How did Texas tax a portrait seller's purchase and resale of slides, photographic enlargements, and a painting?

Plain-English summary

The intermediary used the slides before selling them to her customer. Because of that use, the photographic supplier had to collect tax from her on the film and processing.

She did not use the photographic enlargements, so she could give the supplier a resale certificate for that function only. She then had to charge her customer tax on the entire selling price of the slides, enlargements, and painting.

The letter also warned that a seller's gross receipts were presumed taxable. A seller could protect itself by collecting tax or accepting a completely filled-out resale or exemption certificate in good faith at the time of sale. A facially invalid or incomplete certificate did not protect the seller, and a late certificate faced closer scrutiny.

What this means for you

The historical result separated property consumed or used before resale from property passed through unused. Certificate completeness and timing mattered independently of the underlying resale claim.

Common questions

Why were film and processing taxable to the intermediary? She used the slides before selling them.

Could she give a resale certificate for the enlargements? Yes, because she made no use of them.

What amount did she tax to her customer? The entire package price for slides, enlargements, and painting.

Did any resale certificate protect the supplier? No. It had to be complete, facially valid, and accepted in good faith; late certificates received closer scrutiny.

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/8708L0850C01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 5, 1987

Dear ***:

Thank you for your follow-up letter in regard to your sales to
***.

We would consider *** to be using the slides prior to their
sale to
the customer. For that reason, you must collect tax from her on the film
and
processing.

Because she is making no use of the photographic enlargements, she may
give
you a resale certificate for this function only. She would charge tax to
her
customer on the entire selling price of the slides, enlargements and
painting.

As we discussed, the gross receipts of a seller are presumed to be
taxable
until the contrary is established. A seller may protect himself by
either
collecting the tax or accepting a completely filled out resale or
exemption
certificate in good faith, at the time of the sale.

However, taking a certificate at the time of the sale will not excuse a
seller who accepts a certificate that is not completely filled out or
that is
invalid on its face.

Certificates that are taken by a seller after the time of the sale are
subject to closer scrutiny and if found to be invalid may be construed
against either seller or buyer.

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