How could a landscaper recover tax paid on inventory later transferred to customers, and could equipment used to provide landscaping services be bought for resale?

Plain-English summary

For tax-paid inventory that was actually for resale, the landscaper could give its supplier a resale certificate and request a refund of the tax paid in error. Alternatively, it could take a credit on its sales-tax return for tax-paid materials transferred to customers by reducing taxable sales by the purchase price of those materials.

Equipment used to provide services but not transferred to the customer remained taxable. The provider could neither give a resale certificate for that equipment nor claim a return credit for it.

What this means for you

The historical distinction was transfer to the customer. Materials transferred in the sale could receive resale treatment; equipment the landscaper retained and used to perform services could not.

Common questions

Could the supplier refund tax paid on resale inventory? Yes, after receiving a resale certificate.

Was there an alternative to a supplier refund? Yes, the provider could take the stated credit on its sales-tax return for transferred materials.

Could retained service equipment be bought for resale? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.338

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0845G13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller November 9, 1987

Dear *****:

Thank you for your letter dated September 1, 1987, in which you asked for
clarification of the new tax laws.

Enclosed you will find Texas Tax bulletin entitled Landscaping Services.
The
general questions you have are answered in greater detail by the
information
contained in the bulletin.

In instances where you have a tax paid inventory that is for resale, you
are
correct in wanting to have the tax backed out. You should complete a
resale
certificate for the items in question and give it to your supplier for a
refund of the tax erroneously paid to that supplier. In the alternative
you
may take credit on your sales tax return, for tax paid on materials
transferred to your customers. You may do this by reducing the taxable
sales
amount by the purchase price of materials on which tax was paid.
Equipment
which is used in providing services but not transferred to the customer
is
taxable. You may not issue a resale certificate for such equipment nor
may
you take credit on your return. Rule 3.338 is enclosed.

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,
Eddie C. Washington
Tax Policy Division