Was applying protective chemicals to carpet and upholstery taxable, and could verbal agency advice relieve back tax?

Plain-English summary

Applying protective chemicals to carpet, upholstery, rugs, or draperies was taxable under Rule 3.310(b)(12), even though the company did not clean those items. The company needed a permit and was liable for collecting tax from October 2, 1984.

The Comptroller said relief might be available if the company could establish that an agency employee had said the service was nontaxable and that the company relied on that advice. Because the advice was verbal, the employee had to confirm giving it, and the confirmation had to be kept in the company's permanent records.

Without confirmation, the company had to file and pay the back tax. It could request a penalty waiver and could bill customers for the back tax.

Common questions

Was applying protectant taxable? Yes.

Did the absence of cleaning services change the result? No.

Could verbal advice support relief? Possibly, if the employee confirmed the advice and reliance was established.

What if the advice could not be confirmed? Back tax had to be filed and paid; a penalty waiver could be requested.

Citations and references

• Texas Comptroller Rule 3.310(b)(12) — protective-chemical treatment.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8509L0667C04

Original ruling text

September 25, 1985

Dear ***:

Thank you for your recent letter which is restated with response below.

The name of our company is CORP T. Several months ago when the laws
regarding who should collect sales tax changed I called the State Controller's
office here in CITY to see if our company should begin collecting sales tax.
I explained our services and told them that we spray an anti-soil protectant
(like Scotchguard) on carpet and furniture. I also explained we were not a
cleaning company and offered no cleaning services. We only applied our
protective chemical. I was then told that we were not subject to collecting
tax. I called again a few weeks later and got the same answer.

I was told I could write to you and receive written verification of this
for my files. I would appreciate it if you would send me written verification
of the telephone answer I received.

If for any reason the answer I received on the phone was incorrect and we
should collect sales tax, I would appreciate the following information.

1) Do we need to apply for sales tax collection permit? If so, where do
you obtain this permit and what is the procedure for forwarding collected
sales tax to the state? Where can you obtain a sales tax chart?

2) Are we liable for any back sales tax which we have never collected
because we were told by 2 different people in the CITY office that we were
exempt from doing so?

Response: Treating or applying protective chemicals to carpet, upholstery, rugs
or draperies is taxable under rule 3.310(b)(12). I am attaching a copy for
your reference.

You will be receiving an application under separate cover. However, we
have a number of CITY offices which can issue your permit on-the-spot.
I am enclosing a list of locations for your convenience. Our local offices
can also aid you in filing your returns by supplying forms and information.

You are liable for collecting tax since October 2, 1984. However, if
you can establish that you were told by one of our employees that the
functions you perform were not taxable and you relied on that advice
you may be given relief.

Because the advise was verbal, you would have to get confirmation from
the employee that they did in fact give that advice. This should be
kept in your files as part of your permanent records.

If you are not able to get such confirmation you would be required to
file and pay the back tax. You may request a waiver of penalty at that
time. You may also bill your customers for the back tax.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division