When was sales tax due on a financing lease entered into by a yearly filer when the transaction created more tax liability than the yearly or quarterly filing limits?

Plain-English summary

For the financing lease, sales tax had to be collected when the lessee took possession of the property or when the first payment became due, whichever happened first. The letter cited Rule 3.294(f)(3)(B).

The tax liability exceeded the letter's $1,000 yearly-filer limit and $1,500 quarterly-filer limit. The Comptroller therefore required monthly reporting under Rule 3.335.

If possession transferred or the first payment became due in August 1991, the lessor had to file and remit by September 20, 1991. If that event occurred in September, the due date was October 21, 1991.

What this means for you

A transaction large enough to exceed a lower-frequency filing threshold can accelerate both reporting frequency and payment. The triggering date for this lease was the earlier of possession or the first payment due date.

This is historical guidance. The letter said Rule 3.294 was being revised and specifically told readers to disregard subsections (d) and (e)(1).

Common questions

When did the tax arise? On the earlier of the lessee taking possession or the first payment becoming due.

Could the taxpayer remain a yearly filer for this transaction? No. The stated liability required monthly reporting.

What filing rule did the letter cite? Rule 3.335.

Citations and references

• 34 Tex. Admin. Code Rule 3.294(f)(3)(B) — financing-lease collection timing
• 34 Tex. Admin. Code Rule 3.335 — filing reports

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1131B12

Original ruling text

September 6, 1991

Dear *****:

Thank you for your letter of August 19, 1991, concerning the due date
of the sales and use tax return and sales and use tax on a financing
lease executed by a taxpayer who is a yearly filer.

The sales tax must be collected at the time the lessee takes possession
of the property or when the first payment is due from the lessee,
whichever occurs the earlier. [Rule 3.294 (f)(3)(B)]. The lessor's tax
liability will exceed the $1,000 state tax liability allowed for yearly
filers and the $1,500 quarterly state tax liability allowed for
quarterly filers. This means that the lessee is required to report
and pay the tax monthly. See the enclosed Rule 3.335 - Filing Reports.

The lessor is required to file and remit the tax on or before September
20, 1991, if possession of the equipment transferred in August 1991 or the
first pay-
ment became due in August 1991. If possession transfers or the first
payment becomes due in September 1991, the lessor must file and remit
the tax on or before October 21, 1991.

Please note that Rule 3.294 is under revision. Changes to the sales tax
law since the rule was adopted makes sections (d) and (e)(1) incorrect.
Disregard these two sections.

I am enclosing a sales and use tax return for your client's use. Failure
to timely report and pay the tax due under this transaction will result
in applicable penalty and interest.

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

You may call toll free 1-800-252-5555 if you have any questions or need
more information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division