What did an airline need to show for out-of-state purchases temporarily stored at a Texas facility before being transported out of Texas for use solely elsewhere?

Plain-English summary

An airline planned to receive certain out-of-state purchases at its Texas facility. Section 151.011(e), as described in the letter, excluded tangible personal property from use tax when it was only stored in Texas before transportation out of Texas for use solely outside the state.

The delivery method and which party paid for delivery did not affect the property's taxability.

If the vendor had Texas representation, the airline had to give the vendor an exemption certificate for qualifying purchases. When the airline had both taxable and nontaxable dealings with that vendor, it needed a certificate for each nontaxable purchase. The stated reason had to cite the statute and verbally describe the exemption.

For audit support, the airline needed detailed records connecting specific property to the exclusion: inbound shipping records such as bills of lading, records of how long the property stayed in Texas and what happened to it here, and records showing shipment out of Texas.

Common questions

What property qualified under the described exclusion? Property only stored in Texas before transportation out of Texas for use solely outside the state.

Did the delivery method or who paid delivery matter? No.

What records were required? Detailed inbound shipping, Texas-storage and handling, and outbound shipping records tied to the specific items claimed as excluded.

When were purchase-specific exemption certificates needed? When the airline had both taxable and nontaxable transactions with a vendor that had Texas representation.

Citations and references

• Tex. Tax Code § 151.011(e) — temporary-storage exclusion described in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8609L0754A04

Original ruling text

September 15, 1986

Dear ***:

Thank you for your follow-up letter to our recent meeting regarding
the taxability of certain out-of-state purchases to be delivered to
the AIRLINE A facility in Texas.

Section 151.011(e) of the sales and use tax statute provides an exemption
for tangible personal property subject to use tax if the property is only
stored in Texas prior to being transported out of Texas for use solely
out of state. The method of delivery, or which party pays for it, has
no bearing on the taxability of the property.

If the vendor has representation in Texas, AIRLINE A will be required to
furnish the vendor an exemption certificate for those purchases qualifyng
for this exemption. If AIRLINE A has both taxable and nontaxable
transactions with a vendor, a certificate specific to each purchase of
nontaxable items will need to be completed. The reason given on the
certificate for the exemption should both cite the statute reference and
include a verbal description of the exemption.

As we discussed last week, certain documentation is required to be kept
to substantiate this exemption in case of audit. This would include
shipping records (such as bills of lading) showing the property coming
into Texas from out of state, records of how long the property is in
Texas and what happens to it when it is here, and shipping records
showing delivery back out of state. These records must be kept in sufficient
detail to tie in which specific items are covered by the exemption.

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. The regular number is
512/463-4600. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division