What certificates and export records could a Mexican twin plant use for materials bought from Texas vendors?

Plain-English summary

A Mexican twin-plant manufacturer bought productive and nonproductive materials from Texas vendors, received them at a Texas warehouse, and transported them across the border to its plant.

The Comptroller said the company could give an exemption certificate for items that became component parts of finished products and for other items that independently qualified under the manufacturing exemption.

Equipment and supplies bought for the company's own use did not qualify for an exemption or resale certificate merely because they went to Mexico. Those purchases required the specific proof of export demanded by law. The letter identified U.S. customs-broker certifications and Mexican customs import documents called “Pedimentos” as possible records, and suggested attaching the truck manifest if terminology differences made the Pedimento hard to match to supplier invoices.

Common questions

Could component materials qualify for the manufacturing exemption? Yes.

Could the company use an exemption or resale certificate for its own equipment and supplies? No, unless the item independently qualified; otherwise it needed proof of export.

What export records did the letter identify? U.S. customs-broker certifications and Mexican customs Pedimentos, potentially supported by truck manifests.

Citations and references

The reproduced letter does not cite a specific statute or rule number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8603L0706G07

Original ruling text

March 7, 1986

Dear ***:

Thank you for your letter concerning proper certificates and
documentation needed to prove exemption from sales tax as an export.

You indicated that your company, COMPANY A, is a "twin plant" located in
CITY A Mexico which is just across the border from CITY B. That you are
a subsidiary of CORP X, and you manufacture chassis and other sub-assemblies
for televisions which you sell to your division office (COMPANY B) in CITY C,
Indiana. These sales are made from Mexico and you purchase a significant
amount of non-productive material from suppliers in the State of Texas.
This material includes office supplies, computer supplies, spare parts for
machinery etc. You also purchase some productive material, primarily packing
and chemicals from Texas vendors. This material is delivered to your warehouse
in CITY B and you then provide the trucks to bring the material to our plant
in CITY A.

COMPANY A may issue an exemption certificate for items which become a
component part of your finished products or for other items otherwise
exempt under the manufacturing exemption.

We have a more difficult problem though, for items such as equipment or
supplies that COMPANY A also purchases for its own use. Neither an exemption
certificate nor a resale certificate is valid for items such as these.

As we discussed on the telephone, the Comptroller's office does not wish
to impose unreasonable burdens on any industry, but we are limited by the
parameters of the law itself. The law requires very specific documents
to prove export. U.S. Customs Brokers certifications are one, which you
say you have already been using, and import documents such as the "Pedimento"
issued by Mexican customs officials are another.

Since your company is obviously importing these items legitimately, the
"Pediments" would seem the most likely route. You indicated that the
"Pediments" does not always agree with invoices from your supplier, due
to terminologies (i.e. widgets on invoice; hardware on "Pedimento"). I would
like to suggest that possibly the customs officials could work directly
off the truck manifest and incorporate that as an attachment to the "Pedimento".
If that suggestion does not work then I will certainly be open to discuss
any other variation which may be acceptable to us both.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

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