Was the federal luxury tax included in the amount subject to Texas sales or use tax on jewelry and furs?

Plain-English summary

A taxpayer asked whether the federal luxury tax created by the Omnibus Budget Reconciliation Act of 1990 became part of the Texas taxable sales price of jewelry and furs costing more than $10,000.

The Comptroller said the federal tax was not subject to Texas sales or use tax when it was separately stated and identified on the invoice. In the letter's example, Texas tax applied to the full $12,000 retail sales price, while the separately identified federal luxury tax was excluded.

The letter understood the federal tax to be imposed on the consumer. It described the federal threshold as the portion above $10,000 for jewelry or furs and above $30,000 for motor vehicles, while directing questions about the federal tax's exact application to the IRS.

What this means for you

Separate invoice presentation was essential to the exclusion described in this historical letter. The federal tax did not reduce the underlying retail price subject to Texas tax.

Common questions

Was the separately stated federal luxury tax subject to Texas tax? No.

What amount was subject to Texas tax in the example? The $12,000 retail sales price.

Did the Comptroller give definitive federal-tax advice? No. It directed exact federal application questions to the Internal Revenue Service.

Citations and references

• Omnibus Budget Reconciliation Act of 1990 (identified in the letter as creating the federal luxury tax)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9012L1061D13

Original ruling text

December 10, 1990

Dear ***:

I am responding to your request to determine whether the new federal "luxury
tax" created by the Omnibus Budget Reconciliation Act of 1990 (OBRA '90) is
included in the sales price of jewelry and furs that exceed $10,000.00.

The "luxury tax" when separately stated and identified on the invoice does not
become a part of the taxable sales price and is not subject to Texas sales or
use tax. In your example, the amount subject to tax is the retail sales price
of $12,000.00.

It is our understanding that this new "luxury tax" which applies to certain
tangible personal property and certain motor vehicles is imposed on the
consumer, not the retailer, wholesaler, nor manufacturer. The amount subject to
the "luxury tax" is that portion of the retail sales price which exceeds
$10,000.00 for furs or jewelry and $30,000.00 for motor vehicles. Exact
application of this new tax should, of course, be obtained from the Internal
Revenue Service.

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

You may also write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Correspondence