Acc 4341 - Overview of Texas Taxation

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The State of Texas has enjoyed the benefits of having significant natural resources. The tax structure constructed by the legislature reflects this fact. Listed below are the major taxes and “fees” that apply to transactions occuring in Texas:

Severance Taxes

Motor Fuels Tax

Alcoholic Beverage Tax

Miscellaneous Taxes Boat and Boat Motor Tax 6-1/4 %

Cement Production Tax (use or sale in Texas) $0.0275 per 100 pounds or fraction

Sulphur Production Tax $1.03 per long ton (2,200#) or fraction

Attorney Tax $200

Bedding Tax (one stamp per bed) $15 per 500 stamps

Manufactured Housing Sales and Use Tax 5% of 65% of the sales price

Automobile Sales Tax 6-1/4%

Controlled Substance Tax (one stamp per bundle)

Franchise Tax

Sales and Use Tax

Inheritance Tax

Major Fees Automotive Oil Fee $0.01 per quart

Coastal Protection Fee $0.02 per barrel transerred from ships

Battery Sales Fee (lead-acid 12 volts or more) $3.00 per battery

Petroleum Products Delivery Fee Sliding scale based on gallons withdrawn

Waste Tire Recycling Fee (new tires) $2.00 per tire

Professional Licensing Fee $200 per year per license held

The major revenue producers for the state are the severance taxes, motor fuels taxes, sales/use tax and the franchise tax.

SEVERANCE TAX

Oil Well Service Tax There is a tax imposed on anyone in the business of providing certain well services and who

(1) owns, controls, or furnishes the tools, instruments, and equipment used in providing the well service

(2) uses any chemical, electrical, or mechanical process in providing the service at any oil or gas well during

The tax rate imposed is 2.42% of the gross amount received for service after deduction for the reasonable value of material used, consumed, or expended in or incorporated into the well. Any portion of the tax passed through to the customer is considered part of the company’s gross receipts.

Natural Gas Production Tax There is a tax imposed on each producer of gas in this state at the rate of 7.5% of the market value of gas produced and saved in the state by the producer. In addition, there is imposed an Oil Field Cleanup Regulatory Fee in the amount of 1/30th of one cent for each 1,000 cubic feet of gas produced. Revenue produced by this tax in 1997 should total $507 million.

Crude Oil Production Tax The tax is computed on the production of oil at the rate of (1) 4.6% of the market value of oil produced in this state or (2) $0.046 for each barrel of 42 standard gallons of oil produced whichever rate will results in the greater amount of tax. In addition to the above, there is a regulatory tax of 3/16ths of one cent per barrel and an Oil Field Cleanup Regulatory Fee of 5/16ths of one cent per barrel. The effect of these two “add-on” charges is to increase the tax by 1/2 cent per barrel produced. Revenue produced by this tax in 1997 should total $361 million.

MOTOR FUELS TAX Texas levies a tax of $0.20 per gallon upon the first sale, distribution or use of gasoline and diesel fuel. Sales of liquefied gas and certain sales of diesel fuel are tax-free when the fuel is used for off-roadway purposes (farms and ranches). The tax paid on gasoline used off the roadway may be eligible for refund. Liquefied Gas receives a lower tax rate of $0.15 per gallon. Owners of Texas registered vehicles must prepay the tax and display a decal in the lower right hand corner of the windshield. The dispensing station may not legally provide gas unless your vehicle has the required decal. The tax is based upon the weight of the vehicle and the estimated miles that you will be driving during the upcoming year. The application for subsequent decals will include odometer readings and be subject to adjustment for “understated mileage”. Texas also levies a tax of $0.15 per gallon upon the delivery of liquefied gas and compressed natural gas into the fuel supply tanks of motor vehicles displaying out of state license plates. Revenue produced by these taxes in 1997 should total $2.4 billion.

INHERITANCE TAX The Inheritance tax is levied on estates that are required to file a federal estate tax return. In the lat 1970’s, the Legislature revised the laws governing the Inheritance tax to establish a $200,000 estate exemption that gradually increased to $300,000 by 1985. Subsequent legislation in 1981 revamped the tax as a piggy-back on the federal inheritance tax. This made it equal to the federal credit allowed for the state inheritance tax. Under Texas law, estates with a date of death after September 1, 1983, and that exceed the minimum federal estate tax filing requirement, will pay an Inheritance Tax based on the federal credit for state death taxes. This amount is paid by the estate to Texas and may be subtracted from the estate taxes owed the federal government. Inheritance tax reports must be filed within nine months of the date of death. Revenue produced by this tax should be $177 million in 1997.

The Franchise Tax and the Sales/Use Tax will be discussed at length in a later section.