Did F.O.B. terms or purchaser-paid shipping insurance determine title passage for goods delivered by UPS?

Plain-English summary

The June 16 letter had accepted a revised order form for UPS delivery and said separately stated UPS transportation charges could be excluded because the sale occurred before shipping. It also said F.O.B. terms were irrelevant for U.S. Mail.

The later June 30 letter corrected the reasoning about UPS. The Tax Policy Committee said UPS was not the kind of motor-freight carrier issuing bills of lading on which Rule 3.303(b)(2) was based. F.O.B. terms were therefore irrelevant for UPS deliveries as well.

The correction also said the purchaser's consistent payment for shipping insurance did not cause title to pass at the seller's location. It did not expressly restate whether the separately stated UPS transportation charges remained excluded.

Common questions

Were F.O.B. terms relevant to UPS delivery under this correction? No.

Why not? The letter said UPS was not the bill-of-lading motor carrier contemplated by the rule.

Did purchaser-paid insurance fix title passage at the seller's location? No.

Did the correction expressly revisit the earlier transportation-charge conclusion? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.303(b)(2) — carrier and bill-of-lading rule discussed in the June 30 correction.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8606L0810C04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 30, 1986

Dear ***:

I discussed your question regarding ***'s new order form with
other members
of the Tax Policy Committee which met on June 26th.

They told me that I was mistaken in my response regarding UPS. I was
under the
impression that UPS was a motor freight carrier which issues bills of
lading. This is not
correct. Hence, F.O.B. terms would be irrelevant for UPS deliveries
also. If you will
check court cases listed in the Texas Business and Commerce Code, you
will see that
they all involve motor freight carriers and bills of lading. This is
what we based
section (b) (2) of rule 3.303 on.

Regarding your question about whether the fact that the purchaser always
pays for
insuring the shipped goods causes title to pass at the seller's location,
the answer is no. We do not believe this fact causes transfer of title.

This response is based on the facts as presented. Other facts though
similar may yield
different results.

If you have any other questions or if we may be of further service,
please call us.

Sincerely,
(Mrs.) Wanda Hutcheson

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 16, 1986

Dear ***:

Thank you for your letter of June 10, 1986 regarding the new merchandise
order form
of ***.

The new revised order form is acceptable for Texas sales tax purposes if

is delivering by UPS. If delivery is by U.S. Mail, FOB terms would not
be
relevant. If delivery is by UPS, the separately stated transportation
charges on this
form may be excluded from the Texas sales tax base since the sale will
have occurred
before shipping.

This opinion is based upon the facts as presented. Other facts, though
similar may
yield different results.

If I may be of additional assistance, please let me know.

Sincerely,
Wanda Hutcheson
Tax Administration