Disasters and Texas Taxes

Taxpayers in Texas counties declared disaster areas can request an extension to file their taxes. The Comptroller’s office allows temporary filing extensions on a case-by-case basis. Our office will notify taxpayers when we grant or deny their extension requests.

To request an extension, call 800-252-5555 or email [email protected] and provide the following information:

• Taxpayer name.
• Taxpayer number.
• Name of the person making the request.
• Email or phone number of the person making the request.
• Tax type(s) for which an extension is requested.
• Affected filing periods.

Personal Funds

Taxable items and services bought by an individual with funds from a personal account are taxable, even if an exempt organization gives those funds to the individual. Exception: Items bought by an individual with personal funds to be donated for disaster relief can qualify for exemption. See the Helping People Affected by a Disaster section.

FEMA and Red Cross Funds

Sales and use tax is not due on taxable items purchased with a Federal Emergency Management Agency (FEMA) debit card or a Red Cross voucher.

Because purchases made with FEMA debit cards and Red Cross vouchers are considered purchases made by the federal government, an exemption certificate (PDF) is not required.

If FEMA or the Red Cross provides a check for assistance that is deposited into an individual’s personal bank account, tax is due on the sale or use of taxable items purchased with those personal funds. See the Personal Funds section.

Salvation Army Vouchers

Sales and use tax is not due on taxable items purchased at a designated Salvation Army retail outlet or thrift store with a Salvation Army voucher. A properly completed exemption certificate (PDF) is required for purchases made with Salvation Army vouchers. Purchases made with personal funds are taxable.

Exemptions

Purchases, leases and rentals by governmental agencies and nonprofit entities are exempt from Texas sales and use tax.

Purchase orders issued by federal, state and local governmental entities can be used to document exempt purchases.

Qualifying nonprofit entities can give the seller an exemption certificate (PDF).

If another state is declared a disaster area, and a Texas seller or a third-party common carrier wants to help by delivering equipment there, Texas sales and use tax is not due. The seller must keep the shipping documentation to show that the sale is exempt from Texas sales and use tax as an interstate shipment. Texas sales and use tax is due if the equipment is brought back into Texas for use.

Food, Alcohol and Tobacco Products

Food, including ready-to-eat food bought with a FEMA debit card or a Red Cross voucher, is exempt.

If FEMA or the Red Cross provides a check for assistance that is deposited into an individual’s personal bank account, ready-to-eat food is taxable purchased with those personal funds. See the Personal Funds section.

Alcohol and tobacco products are taxable, even when using FEMA or Red Cross funds.

Retailers’ Responsibilities

For exempt entity purchases, retailers can check our Texas Tax-Exempt Entity Search to verify exemption.

To document exempt purchases, retailers must keep copies of vouchers or receipts for the items purchased (including receipts for food) for at least four years. The receipt copy must be clearly marked “FEMA” or “Red Cross” and must be signed by the purchaser.

If a combination of FEMA or Red Cross funds and cash or a personal credit or debit card are used, the retailer must collect sales and use tax on the amount paid with personal funds, but not on the amount paid with FEMA or Red Cross funds.

For Salvation Army vouchers, retailers must show the amount of the voucher on the invoice, deduct that amount before computing the sales tax and keep a copy of the voucher to substantiate the sale to the Salvation Army on behalf of the individual.

In general, charges for labor to repair residential or nonresidential real property damaged in a declared disaster area are exempt from sales and use tax. The materials used to make the repairs are taxable.

For the customer to receive an exemption from tax on labor charges, the service provider must either:

• Bill the customer for residential work; or
• Use a separated (labor and material) contract for nonresidential work and accept an exemption certificate (PDF) from the customer for the labor.

Note: The exemption certificate must include the service provider’s name and address, the customer’s name and address and a list of the items being repaired. The certificate must also give the reason for claiming the exemption. For example, “Repair due to Hurricane Harvey in Galveston County.”

Residential Real Property

For residential real property repairs in a disaster area, the charges for labor are exempt from sales and use tax. The contract used determines the taxability of the incorporated materials.

• Separated contracts – Under a separated contract (labor and material), the charges for the incorporated materials and the labor are separate. The contractor must collect tax on the incorporated materials billed to the customer, but there is no tax due on labor.
• Lump-sum contracts – Lump-sum contracts are also known as “one-fixed-price” or “turn-key” contracts. The contractor bills the customer one amount for both labor and incorporated materials instead of separately stating them. Under a lump-sum contract, the contractor does not collect sales tax on the lump-sum charge for materials and labor from the customer.

Nonresidential Real Property

For nonresidential real property repairs in a disaster area, the contract used determines the taxability of the incorporated materials and labor.

• Separated contracts – Under a separated contract (labor and material), the charges for the incorporated materials and the labor are separate. The service provider must collect tax on the incorporated materials billed to the customer, but there is no tax due on labor.
• Lump-sum contracts – Lump-sum contracts are also known as “one-fixed-price” or “turn-key” contracts. The service provider bills the customer one amount for both labor and incorporated materials instead of separately stating them. Under a lump-sum contract, the service provider must collect sales tax on the lump-sum charge for both materials and labor from the customer.

Personal Property

Purchasers can claim an exemption from sales and use tax on charges for the following:

• Labor to repair or restore items damaged by a declared natural disaster, including furniture and other tangible personal property; and
• Laundering or dry cleaning damaged clothing or other items.

Cleaning Up

• Purchasers can claim an exemption from sales tax on labor charges for cutting down damaged branches or cutting up a damaged tree.
• Charges for hauling away branches, limbs or trees are taxable.
• Tax is due on the purchase, lease or rental of chainsaws, stump cutters and other equipment used to repair or remove trees, etc.

Individuals

Individuals who want to help people recover from a disaster do not have to pay tax on items they buy to donate directly to these exempt organizations:

• Religious.
• Charitable.
• Educational.
• Nonprofits exempt under IRS Sections 501(c)(3), (4), (8), (10) or (19).
• Federal government entities.
• Texas state and local government entities.

The purchaser must give the seller an exemption certificate (PDF) showing the individual’s name and the name of the qualifying exempt organization accepting the donation. If the individual uses the item before donating it, the individual owes tax on the purchase price.

Retailers

A retailer can remove an item from a tax-free inventory to donate to qualified exempt organizations without paying use tax on the item.

Schools and PTAs

A school district or a PTA can claim sales tax exemption on purchases of school supplies and clothing that will be given to students affected by a declared disaster.

Fundraising Events

Generally, all sales of taxable items are subject to tax, even if all proceeds will be donated to a charity. There are, however, several events that can be held as fundraisers that are not subject to tax:

• Bake sales.
• Car washes.
• Concerts – if the admission is based on donations only or if the concert is provided by a nonprofit organization. Otherwise, a set price for admission to a concert, even for a fundraising event, is taxable.

Two One-Day, Tax-Free Sales

Each chapter of an organization qualifying for sales tax exemption under the religious, educational or charitable category, as well as organizations exempted from sales tax based on their IRS Section 501 (c)(3), (4), (8), (10) or (19) status, can hold two one-day, tax-free sales or auctions each calendar year. These designated days can be used for disaster relief.

Youth athletic organizations, volunteer fire departments and chambers of commerce cannot hold tax-free sales.

For more information, see Nonprofit and Exempt Organizations – Sales and Purchases.

An out-of-state business coming to Texas to help with disaster recovery is not considered engaged in business here and is not required to register with the Secretary of State or to collect or remit Texas taxes (including franchise tax) from its customers if it meets certain requirements.

The out-of-state business must:

• Be in Texas as an affiliate of a Texas business or at the request of a Texas business under a mutual assistance agreement; and
• Only perform disaster-related work to repair or restore damaged critical infrastructure during a disaster response period in a declared disaster area.

The out-of-state business will owe sales tax on taxable items purchased for its own use here.

It will not owe use tax on equipment it brings here used only to perform disaster-related work to repair or restore damaged critical infrastructure during the disaster response period, and it must remove the equipment from Texas after the disaster response period. See Rules 3.583 and 3.286 for more information.

State and Federal Resources

• Disaster Assistance and Emergency Relief for Individuals and Businesses (IRS)
• Disaster Assistance.gov
• Federal Emergency Management Agency
• Property Taxes in Disaster Areas and During Droughts (Comptroller’s office)
• Texas Division of Emergency Management

Be Prepared

Take advantage of the annual Emergency Preparation Supplies Sales Tax Holiday when you can buy many items tax free, such as emergency generators, hurricane shutters and batteries.

The Governor’s Office has helpful emergency preparation information on its website at Emergency Management – Planning for Emergencies and Disasters in Texas.

If you need more information, contact us at Texas Taxes Help.