Could an out-of-state buyer obtain a refund of Texas sales tax on auction equipment shipped out by common carrier without Texas use or possession?

Plain-English summary

An out-of-state buyer paid $14,875 for equipment at a Texas auction and expected a common carrier to ship it to the buyer's Arkansas plant. The Comptroller said the buyer could ask the auctioneer for a sales-tax refund if the buyer made no use of the equipment in Texas and did not take possession there.

The buyer needed a common-carrier bill of lading showing shipment out of Texas and a letter stating that it had not taken possession in Texas. With that documentation, the auctioneer could refund the tax and take a credit on its sales-tax return, or amend the return if it had already been filed.

If the buyer took possession in Texas, no refund was available.

What this means for you

The letter tied the refund to both the transaction's facts and the records proving them. Out-of-state destination alone was not enough; the buyer also needed to avoid Texas use and possession and retain the carrier documentation.

Common questions

Was equipment bought at a Texas auction automatically taxable because the auction occurred in Texas? The letter allowed a refund path when the buyer neither used nor took possession of the equipment in Texas and a common carrier shipped it out.

What documentation did the buyer need? A common-carrier bill of lading showing shipment out of Texas and a letter stating that the buyer did not take possession in Texas.

Who could issue the refund? The auctioneer.

How could the auctioneer recover the refunded tax? By taking credit on its sales-tax return or amending an already filed return for the period.

What if the buyer took possession in Texas? The letter says no refund was available.

Citations and references

• The letter cites no statute or administrative rule.
• Its operative conditions are no Texas use, no Texas possession, and a common-carrier bill of lading showing shipment out of Texas.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8705L0838E11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

May 26, 1987

Dear ***:

Thank you for your recent letter which is restated with response below.

On May 7, 1987 we bought the equipment shown on the attached invoice at
an auction in Texas. We paid for the equipment by check for $14,875.00.
We have not received the equipment at our plant site yet. It will be
shipped to us at our expense, by common carrier.

I have spoken to two of your representatives by phone, and after explain-
ing this to them, they both told me that this purchase was not subject to
Texas sales tax as we would not take possession of the equipment until we
sign the common carrier's bill of lading in Arkansas.

In order for us to get a refund of the Texas sales tax from COMPANY A,
they require that we send them written verification from you and a copy
of the carrier's bill of lading.

Would you please send me a letter of verification on this subject so that
we may receive this refund? Thank you.

Response: Assuming that you have made no use of the equipment in Texas
and you obtain a bill-of-lading from a common carrier showing that the
equipment was shipped out of Texas, you may give a copy of the bill of
lading to the auctioneer along with a letter stating that you did not
take possession of the equipment in Texas and request a refund of the
sales tax. The auctioneer may refund the tax and take credit on his
sales tax return. If the return for the period has already been filed,
he may amend the appropriate return.

If you took possession of the equipment in Texas, you are not entitled
to a refund.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Al Van Allen
Tax Policy Section
Tax Administration Division