Summary
In 2013, the 83rd Texas Legislature enacted House Bill 800 creating a Research & Development tax credit effective January 1, 2014. Providing companies a choice between a franchise tax credit and a sales tax exemption for materials, software, and equipment used for R&D purposes. Tax Code Chapter 171, subchapter M effectively establishes the qualifications, definitions and eligibility criteria for the credit.
Who can claim the sales tax exemption?
The sale, storage or use of depreciable tangible personal property directly used in qualified research is exempt from Texas sales and use tax if the property is sold, leased or rented to, or stored by, a person who:
- is engaged in qualified research;
- will not, as a taxable entity or as a member of a combined group, claim a franchise tax research credit on a franchise tax report for the period during which the depreciable tangible personal property used in qualified research would first be subject to Texas sales or use tax; and
- registers with the Comptroller's office.