Which kinds of fishing bait are exempt from Texas sales tax as perishable bait, and how does a seller refund tax already collected on them?

Subject

Bait — Fishing Bait — Perishable And Exempt (Worms, Minnows, Shrimp, Squid, Water Dogs, Blood Baits, Dough, Cheese Balls) And Taxable (Plastic Worms, Artificial Flies)

Plain-English summary

A bait seller wrote to the Comptroller asking what counts as "perishable fishing bait" for sales tax purposes, and how to get refunds for tax already collected on exempted bait. The Comptroller confirmed that the specific items the seller listed all qualify as exempt perishable bait, restating the list: live bait, stock that died while waiting for sale, minnows (fresh and frozen), goldfish (fresh and frozen), scaleless carp, frozen shrimp, crawfish or crawdads, frozen shad, worms or night crawlers, frozen cut shad, frozen shad guts, chicken livers, and chicken hearts.

For refunds, the letter lays out two paths: the seller may refund the sales tax to customers who have receipts showing tax paid on perishable bait purchased within the last four years, or -- if the seller's own records adequately document the sale date, customer name, type of bait, sales price, and tax collected -- the seller may refund the tax to the customer using those records instead of requiring a receipt from the customer.

After refunding customers, the seller can either take a credit for the refunded amount by adjusting taxable sales on its next sales tax return, or request a refund directly from the Comptroller's office. If the seller itself paid sales tax to its suppliers when buying bait it later resold, it can ask those suppliers for a refund, or take a credit on its next return. The letter references Comptroller Rule 3.338 (credit for tax paid to suppliers) and Rule 3.325 (refunds) as the enclosed guidance on these procedures.

What this means for you

Bait shop owners and retailers

If you sell live or perishable bait -- minnows, worms, shrimp, crawfish, shad, goldfish, chicken livers or hearts, and similar items -- those sales are exempt from Texas sales tax. If you mistakenly collected tax on these items, you have a defined path to fix it: refund customers (using their receipts or your own adequate sales records), then either credit the refunded amount against your next sales tax return or request a refund from the Comptroller.

Suppliers and wholesalers of bait

If you paid sales tax when purchasing bait that you then resold as exempt perishable bait, you can seek a refund from your supplier or take a credit for that tax on your next sales tax return, per Rule 3.338.

Accountants and tax professionals

When advising bait retailers, distinguish perishable/live bait (exempt) from items like plastic worms and artificial flies (referenced in the subject line as taxable, though not detailed in the letter's body). For refund procedures, point clients to Rule 3.338 (supplier tax credit) and Rule 3.325 (refunds), and to the four-year lookback period for refunding customers with receipts.

Common questions

Q: Is live bait like minnows and worms taxable in Texas?
A: No. The letter confirms live bait, minnows, goldfish, scaleless carp, shrimp, crawfish, worms/night crawlers, shad, shad guts, chicken livers, and chicken hearts (fresh or frozen where applicable) all qualify as exempt perishable bait.

Q: How far back can a seller refund sales tax collected on exempt bait?
A: The letter allows refunds to customers with receipts for tax paid on perishable bait purchased within the last four years.

Q: What if a customer doesn't have a receipt?
A: The seller may still refund the tax if its own records adequately document the date of sale, customer name, type of bait sold, sales price, and sales tax collected.

Q: After refunding a customer, how does the seller recover that money?
A: The seller may take credit for the refunded tax against the tax due on its next sales tax return, or request a refund directly from the Comptroller's office.

Q: What if the seller paid sales tax to its own supplier on bait it resold?
A: The seller may ask the supplier to refund that tax, or take a credit for it on its next sales tax return, per Rule 3.338.

Citations and references

Rules:

• Rule 3.338 (allowance of credit for tax paid to suppliers)
• Rule 3.325 (refunds)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9609L1429A01

Original ruling text

September 24, 1996

Dear ****:

Thank you for your recent letter requesting clarification of what constitutes
"perishable fishing bait" and the procedures for obtaining refunds of taxes
paid on exempted bait.

The items listed in your letter all qualify as perishable bait and are exempt
from tax. That list is restated below:

Live bait
Stock that died while waiting for sale
Minnows
Frozen minnows
Goldfish
Frozen goldfish
Scaleless carps
Frozen shrimp
Crawfish or crawdads
Frozen shad
Worms or night crawlers
Frozen cut shad
Other
Frozen shad guts
Chicken livers
Chicken hearts

You may refund the sales tax you collected from customers who have receipts for
tax they paid on perishable bait purchased from you within the last four years.
Alternatively, if your records adequately document the date of sale, name of
customer, type of bait sold, sales price, and sales tax collected, you may
refund the sales tax to the customer.

After refunding the tax to your customers, you may take credit for the tax
refunded against the tax due on your next sales tax return by adjusting the
amount of taxable sales reported on that return, or you may request a refund
from this office.

If you paid sales tax to your suppliers on the purchase of bait that you
resold, you may request that they refund the tax to you, or you may take a
credit for the tax on your next return. I am enclosing some information
explaining the procedures for sales tax refunds and a copy of Rule 3.338 on
allowance of credit for tax paid to suppliers and Rule 3.325 on refunds.

I hope this satisfactorily answers your questions. If you need additional
information, please feel free to call Gilbert Zamora in the Tax Policy
Division toll free at 1-800-531-5441, extension 3-4502.

Sincerely,

Karey W. Barton
Manager, Tax Policy Division

NOTE: Previous Accession Number 9609529L