The Texas Tax Code provides that sales of “real property services” are subject to Texas sales and use tax. [1] “Real property services” include the following:

• Landscaping;
• The care and maintenance of lawns, yards, or ornamental trees or other plants;
• The removal or collection of garbage, rubbish, or other solid waste other than:
  • Hazardous waste;
  • Industrial solid waste;
  • Waste material that results from an activity associated with the exploration, development, or production of oil, gas, geothermal resources, or any other substance or material regulated by the Railroad Commission of Texas under Section 91.101, Natural Resources Code;
  • Domestic sewage or an irrigation return flow, to the extent the sewage or return flow does not constitute garbage or rubbish; and
  • Industrial discharges subject to regulation by permit issued pursuant to Chapter 26, Water Code;
• Building or grounds cleaning, janitorial, or custodial services;
• A structural pest control service covered by Section 1951.003, Occupations Code; or
• The surveying of real property. [2]

However, there are exceptions to the above.  For example, the Texas Tax Code also provides that a service will not be considered a “real property service” if it’s purchased by a contractor as part of the improvement of real property with a new structure to be used as a residence, or another improvement immediately adjacent to the new structure and used in the residential occupancy thereof. [3] I’ve previously written about the rules applicable to contractors – that post can be found here.  Interestingly, Comptroller Rule 3.291 (which lays out the tax responsibilities of contractors) notes that in these cases, a contractor must issue a “properly completed exemption certificate or other acceptable documentation” to the service provider, but no such requirement exists in the Tax Code itself.

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In Texas, sales of alcoholic beverages can give rise to two types of taxes: Mixed Beverage Gross Receipts Tax, and Mixed Beverage Sales Tax.  There are several complexities in how these are computed and how they interact with other state taxes, including the normal Sales and Use Tax.  Additionally, the Comptroller’s audit methodology for these taxes often creates problems for taxpayers.  Below is a brief summary of these taxes and some of the more prevalent issues they present.

Mixed Beverage Gross Receipts Tax

 Texas Tax Code § 183.021 provides that a 6.7% tax is imposed on “the gross receipts of a permittee received from the sale, preparation, or service of mixed beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee.” [1]

In turn, the term “mixed beverage” is defined to mean:

“One or more servings of a beverage composed in whole or part of an alcoholic beverage in a sealed or unsealed container of any legal size for consumption on the premises where served or sold by the holder of a mixed beverage permit, the holder of certain nonprofit entity temporary event permits, the holder of a private club registration permit, or the holder of certain retailer late hours certificates.” [2]

This generally includes three primary categories of drinks: liquor (including mixed drinks), beer, and wine.

As noted, the 6.7% tax applies to the “gross receipts” of a permittee.  This term is not defined by statute or by regulation, but the Comptroller’s regulations do provide some insight by stating “[t]he tax may not be separately charged to or paid for by the customer and cannot be considered included in the gross receipts amount.” [3] This language suggests the amount must be computed as 6.7% of the total amount charged to the customer, and must be paid separately by the permittee to the Comptroller.

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