According to the preamble to the proposed revisions, the Texas Comptroller interprets the Supreme Court’s phrase “ ‘useful work for the customer’ to mean ‘work that the customer hired the taxable entity to perform,’ [but] does not include ‘activities that enable the taxable entity to do business in general or are not directly used in the provision of a service to the customer.’ ” See Preamble, 34 Tex. Admin. Code sec. 3.591 (proposed rev. published Jan 20, 2023). The proposed revisions also replace the word “equipment” with the word “property” in recognition of the fact that certain property may be used to perform services and the property may not be equipment. The proposed revisions to Rule 3.591 include changes throughout the Rule that incorporate the Texas Comptroller’s application of these general concepts. Taxpayers may submit comments on the proposed rules for a period of 30 days from the date of publication (i.e., until February 20, 2023 as the 30th day falls on a Sunday).
The question that taxpayers and the Texas Comptroller will no doubt be debating and possibly litigating will likely be whether these revisions go far enough.
If you have questions regarding the information disclosed above or any other State Tax related matter, please contact David Colmenero at firstname.lastname@example.org, Alex Pilawski at email@example.com or Jason Hendrix at firstname.lastname@example.org. To contact them by phone, please call 214.744.3700.