Could purchase-order language serve as a Texas resale or exemption certificate, and when could blanket certificates or direct-payment permits be used?

Plain-English summary

The Texas Comptroller said the taxpayer's purchase-order language did not substantially follow the resale- or exemption-certificate forms in Rules 3.285 and 3.287. The taxpayer could reproduce the official forms on its purchase orders, but the submitted orders were not certificates.

A certificate had to be recognizable to the vendor, contain the appropriate language, and include a signature tied to the certificate rather than merely to the purchase order.

When all purchases from a vendor were for resale or one specific exempt use, the purchaser could issue a specifically worded blanket resale or exemption certificate. Other purchases required case-by-case treatment. A purchaser wanting to self-accrue tax on its own-use items needed a direct-payment permit.

The deficient orders would not protect vendors from tax, penalty, or interest on audit.

What this means for you

A valid purchase order was not automatically a valid tax certificate. Certificate purpose, wording, signature, purchase scope, and permit status each mattered.

Common questions

Did the submitted purchase orders work as certificates? No.

Could official certificate forms be reproduced on purchase orders? Yes.

When could a blanket certificate be used? When all purchases from the vendor were for resale or the same specific exempt use.

What if the purchaser wanted to self-accrue tax? It needed a direct-payment permit.

Did the deficient order protect the vendor on audit? No.

Citations and references

• Comptroller Rule 3.285 — resale certificates.
• Comptroller Rule 3.287 — exemption certificates.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8611L0775G05

Original ruling text

November 20, 1986

Dear ***:

Thank you for your follow-up to *** letter. The information you
have submitted is not substantially in the form set out in either Rule
3.285 or 3.287. However, you may feel free to reproduce our forms on
your purchase orders if you like.

If all the material you purchased from a specific vender were for resale
or were exempt due to a specific use (such as materials for further
manufacture and sale), you could give one specifically worded resale or
exemption certificate as appropriate in lieu of tax on all purchases.

It is important that resale and exemption certificates be recognizable to
the vender as such, as well as having appropriate language and a
signature relating to the certificate itself not just the purchase order.
Your purchase orders do not meet either of these criteria.

There is nothing wrong with your purchase order as a purchase order, but
it isn't a resale or exemption certificate. I would recommend your issuing
blanket certificates where possible and others on a case-by-case basis.

Obviously everything you buy from vendors is not exempt. If it is your
desire to accrue and pay tax yourself on purchases for your own use, you
should obtain a direct payment permit. It is my understanding that our
auditors have given your personnel this information before.

In their current form, your purchase orders will not protect your vendors
from assessment of tax, penalty or interest in the event of an audit.

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