tax rate increase.

These contracts do not have a definite ending date as prescribed
under section (c)(3) of Rule 3.319 - Prior Contracts. The con-
tracts are thirty (30) day contracts that automatically renew
each month. The annual seasonal color calendar and the pro-
jected annual cost along with the stated color changes do not
make these annual contracts.

This opinion is based on the facts presented. If there are ad-
ditional or different facts, the opinion may change.

If you have any questions or need more information, you may
call toll free 1- 800- 252- 5555. The regular number is
512/463-4600. You may write to Tax Correspondence, Comptroller
of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence

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