Can an LNG exporter use its own loading documents (Master's Receipt, Certificate of Quantity, Certificate of Quality) instead of a traditional bill of lading to prove the export exemption from Texas sales tax?

Plain-English summary

A Texas liquefied natural gas (LNG) exporter sells LNG to foreign customers who arrange their own transport via foreign-flagged ocean vessels to overseas regasification terminals. To claim Texas's export sales tax exemption, the law normally requires a bill of lading — but the exporter isn't a party to the shipping contract between its customers and the carriers, so a formal bill of lading is rarely available by the time the vessel departs. Instead, the exporter reliably receives a different, contemporaneous document set at the moment of loading: a Master's Receipt (confirming the carrier received all documents, naming the vessel, master, ports, seller-as-consignor, and buyer-as-consignee), a Certificate of Quantity (the precise LNG volume and temperature loaded, driving the exporter's invoicing under its sale agreements), and a Certificate of Quality (the LNG's composition, certifying spec compliance). It asked whether this "Loading Documents" set could substitute for a bill of lading when claiming the export exemption.

The Comptroller ruled yes. Texas's export exemption under § 151.307(b) — which implements the U.S. Constitution's Import-Export Clause — requires a bill of lading "issued by a licensed and certificated carrier" showing the seller as consignor, the buyer as consignee, and delivery outside U.S. territorial limits. The Loading Documents carry the same indicia even though their primary purpose differs from a traditional bill of lading (they're mainly used to audit the seller's compliance with its sale agreements and trigger invoicing, rather than to document the carriage contract itself). Because they're signed/issued by the LNG carrier, name the seller and buyer in the consignor/consignee roles, and confirm a foreign delivery point, that's enough to satisfy the statute's substance even without matching a bill of lading's traditional legal function.

What this means for you

Exporters of goods where the buyer arranges transport (FOB or similar terms)

If your business model has the customer contracting directly with the carrier — leaving you without a traditional bill of lading at the time of export — this ruling shows the Comptroller will look at substance over form: any consistently issued, carrier-signed document set containing the statute's core elements (carrier issuance, seller as consignor, buyer as consignee, delivery point outside the U.S.) can substitute, even if the documents were designed for a different primary purpose like invoicing or quality assurance.

LNG and bulk commodity exporters specifically

The specific "Loading Documents" combination approved here (Master's Receipt + Certificate of Quantity + Certificate of Quality) is a useful template if your export documentation follows a similar structure — but confirm your own documents actually carry carrier-issuance indicia and name both parties in the consignor/consignee roles, since that's what the ruling turned on.

Accountants and tax professionals

The underlying constitutional hook is the Import-Export Clause (U.S. Const. art. I, § 10, cl. 2), implemented in Texas through § 151.307(a)-(b). The ruling is a good illustration that the Comptroller reads the bill-of-lading requirement functionally (does the document contain the required content) rather than formally (does it use the words "bill of lading" or serve the traditional carriage-contract purpose).

Common questions

Q: Does a document need to be labeled "bill of lading" to satisfy the export exemption?
A: No — this ruling confirms a functionally equivalent document set can substitute, as long as it shows carrier issuance, the seller as consignor, the buyer as consignee, and a delivery point outside the United States.

Q: What if the exporter isn't a party to the actual shipping contract between the buyer and the carrier?
A: That's exactly the situation here — the taxpayer wasn't party to the carriage contract and couldn't reliably obtain a formal bill of lading before the vessel departed, which is why it relied on its own contemporaneously issued Loading Documents instead.

Q: Is this ruling limited to LNG exports?
A: The ruling addresses LNG specifically, but the underlying legal standard (functional equivalence to a bill of lading under § 151.307(b)(1)) could inform similar documentation questions for other bulk commodity exports — though only the taxpayer here can rely on this specific ruling.

Q: Can another exporter rely on this ruling for its own documentation?
A: No. It binds the Comptroller only for the taxpayer and facts presented; different document sets lacking the same indicia could be analyzed differently.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.307(a) (exemptions required by prevailing law); § 151.307(b), (b)(1) (export exemption — bill of lading requirement)
• Tex. Tax Code § 151.051 (sales tax imposed); § 151.010 (taxable item); § 151.054 (gross receipts presumed taxable absent valid certificate)
• U.S. Const. art. I, § 10, cl. 2 (Import-Export Clause)

Source

• Landing page (STAR search): https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201906012L

Original ruling text

June 28, 2019

RE: Private Letter Ruling No. 20190403102911

**, Taxpayer No. **

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[1] We are responding to your request dated March 29, 2019. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether ** (Taxpayer), an exporter of Liquefied Natural Gas (LNG), may rely on loading documents as a proxy for a bill of lading, when an exemption under Section 151.307(b) (Exemptions Required by Prevailing law) is claimed.

Facts Presented

Taxpayer is a seller and exporter of LNG, refrigerated natural gas that is liquefied to 1/600th of its gaseous volume. Liquefying natural gas makes it economically feasible in order to transport it from natural gas abundant areas of the world to natural gas scarce areas of the world. In recent years, a growing export market for domestic LNG has emerged.

Taxpayer plans to purchase natural gas and have it delivered by pipeline to its liquefaction facility and export terminal (Facility) on the shore of CITY. Taxpayer’s Facility will remove contaminants from the natural gas and cool it until liquefaction has resulted in the production of LNG. Taxpayer will then sell the LNG to foreign customers under secured fixed price sale and purchase agreements (SPAs) that require the customers to arrange the transport of the LNG, at their own expense.

Taxpayer’s customers will hire contract carriers to transport the purchased LNG to regasification facilities. All exported LNG will be delivered directly to foreign ports for regasification. Ocean going vessels used to transport LNG from Taxpayer’s facility to foreign ports will operate under foreign flags.

The U.S. Coast Guard (USCG) authorizes specialized foreign-flagged oceangoing vessels to transport LNG after each vessel has received an International Maritime Organization (IMO) Certificate of Fitness for the Carriage of Liquefied Gases in Bulk. All vessels carrying LNG from the Taxpayer Facility will be authorized by the USCG. The Jones Act prohibits foreign-flagged commercial ships from carrying cargo between two U.S. ports, either directly or indirectly.

Taxpayer can obtain bills of lading that are governed by contractual law and document transport of LNG shipments beyond the territorial limits of the United States, from LNG carriers. Taxpayer is not a party to any contractual agreements between the purchasers and carriers of LNG. Bills of lading for LNG shipments from the Facility are not immediately generated upon transfer of the LNG from Taxpayer to the carrier, but at some point afterwards. The purpose of obtaining bills of lading from LNG carriers is to document to the foreign customer the transportation of the LNG to the customer’s designated port of discharge.

Taxpayer has identified a specific, consistently and reliably received document set, received for each outgoing LNG shipment. Taxpayer prepares and the LNG carrier signs and issues this document set (Loading Documents) to the LNG buyer, as well as to Taxpayer, upon the loading of the LNG to the vessel, before departure.

The primary purpose of the Loading Documents is to contemporaneously document the physical transfer of the LNG from the Facility to the LNG carrier. The Loading Documents consist of a Master’s Receipt of Documents (Master’s Receipt), a Certificate of Quantity, a Certificate of Quality, and any additional supporting documents needed.

The first document is the Master’s Receipt, a cover page that certifies that the LNG vessel master has received all documents in the set. The Master’s Receipt also displays the indicia of issuance by an LNG carrier, the name of the vessel, the name of the vessel’s master, the ports of loading and discharge, the cargo number for the shipment, the name of the seller as consignor, and the name of the buyer as consignee. Taxpayer prepares the Master’s Receipt from information obtained from the customer and carrier. The Master’s Receipt is verified and executed by the master of the LNG vessel, or their agent.

The second document is the Certificate of Quantity, which certifies the precise quantity, in cubic meters and metric tons, of LNG that is loaded onto the LNG vessel. The Certificate of Quantity quantifies the energy content of the LNG, certifies the temperature of the LNG upon transfer, and cannot be completed until immediately after loading. The Certificate of Quantity also displays the terminal, the name of the LNG vessel, the cargo number, the destination, and the date of completion of the LNG transfer.

The Certificate of Quantity is prepared by Taxpayer based on the amount of LNG loaded, is verified and executed by the vessel master or their agent, and is countersigned by a terminal representative. The master’s signature signifies the LNG carrier’s contemporaneous receipt of the LNG in the quantity specified. The Certificate of Quantity is expressly referenced in the SPAs between Taxpayer and its customers as the supporting document that drives Taxpayer’s invoicing of its customers.

The third document is the Certificate of Quality, which is signed and sealed by a representative of the terminal and the independent surveyor. This constitutes the Facility’s certification of the precise makeup and composition of the LNG loaded onto the vessel. The Certificate of Quality allows customers to evaluate Taxpayer’s compliance with the LNG composition specification set forth in the SPAs, and displays the terminal, vessel name, cargo number, destination, and product type.

Copies of the Loading Documents are distributed to Taxpayer, the LNG carrier, and the customer for each shipment. The Loading Documents allow customers to audit Taxpayer’s compliance with the SPAs and facilitate Taxpayer’s invoicing of its customers. The Loading Documents’ primary purpose thus differs from the primary purpose of the bill of lading, which is to document the contract of carriage between the customer and the carrier, receipt of goods, and transfer of title. As the Loading Documents are executed and issued before the LNG vessel leaves the Facility, they are more reliably available to Taxpayer than the bill of lading, which Taxpayer must request from its customer, and which is rarely available upon the vessel’s departure.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Is a set of Loading Documents sufficient proxy for a bill of lading, as described in Section 151.307(b)(1), when claiming the export exemption under Section 151.307?

Ruling: Yes. A set of Loading Documents that meets the requirements of Section 151.307(b)(1) may be used as a proxy for a bill of lading when claiming the export exemption under Section 151.307(b).

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). A seller’s gross receipts are presumed to be subject to sales tax unless the seller accepts a valid resale or exemption certificate from the purchaser. Section 151.054 (Gross Receipts Presumed Subject to Tax).

The Import-Export Clause of the United States Constitution prohibits states from imposing sales tax on exports. See U.S. Const. art. 1, § 10, cl. 2. Under Section 151.307(a), taxable items that this state is prohibited from taxing by the law of the United States, the United States Constitution, or the Constitution of Texas are exempt from Texas sales and use tax.

When claiming an exemption because tangible personal property is being exported beyond the territorial limits of the United States, Section 151.307(b) requires the taxpayer to provide a bill of lading issued by a licensed and certificated carrier of persons or property showing the seller as consignor, the buyer as consignee, and a delivery point outside the territorial limits of the United States.

A set of Loading Documents that possesses the indicia of issuance by an LNG carrier and list the seller as consignor, the buyer as consignee, and a delivery point outside the territorial limits of the United States may be used to claim the export exemption under Section 151.307(b).

The Texas Tax Code and Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20190403102911.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.