This Freeman Law Insights blog provides general legal information (not legal advice) about Texas sales tax on horse boarding and related sales and options that a collector of sales tax may take to rectify the collection of sales tax on items that are not subject to a sales tax.
Sale Tax and Sales of Boarding and Feed for Horses in Texas
Texas imposes sales and use tax on the sale, lease, or rental of tangible personal property and certain taxable services. See Tex. Tax Code § 151.001, et. seq. The Texas Tax Code specifically lists such taxable services in section § 101.0101 and Chapter 3 of the Texas Administrative Code.
Horse boarding is not listed among taxable services in either the Tax Code or the Administrative Code. The Texas Comptroller has held in a STAR ruling (State Tax Automated Research) that there is no tax on boarding stables, as it is a non-taxable service. See STAR Doc. No. 8411L0603B10 (June 3, 1984). The Texas Comptroller released a publication of guidance pertaining to Texas Sales Tax on the Use of Horses. Texas Comptroller Publication 94-433, “Texas Sales Tax on the Use of Horses” (January 2012), indicates that horse boarding services are not taxable and that sales of horse feed, including grain, hay and supplements, are exempt from sales tax under section 151.316(a)(3) of the Texas Tax Code.
General Guidance for Improper Collection and Remittance of Sales Tax
“Any person who receives or collects a tax or any money represented to be a tax from another person holds the amount so collected in trust for the benefit of the state and is liable to the state for the full amount collected plus any accrued penalties and interest on the amount collected.” Tex. Tax Code § 111.016. If a sales tax collected in error is not yet remitted to the Texas Comptroller, e.g., collected during a current tax period, the person who receives or collects the tax has two primary options: (1) remit the tax collected to the Texas Comptroller or (2) return the tax collected to the purchaser or payor. The person who collected the sales tax in error should not and is not legally permitted to simply keep the tax amounts collected.
If the tax collected has been remitted to the Texas Comptroller, the collector may also assign any right to a refund to the purchaser, who may then request a refund (plus interest) directly from the Texas Comptroller.
A person who does not have a sales and use tax permit and who has paid tax in error to a permitted seller may request a refund only from the permitted seller to whom the tax was paid. The permitted seller who refunds tax to a purchaser may claim a refund[.]. . . A permitted seller may assign its right to refund to the purchaser, who may then request a refund directly from the comptroller[.]
See 34 Tex. Admin. Code § 3.325(a)(1).
If a sales tax collected in error has been remitted to the Texas Comptroller, the person who collected and remitted the tax may file a claim for refund, generally within four years. See Tex. Tax Code § 111.104(c)(3); 34 Tex. Admin. Code § 3.325(b)(1). There are certain exceptions to the statute of limitations. The person who collected the sales tax in error likely has no legal duty to notify past purchasers about sales tax collected for items or services that should not have been taxed, but it is likely advisable to cease collecting sales tax on sales of items that are learned to be exempt from sales tax.
A claim for refund may be requested using the Texas Comptroller Form 00-957. The Comptroller cannot refund the tax until the following are satisfied: (1) either refunded to the purchaser the tax collected in error, or provided a credit to the purchaser for the tax collected in error (with the purchaser’s written consent; use Texas Comptroller Form 89-123), and (2) obtained a resale or exemption certificate from the purchaser, if the purchaser is asking for the refund because an exemption or sale for resale applies.
Interest is earned on refund amounts requested from the Texas Comptroller, but there is no corollary statute for recovery of interest from a seller who collected the sales tax in error. See Tex. Tax Code § 111.064. The sales tax collector cannot request a refund of interest from the Texas Comptroller, unless all the taxes and interest were paid to the purchasers. “A tax refund claim may be filed with the comptroller only by the person [or its assignee] who directly paid the tax to this state[.] . . . No taxes, penalties, or interest may be refunded to a person who has collected the taxes from another person unless the person has refunded all the taxes and interest to the person from whom the taxes were collected.” Id. at § 111.104(b), (f).
