What documentation could a Texas catalog seller use to allocate in-state and out-of-state mailings through a forwarding agent?

Plain-English summary

The Texas Comptroller allowed the catalog seller to use a signed statement on the forwarding agent's letterhead to calculate the in-state shipment percentage. The statement had to break down the number and destinations of the catalogs, and its totals had to match the amount originally delivered.

Tax was not due on taxable items shipped out of Texas by the seller or delivered to a forwarding agent for out-of-state delivery. The answer did not change when the seller, rather than the customer, was responsible for arranging shipment.

The letter also said related charges such as postage, shipping, and folding would become part of the tax base.

What this means for you

The seller needed destination records that reconciled to the full catalog batch. Using a forwarding agent supported out-of-state treatment only to the extent the seller could document where the catalogs actually went.

Common questions

What proof could the seller accept? A signed destination statement on the forwarding agent's letterhead.

What had to appear in the statement? Catalog counts and destinations that reconciled to the original delivery total.

Were catalogs sent out of state taxable? No, under the stated seller or forwarding-agent shipment facts.

Did seller responsibility for shipping change the result? No.

What happened to postage, shipping, and folding charges? The letter included them in the tax base.

Citations and references

• The letter cited no numbered statute or Comptroller rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8702L0798A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 12, 1987

Dear **:

Thank you for your letter concerning acceptable documentation needed by
your
company when delivering taxable items to a mailing service on behalf of a
client.

Situation: A client contracts with you to have catalogs printed,
and requests that
you deliver the catalogs to a mailing service in Texas who will then ship
the catalogs nationally.

Question: We would like to have on file a definitive ruling from
you as to exactly
what documents are acceptable to the state to back up the percentage of
in-state shipments which we use to calculate sales tax.

Answer: We will allow you to accept a signed statement from the
forwarding
agent, on its letterhead, breaking down the number and destination of the
catalogs to compute the percentage. The totals must correlate to
the amount originally delivered.

Question: Inasmuch as the merchandise is not used in state, does it make
any
difference whether the mailing service is under contract to

to perform the service for the customer of ** or whether the
business transaction is strictly between the mailing service and the customer
of **?

Answer: Tax is not due on taxable items shipped out of state by the
seller or
delivered to a forwarding agent for delivery out of state. When you are
responsible for the shipping it does not change the taxability. However, other
charges would necessarily become part of the base (i.e. postage, shipping,
folding, etc.)

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

Please feel free to contact me if you have additional questions. You may
write me,
call 1-800-252-5555 toll free from anywhere in Texas, or telephone
512/463-4600.

Sincerely,
F. Wayne McDonald
Tax Policy/Tax Administration Division