1. SALES TAX EXEMPTIONS YOU (POSSIBLY) AREN’T AWARE OF
Efficient Strategies
for Sales Tax Savings
SALES TAX EXEMPTIONS YOU (POSSIBLY) AREN’T AWARE OF
Presented by: Stephen Hanebutt, CPA
Annual CPE Event For UTA Alumni And Friends
August 11, 2016 1

2. Seller Buyer/Seller Buyer
Efficient Strategies
for Sales Tax Savings
THE RESALE EXEMPTION
Seller Buyer/Seller Buyer 2

3. THE RESALE EXEMPTION Also applies to rentals
Efficient Strategies
for Sales Tax Savings
THE RESALE EXEMPTION
Also applies to rentals
This includes replacement parts on rented items
Many opportunities for restaurants 3

4. TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE
Efficient Strategies
for Sales Tax Savings
TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE
When a provider of taxable services transfers tangible personal property in connection with the providing of the service, the tangible personal property transferred may be purchased tax-free by the service provider. 4

5. TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE
Efficient Strategies
for Sales Tax Savings
TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE
Janitorial Services
Lawn Maintenance Services
Pool Cleaning Services
Golf Courses 5

6. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
In general, a purchase of otherwise taxable TPP or a taxable service will be nontaxable when purchased by a manufacturer in the process of making a chemical or physical change to property being manufactured for ultimate sale so long as the item purchased is necessary and essential to the manufacturing process. 6

7. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
The manufacturing process is defined to be “Each operation beginning with the first stage in the production of tangible personal property and ending with the completion of tangible personal property.” 7

8. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Raw Materials

9. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Manufacturing Equipment 9

10. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Energy 10

11. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Packaging Supplies
Boxes
Tape
Strappers
Labels
Pallets 11

12. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Industrial Solid Waste Disposal
Scrap
Must be a result of the
manufacturing process
Take a percentage 12

13. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Pollution Control Equipment
Quality Control Equipment 13

14. THE MANUFACTURING EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE MANUFACTURING EXEMPTION
Cleanrooms 14

15. THE RESIDENTIAL EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE RESIDENTIAL EXEMPTION
Improvements - the labor to improve real residential property is nontaxable (exclusion). If labor charges are separated from materials charges, the labor charges are exempt and the materials charges are taxable. If there is a lump-sum charge for both materials and labor, the entire amount is nontaxable. 15

16. THE RESIDENTIAL EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE RESIDENTIAL EXEMPTION
Applies to:
Single family homes
Apartment complexes
Nursing homes
Does not apply to:
Hospitals
Most hotels 16

17. THE RESIDENTIAL EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE RESIDENTIAL EXEMPTION
ABC Carpet Cleaning Co.
Heavy clean
Deodorize
Spot treatment
Pet stains
Mildew treatment 17

18. THE RESIDENTIAL EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE RESIDENTIAL EXEMPTION
ABC Carpet Cleaning Co.
Water extraction
Furniture moving
Replace pad
Dehumidifier rental
Blower charge
After-hours service call 18

19. THE RESIDENTIAL EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE RESIDENTIAL EXEMPTION
Energy 19

20. THE HOME BUILDER’S EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE HOME BUILDER’S EXEMPTION
Builders of residential properties are eligible.
Single family homes
Apartment complexes
Nursing homes 20

21. THE HOME BUILDER’S EXEMPTION
Efficient Strategies
for Sales Tax Savings
THE HOME BUILDER’S EXEMPTION
Applies to real property services.
Landscaping
Lawn and yard maintenance
Janitorial/custodial services
Waste disposal services
Pest control
Surveying 21

22. Efficient Strategies
for Sales Tax Savings
EXEMPT ENTITIES
It is important to keep in mind that the sales tax exemption for exempt entities applies to their purchases, not their sales.
There is an exemption available to for-profit entities owned in a partnership by tax-exempt entities. 22

23. NEW CONSTRUCTION EXEMPTION
Efficient Strategies
for Sales Tax Savings
NEW CONSTRUCTION EXEMPTION
The labor to build newly constructed property is nontaxable (exclusion). If labor charges are separated from materials charges, the labor charges are exempt and the materials charges are taxable. If there is a lump-sum charge for both materials and labor, the entire amount is nontaxable. 23

24. NEW CONSTRUCTION EXEMPTION
Efficient Strategies
for Sales Tax Savings
NEW CONSTRUCTION EXEMPTION
New construction defined
Building new structures
Adding new usable square footage to an existing building (expansion)
Initial finish out work
Rebuilding from the ground up a structure that has been demolished down to the foundation 24

25. OIL AND GAS EXEMPTION Fracturing Perforating Workover Acidizing
Efficient Strategies
for Sales Tax Savings
OIL AND GAS EXEMPTION
Fracturing
Perforating
Workover
Acidizing
Logging
Plug and abandon
Pull back charges
Swabbing
Jetting 25

26. MAINTENANCE OF REAL PROPERTY
Efficient Strategies
for Sales Tax Savings
MAINTENANCE OF REAL PROPERTY
Distinguished from repair, remodeling or restoration
Must be scheduled and periodic 26

27. GOOD PROSPECTS FOR SAVING FROM HAVING A SALES TAX REFUND REVIEW
Efficient Strategies
for Sales Tax Savings
GOOD PROSPECTS FOR SAVING FROM HAVING A SALES TAX REFUND REVIEW
Manufacturers
Apartment Complexes and Nursing Homes (Property Management Companies)
Home Builders
Construction Companies
Oil and Gas Companies 27