How did Texas treat transportation, mailing, word-processing, and clipping-service charges during the 1987 tax-law transition?

Plain-English summary

Before October 1, 1987, separately stated transportation was nontaxable when title passed before shipment. If a contract was silent, third-party shipment under F.O.B. origin terms shown on the bill of lading established pre-shipment title transfer. Recent legislation made transportation before and after a sale taxable on October 1, while delivery of nontaxable items remained nontaxable.

Mailing service unconnected to a sale was normally nontaxable. Stuffing and stamping customer-supplied, preaddressed envelopes was the example. The letter could not decide unspecified “assembly” work without more facts.

Word-processing services were scheduled to become taxable January 1, 1988. A clipping service's charge was already taxable as a sale of tangible property, and the reading service necessary to obtain the clippings was taxable too.

What this means for you

This historical letter covers several distinct transactions and transition dates. It does not support treating all mailing or assembly work alike, and its pre-October transportation answer was expressly about to change.

Common questions

When did transportation before and after a sale become taxable? October 1, 1987.

Was stuffing and stamping customer-supplied envelopes taxable? No, when unconnected to a sale.

Was assembly work decided? No; more information was required.

When did word processing become taxable? January 1, 1988.

Were clipping and necessary reading services taxable? Yes.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8708L0827D05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 3, 1987

Dear ****:

Thank you for your recent letter regarding transportation, mailing
services and clipping service charges.

Transportation charges are not taxable if separately stated to the
customer and title to the goods is transferred to the customer prior to
shipment.

If your contract with your customer is silent as to when title
passes and you ship by a third party carrier with terms F.O.B. origin on the
bill of lading, we would consider the title to have transferred to the customer
before shipment. It is necessary that the carrier's bill of lading show the
F.O.B. terms or this provision of the rule may not be used.

As a result of recent legislation, charges for transportation that
occurs both before and after the sale will become taxable October 1, 1987.
However, charges for delivery of non-taxable items will remain non-taxable.

Normally services by a mailing service which are not connected to a
sale are not taxable. For example, charges for stuffing and stamping
preaddressed envelopes (where all materials are provided by the customer) are
not taxable.

However, because you mentioned assembly, I am not sure what
functions they are performing. Therefore, I need more information before I can
answer this question.

Effective January 1, 1988 data processing services, including word
processing services, will become taxable. Because this new legislation will
probably affect you in some way, you should carefully read any materials you
receive from this agency.

Charges by, a clipping service have been found to be taxable as a
sale of tangible property. As we discussed, because the reading service is
necessary to obtain the clippings, it is also taxable.

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 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 Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division