TITLE 34.PUBLIC FINANCE

Part 1. COMPTROLLER OF PUBLIC ACCOUNTS

Chapter 3. TAX ADMINISTRATION

Subchapter S. MOTOR FUEL TAX

34 TAC §3.434

The Comptroller of Public Accounts proposes a new §3.434, concerning liquefied gas tax decal. The rule was originally filed as new §3.744, appearing in the May 28, 2004, issue of the Texas Register (29 TexReg 5304), and is being re-filed to comply with Texas Register requirements for numbering sequence. The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides a liquefied gas decal rate schedule, sets out exceptions to liquefied gas tax, discusses the display of decals, and provides guidance for refunds of prepaid liquefied gas tax.

James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing new information regarding tax responsibilities. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas, 78711.

The new rule is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of Tax Code, Title 2.

The new rule implements the Tax Code, §§162.302, 162.3021, 162.305, 162.307, 162.309, and 162.311.

§3.434.Liquefied Gas Tax Decal (Tax Code, §§162.302, 162.3021, 162.305, 162.307, 162.309, and 162.311).

(a) Effective date. This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) Use of decal. Except as provided in subsections (c), (d), and (g) of this section, a person who operates a motor vehicle that is required to be licensed in Texas for use on the public highways of Texas and that is powered by natural gas, methane, ethane, propane, butane, or a mixture of those gases, including a motor vehicle equipped to use liquefied gas interchangeably with another motor fuel, must:

(1) obtain from the comptroller a liquefied gas decal; and

(2) prepay the liquefied gas tax to the comptroller on an annual basis.

(c) Motor Vehicle Dealer. A motor vehicle dealer registered under Transportation Code, Chapter 503, must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of each motor vehicle that display a motor vehicle dealer decal and that is held for resale.

(d) Interstate trucker. An interstate trucker registered under a multistate tax agreement (International Fuel Tax Agreement), must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of motor vehicles that have two axles and a registered gross weight in excess of 26,000 pounds; have three or more axles, or are used in combination and the registered gross weight of the combination exceeds 26,000 pounds, and that display current multistate tax agreement (International Fuel Tax Agreement) decals.

(e) Vehicle registered in another state. A liquefied gas tax decal cannot be issued to a motor vehicle registered in a state other than Texas. Owners of such vehicles must pay tax to a licensed liquefied gas dealer on fuel delivered into the fuel supply tanks.

(f) Application. Each person purchasing liquefied gas for use in a liquefied gas powered motor vehicle must submit an annual application to the comptroller for each vehicle.

(1) Initial application. An applicant initially applying for a liquefied gas tax decal for a Class A- F motor vehicle must purchase a decal based on an estimate of miles that will be driven during the next one-year period.

(2) Renewal. The applicant must produce an ending odometer reading on the renewal application. In the absence of an ending odometer reading, the previous year's mileage will be presumed to be at least 15,000 miles. Applications for the upcoming year should be submitted during the month of expiration of the current decal.

(A) The liquefied gas tax does not apply to miles traveled outside the state. A record of miles traveled by the motor vehicle outside Texas must be maintained and submitted with the renewal each year. The record must include the date(s) of travel, beginning and ending odometer readings and destination.

(B) Special use vehicles. Vehicles required to be licensed for highway use but whose main purpose, design, and use is off the highway may renew a liquefied gas decal for a rate less than the mileage indicated on the odometer if a record or log indicating the miles traveled on the highway by the vehicle is maintained and attached to the renewal application.

(g) Exceptions.

(1) School district transportation and county exceptions. The liquefied gas tax does not apply to liquefied gas sold to public school districts and counties in this state, or to commercial transportation companies providing transportation services to public school districts in this state. These transportation companies must obtain letters of exception from the comptroller, as discussed in §3.448 of this title (relating to Transportation Services for Texas Public School Districts).

(2) Decal not required. A public school district, a commercial transportation company providing transportation services to a public school district and holding a valid letter of exception from the comptroller, or a county in this state operating a motor vehicle powered by liquefied gas is not required to prepay the liquefied gas tax and obtain a decal for the motor vehicle.

(h) Rate schedule.

(1) The following rate schedule (based on mileage driven the previous year) applies.

Figure: 34 TAC §3.434(h)(1)

(2) Transit company. A special use liquefied gas tax decal and tax is required for the following type of vehicles: Class T: Transit carrier vehicles operated by a transit company, $444.

(i) Display of decal. The decal shall be affixed to the inside, lower right corner of the windshield (passenger side) of the vehicle. An expired or invalid liquefied gas tax decals shall be removed before installing a new decal or transferring ownership of the motor vehicle.

(j) Refunds; transfer of decal. If a motor vehicle bearing a liquefied gas tax decal is sold, transferred, destroyed, or the liquefied gas carburetor system (regulator or fuel supply tank) is removed from the motor vehicle the owner is entitled to a refund of the unused portion of the advanced taxes paid for the decal year. The owner must submit to the comptroller the liquefied gas tax decal with an affidavit identifying the motor vehicle and circumstances for requesting a refund. The comptroller shall refund that portion of the tax payment that corresponds to the number of complete months remaining in the decal year.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 15, 2004.

TRD-200403883

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: August 1, 2004

For further information, please call: (512) 475-0387


34 TAC §3.437

The Comptroller of Public Accounts proposes a new §3.437, concerning trip permit in lieu of interstate trucker license. The rule was originally filed as new §3.747, appearing in the May 28, 2004, issue of the Texas Register (29 TexReg 5304), and is being re-filed to comply with Texas Register requirements for numbering sequence. The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides qualification for a trip permit, conditions for trip permit use, procedures for obtaining trip permit, and limitations on the use of trip permits.

James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing new information regarding tax responsibilities. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas, 78711.

The new rule is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the Tax Code, Title 2.

The new rule implements Tax Code, §§162.003, 162.106, 162.110, 162.207, and 162.211.

§3.437.Trip Permit in Lieu of Interstate Trucker License (Tax Code, §§162.003, 162.106, 162.110, 162.207, and 162.211).

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) Who may qualify. A person entering Texas for commercial purposes with a motor vehicle that has two axles and a registered gross weight in excess of 26,000 pounds; or has three or more axles, or is used in combination and the registered gross weight of the combination exceeds 26,000 pounds, may purchase a temporary trip permit in lieu of the required interstate trucker license or registration under a multistate tax agreement (International Fuel Tax Agreement) if no more than five entries into the state are made during a calendar year.

(c) Conditions.

(1) A trip permit must be obtained before or at the time of entry into Texas.

(2) The trip permit is valid for 20 days from date of purchase.

(3) The trip permit may be used for only one entry into the state.

(d) Procedures.

(1) A fee of $50 for the trip permit shall be paid to the Texas comptroller.

(2) The fee may be paid in the form of a cashier's check or a money order delivered by mail or wire service to the Texas comptroller's office, Austin.

(3) The receipt from the cashier's check or money order shall be marked "trip permit" and, identify the motor vehicle by license plate number or the manufacture's vehicle identification number.

(4) The receipt must be carried in the vehicle for which the tax payment is made.

(e) Limitations. Persons who make more than five entries in a calendar year must obtain an interstate trucker license or register under a multistate tax agreement (International Fuel Tax Agreement).

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 15, 2004.

TRD-200403884

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: August 1, 2004

For further information, please call: (512) 475-0387


34 TAC §3.438

The Comptroller of Public Accounts proposes a new §3.438, concerning signed statements for purchasing dyed diesel fuel tax free. The rule was originally filed as new §3.748, appearing in the May 28, 2004, issue of the Texas Register (29 TexReg 5304), and is being re-filed to comply with Texas Register requirements for numbering sequence. The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides registration for end user numbers, sets out the content of a signed statement, and describes the limitations on the use of signed statements.

James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing new information regarding tax responsibilities. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas, 78711.

The new rule is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of Tax Code, Title 2.

The new rule implements Tax Code, §162.206.

§3.438.Signed Statements for Purchasing Dyed Diesel Fuel Tax Free (Tax Code, §162.206).

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) End User Number. A person who wants to use a signed statement to purchase dyed diesel fuel tax free for use in nonhighway equipment must apply to the comptroller for an End User Number. The comptroller will issue to a qualified applicant an End User Number with a prefix of DD (for non-agriculture off road equipment) or AG (for agriculture off road equipment) depending on the manner in which the applicant will use the dyed diesel fuel. A person cannot use a signed statement to purchase tax-free dyed diesel fuel unless the person holds an End User Number issued by the comptroller.

(c) Signed Statement. A person with a valid End User Number may purchase dyed diesel fuel tax free for nonhighway use by providing the seller with a signed statement subject to the limitations that are stated in paragraphs (2), (3) and (4) of this subsection. Copies of the blank signed statements are available for inspection at the office of the Texas Register. Copies may be obtained from the Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3528 or requested by calling 512/463-4600, or our toll-free number 1-800-252-1383. (From a Telecommunication Device for the Deaf (TDD) only, call 512/463-4621 or 1-800-248-4099 toll free) Taxpayers may download copies at www.window.state.tx.us.

(1) The signed statement must include the purchaser's End User Number, must be signed by the buyer or the buyer's authorized representative, and must specify that:

(A) only dyed diesel fuel will be purchased using the signed statement;

(B) all dyed diesel fuel will be used by the buyer and will not be resold; and

(C) none of the dyed diesel fuel will be delivered into the fuel supply tanks of motor vehicles operated on public highways.

(2) A person issued an End User Number beginning with DD may buy, and a licensed diesel fuel supplier, permissive supplier, or distributor may sell, dyed diesel fuel tax free using a signed statement subject to the following limitations:

(A) not more than 7,400 gallons of dyed diesel fuel may be purchased or sold in a single delivery; or

(B) not more that 10,000 gallons of dyed diesel fuel may be purchased or sold to a purchaser during a month. The purchase, sale, or delivery that causes the 10,000 gallon limit to be exceeded during a month is not taxable. Any subsequent purchase, sale, or delivery made during the same month is taxable.

(3) A person who has been issued an end user number beginning with DD and who uses the dyed diesel fuel exclusively in the original production of oil and gas, or to increase the production of oil and gas, must obtain a letter of exception authorizing the person to exceed the 10,000 gallon limit. Examples of uses that may occur in the original production or to increase production of oil and gas include the use of dyed diesel fuel to drill, fracture, perforate, squeeze cement, acidize, log, plug back, complete, plug and abandon, install a casing liner, pull or reset a casing liner, swab, drill out a plug, jet, pack gravel or workover, and perform a hot oil treatment on a formation. Oil and gas production does not include maintaining the site, mowing, painting, gauging tanks, changing pumps, performing rod or tubing jobs, fishing for rods or tubing, repairing a tubing leak, changing a packer or anchor, performing hot oil or water treatment on casing, tubing or flow lines, and transporting. A person who uses dyed diesel fuel exclusively in the original production of oil and gas or to increase the production of oil and gas, may buy, and a licensed diesel fuel supplier, permissive supplier, or distributor may sell, dyed diesel fuel tax free by using a letter of exception and a signed statement, subject to the following limitations:

(A) not more than 7,400 gallons of dyed diesel fuel may be purchased or sold in a single delivery; or

(B) not more than 25,000 gallons of dyed diesel fuel may be purchased or sold to a purchaser during a calendar month. The purchase, sale, or delivery that causes the 25,000 gallon limit to be exceeded during a calendar month is not taxable. Any subsequent purchase, sale, or delivery made during the same calendar month is taxable.

(4) A person who has been issued an end user number beginning with AG and who uses dyed diesel fuel exclusively for an agricultural purpose as described in Tax Code, §162.001, may buy, and a diesel fuel licensed supplier, permissive supplier, or distributor may sell, dyed diesel fuel tax free using a signed statement subject to the following limitations:

(A) not more that 7,400 gallons of dyed diesel fuel may be purchased or sold in a single delivery; or

(B) not more than 25,000 gallons of dyed diesel fuel may be purchased or sold to an end user during a calendar month. The purchase, sale, or delivery that causes the 25,000 gallon limit to be exceeded during a calendar month is not taxable. Any subsequent purchase, sale, or delivery made during the same calendar month is taxable.

Figure: 34 TAC §3.438(c)(4)(B)

(d) A person who exceeds the limitations in subsection (c) of this section shall be required to obtain a dyed diesel fuel bonded user license.

(e) A separate operating division of a corporation may apply for and receive an End User Number to buy dyed diesel fuel tax free using a signed statement if the division:

(1) does not resell the fuel;

(2) consumes the fuel; and

(3) maintains separate storage apart from other corporate divisions.

(f) The signed statement remains in effect until:

(1) it is revoked in writing by either the buyer or seller; or

(2) the comptroller notifies the supplier or distributor in writing or by means of electronic transmission that the buyer may no longer make tax-free purchases.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 15, 2004.

TRD-200403885

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: August 1, 2004

For further information, please call: (512) 475-0387


34 TAC §3.443

The Comptroller of Public Accounts proposes new §3.443, concerning diesel fuel tax exemption for water, fuel ethanol, biodiesel, and biodiesel mixtures. The rule was originally filed as new §3.753, appearing in the May 28, 2004, issue of the Texas Register (29 TexReg 5304), and is being re-filed to comply with Texas Register requirements for numbering sequence. The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule provides an exception from the motor fuels tax on biodiesel or to the volume of water, ethanol, or biodiesel blended with taxable diesel fuel. The new rule provides definitions, invoice documentation requirements, storage tank and retail pump labeling requirements, refund procedures, and reporting requirements of interstate commercial carriers licensed under the International Fuel Tax Agreement.

James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing new information regarding tax responsibilities. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.

The new rule is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of Tax Code, Title 2.

The amendment implements Tax Code, §§162.003, 162.204, and 162.227.

§3.443.Diesel Fuel Tax Exemption for Water, Fuel Ethanol, Biodiesel, and Biodiesel Mixtures (Tax Code, §§162.003, 162.204, and 162.227).

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Water-based diesel fuel--a combination of water, petroleum diesel fuel, emulsifier, and seasonal additives (when necessary) into an emulsion that is suitable or used for the propulsion of a diesel-powered motor vehicle.

(2) Fuel ethanol--alcohol that is made from agricultural products and bioethanol that is made from cellulosic biomass materials.

(3) Biodiesel--a fuel comprised of monoalkyl esters of long chain fatty acids generally derived from vegetable oils or fats, designated B100, and meeting the requirements of ASTM D 6751.

(4) Biodiesel Blend--a blend of biodiesel fuel meeting ASTM D 6751 with petroleum based diesel fuel, designated Bxx where xx represents the volume percentage of biodiesel fuel in the blend. (Example: B20 is 20% biodiesel and 80% petroleum diesel)

(c) Diesel fuel tax exception. The tax imposed on the first sale or use of diesel fuel in this state does not apply to biodiesel or to the volume of water, fuel ethanol, or biodiesel that is blended with taxable diesel fuel, when the finished product is clearly identified on the retail pump, storage tank, and sales invoice as biodiesel or a combination of diesel fuel and water, fuel ethanol, or biodiesel.

(d) Invoice documentation.

(1) The volume of biodiesel must be identified on the sales invoice on each sales transaction, and must continue to be identified on sales invoices until the blended product is sold to the ultimate consumer.

(2) The volume of water, fuel ethanol, or biodiesel that is combined with taxable diesel fuel must be identified on the sales invoice on each sales transaction after the water, fuel ethanol, or biodiesel is first blended with taxable diesel fuel, and must continue to be identified on sales invoices until the blended product is sold to the ultimate consumer.

(3) A sales invoice must:

(A) identify a water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend by a commonly accepted commercial or industry name for the blended product;

(B) list the volume in gallons (rounded to the nearest whole gallon) or the percentage (rounded to the nearest tenth of one percent) of the blended product that is water, fuel ethanol, or biodiesel;

(C) list the volume in gallons (rounded to the nearest whole gallon) or the percentage (rounded to the nearest tenth of one percent) of the blended product that is taxable diesel fuel. Taxable diesel fuel includes emulsifiers and additives, but not water, fuel ethanol, or biodiesel; and

(D) list the basis of calculating the tax (if a taxable sale) as either $0.20 for each gallon of taxable diesel fuel in the blended product or a ratable tax rate based on the percent of taxable diesel in the blended product. For example, the invoice for the sale of 100 gallons that is a blend of 20% water and 80% taxable diesel fuel may list: state diesel fuel tax of $0.20 per gallon on 80 gallons, or state diesel fuel tax of $0.16 per gallon on 100 gallons of water-based diesel fuel.

(e) Notice required on storage tank and retail pump.

(1) A notice must be posted in a conspicuous location on each storage tank and retail pump from which biodiesel is stored or sold until sold to the ultimate consumer.

(2) A notice must be posted in a conspicuous location on each storage tank and retail pump from the time that the water, fuel ethanol, or biodiesel is first blended with taxable diesel fuel until the blended product is sold to the ultimate consumer, and state the volume percentage of water, fuel ethanol, or biodiesel that is blended with petroleum diesel fuel.

(3) The notice must:

(A) identify the product by the common industry name or commercial name of the blended product,

(B) state the percentage (rounded to the nearest tenth of one percent) of the finished blended product that is water, fuel ethanol, or biodiesel, and

(C) state the percentage (rounded to the nearest tenth percent of one percent) of the finished blended product that is taxable diesel fuel. Taxable diesel fuel includes emulsifiers and additives, but not water, fuel ethanol, or biodiesel.

(f) Refund of diesel tax paid. The ultimate consumer who has paid tax on biodiesel or on the percentage of product that is water, fuel ethanol, or biodiesel may file a claim for refund of taxes that have been paid on biodiesel or on the volume of water, fuel ethanol, or biodiesel that is blended with taxable diesel fuel as provided by §3.432 of this title (relating to Refunds on Gasoline and Diesel Fuel Tax). The refund claim must be supported with purchase invoice(s) as described in subsection (d) of this section. The total volume of diesel fuel that is purchased is presumed to be taxable diesel fuel if the purchase invoice does not meet the requirements of subsection (d) of this section.

(g) Commercial motor vehicles licensed under the International Fuel Tax Agreement (IFTA).

(1) A water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend that is delivered into the fuel supply tank(s) of a motor vehicle that is licensed under the IFTA is presumed to be used in the jurisdiction in which it was purchased. This presumption may be overcome if it is shown that the total amount of water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend that is purchased in other IFTA jurisdictions is greater than the amount of total diesel fuel used in other IFTA jurisdictions by all diesel-powered motor vehicles that the IFTA licensee operates.

(2) In calculating the IFTA fleet average mile-per-gallon, the total gallons of diesel fuel that are consumed includes the total gallons of water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend.

(3) An IFTA licensee who overpays the tax on a water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend by way of an IFTA tax return may request a refund from the comptroller. A refund claim must be supported with purchase invoice(s) as described in subsection (d) of this section. The total volume of diesel fuel that is purchased is presumed to be taxable diesel fuel if the purchase invoice(s) do not meet the requirements of subsection (d) of this section.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 15, 2004.

TRD-200403886

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: August 1, 2004

For further information, please call: (512) 475-0387


34 TAC §3.448

The Comptroller of Public Accounts proposes new §3.448, concerning transportation services for Texas public school districts. The rule was originally filed as new §3.758, appearing in the May 28, 2004, issue of the Texas Register (29 TexReg 5304), and is being re-filed to comply with Texas Register requirements for numbering sequence. The new rule incorporates legislative changes in House Bill 2458, 78th Legislature, 2003, to add Tax Code, Chapter 162, relating to motor fuel taxes and the repeal of Tax Code, Chapter 153. The new rule prescribes the application, exception letter, record requirements, refunds, and method to compute taxable use by a commercial transportation company providing transportation services for a public school district in Texas.

James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing new information regarding tax responsibilities. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.

The new rule is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of Tax Code, Title 2.

The amendment implements Tax Code, §§162.104, 162.125, 162.204, 162.227, and 162.3041.

§3.448.Transportation Services for Texas Public School Districts (Tax Code, §§162.104, 162.125, 162.204, 162.227, and 162.3041).

(a) Effective date. This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.

(b) Application. To purchase gasoline or diesel fuel less the state tax and not prepay the liquefied gas tax for vehicles equipped to use liquefied gas, a commercial transportation company that provides transportation services to a public school district in Texas must submit to the comptroller an affidavit stating:

(1) that the company has contracted with a specific public school district to provide transportation services (other than charter trips) for the school district;

(2) that motor fuel purchased tax free will be used exclusively by the company to provide the transportation services for the school district; and

(3) the vehicle identification number and vehicle license plate number for each vehicle equipped to use liquefied gas to furnish transportation services exclusively to public school districts in Texas.

(c) Exception letter. After review and approval of the affidavit, the comptroller shall issue to the company a letter of exception specifying that the company may purchase tax free gasoline and/or diesel fuel used to provide transportation services to a public school district in Texas. The letter of exception may be reproduced for licensed suppliers and licensed distributors. An exception letter shall be issued to the company for specific vehicles operated using liquefied gas. The letter may be furnished to inspectors when a liquefied gas-powered bus is undergoing a safety inspection and to liquefied gas dealers when the company purchases liquefied gas tax free to be placed into the fuel supply tank of the bus.

(d) Records required. A commercial transportation company providing transportation services to a Texas public school district shall keep separate records for tax-free and tax-paid fuels. Both sets of records must show:

(1) the number of gallons of gasoline, diesel fuel, and liquefied gas on hand on the first day of each month;

(2) the number of gallons of gasoline, diesel fuel, and liquefied gas purchased or received, showing the name of the seller and the date of each purchase;

(3) the date and number of gallons of gasoline, diesel fuel, and liquefied gas delivered into the fuel supply tanks of vehicles used to furnish transportation services to public school districts;

(4) the date and number of gallons of gasoline, diesel fuel, and liquefied gas delivered into the fuel supply tanks of vehicles used to furnish transportation services other than to public school districts;

(5) the date and number of miles traveled to provide transportation services for the public school district, including starting point, destination, purpose of trip, beginning and ending odometer readings, vehicle identification number, and the vehicle license plate number;

(6) the date and number of miles traveled to provide transportation services for customers other than public school district(s), including the beginning and ending odometer readings, vehicle identification number, and vehicle license plate number of the vehicle so used.

(e) Taxable use. A commercial transportation company forfeits its right to purchase fuel tax free if:

(1) the fuel is sold, other than to a Texas public school district for which the commercial transportation company provides transportation services; or

(2) the fuel is used in a vehicle for any purpose other than providing transportation services for a Texas public school district.

(f) Cancellation or completion of contract. A commercial transportation company shall report the following to the comptroller within five days of the cancellation or completion of a contract with a Texas public school district:

(1) the total number of gallons of tax-free gasoline and/or diesel fuel on hand in storage tanks and in the fuel supply tanks of motor vehicles, and remit the tax due on the ending tax-free inventory; and/or

(2) in the case of a liquefied gas vehicle, obtain a liquefied gas tax decal for previously excepted vehicles used to provide transportation services under the canceled/completed contract.

(g) Charter trips. A commercial transportation company that charters round-trip transportation to special events for a Texas public school district may claim a refund for the fuel used in the charter vehicle.

(1) The refund shall be computed by starting the trip with a full fuel supply tank or tanks, maintaining records of the fuel delivered into the fuel supply tank or tanks of the vehicle during the trip, and filling the fuel supply tank or tanks upon arrival back at the origination point. The number of gallons delivered into the fuel supply tank or tanks after the start of the trip will be the number of gallons upon which the charter company may claim a tax refund.

(2) The records required by subsection (d)(5) of this section shall also be maintained for each charter trip.

(3) The commercial transportation company shall keep a copy of the billing to the school district for the trip.

(h) Refunds. A commercial transportation company providing transportation services to a Texas public school district may file a claim for refund of state taxes paid on gasoline and diesel fuel used exclusively for such transportation purposes.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 15, 2004.

TRD-200403887

Martin Cherry

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: August 1, 2004

For further information, please call: (512) 475-0387