Did a separately stated federal luxury tax on taxable jewelry or fur become part of the amount subject to Texas sales tax?

Plain-English summary

The requester asked whether proposed federal regulations changed the Comptroller's earlier treatment of the new federal luxury tax. Although the federal tax was the retailer's liability on the first retail sale, Texas kept its earlier position: the luxury tax was not part of the taxable sales price when the retailer separately stated and identified it on the customer invoice or bill.

What this means for you

Under this 1991 letter, invoice presentation controlled the stated result. A retailer passing the federal luxury tax through to a customer had to separately state and identify the charge to keep it outside the Texas sales-tax base described in the letter.

Common questions

Did it matter that federal law placed liability on the retailer? No. After reviewing that point, the Comptroller said its position remained the same.

What condition did Texas impose for exclusion? The federal luxury tax had to be separately stated and identified as such on the invoice or billing to the customer.

What items did the correspondence discuss? The subject and attached request referred to luxury-tax treatment of items including jewelry and fur.

Citations and references

The attached request quoted proposed federal regulation section 48.4006-1(3) concerning liability for the luxury jewelry tax. The Comptroller's response did not cite a Texas statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1083E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller

March 7, 1991

Dear **:

I am responding to your request for confirmation of our admini-
strative policy regarding the application of Texas sales or use
tax in coordination with the new federal luxury tax.

You explained that federal regulations were issued on January 2,
1991, and my previous letter was written on December 10, 1990.
You questioned the fact that this agency's decision was made
before the issuance of the federal regulations regarding this tax
and whether our policy has changed after the issuance of the fed-
eral regulations.

Based upon the information you enclosed, the federal tax is levied
on the first retail sale of certain items, and it is the retail-
er's liability to "pay" the tax. This agency's position continues
to be the same as expressed in the December 10, 1990, letter.

The federal luxury tax is not included in the sales price of
taxable items when the luxury tax is separately stated and
identified as such on the invoice or billing to the customer.

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 Administration Division, Comptroller
of Public Accounts.

Sincerely,

Tax Policy Division
Tax Administration Division

February 15, 1991

Tax Administration Division

Austin, Texas 78774

Dear Tax Policy Division:

I received a copy of a letter which was sent out from the Comptroller on
December 10, 1990 in response to a question that my staff had raised by
telephone a few days ago regarding the application of Texas Sales Tax in
coordination with the new Federal "Luxury" Excise Taxes. A copy of that
letter is enclosed. The third paragraph of that letter indicates that
the Comptroller's opinion is based upon the understanding "that this new
'Luxury Tax ...is imposed on the consumer, not the retailer, wholesaler,
nor manufacturer."

Federal Regulations were proposed on January 2, 1991 that are entitled
"Proposed Manufacturers and Retailers Excise Tax Regulations".
Specifically referring to that section of the regulations 48.4006-1(3),
(a copy of the pertinent part which is enclosed) , that section reads
"Liability for Tax. The luxury jewelry tax shall be paid by the person
who makes the first retail sale."

It would appear that the Federal Luxury Tax is an excise tax
specifically levied on the retail seller, not on the consumer. While
the intention was obviously to make consumers pay the luxury tax by
means of a pass-through, nonetheless, it appears that the technical
liability for the tax is on the seller. It appears that the Luxury Tax
is similar to all other Federal Excise Taxes (which have been ruled to
be not exempt from taxation under the Texas Sales Tax Rules).

The only possible distinction I can discern is that most excise taxes
are levied at some point prior to the retail sale. For example, the
liability for excise tax on fishing equipment is on the manufacturer or
producer or importer, not on the retailer. (See enclosed copy of the
regulation also) . The Luxury Tax is not due except at the first retail
sale.

Would your office please confirm to me that the conclusions in your
letter of December 10, 1990 are still in effect, notwithstanding that
the Federal Regulations indicate that the liability for tax is actually
on the retail seller, not on the consumer as your letter indicates.

Sincerely,