Could a welding-repair provider buy flux tax-free, or was the flux a taxable consumable supply?

Plain-English summary

The tax treatment of welding flux depended on whether it became part of the customer's property.

If the flux was physically incorporated into the property like welding material and sold to the customer, the repairer could give its supplier a resale certificate. The utility customer could pay the tax under its direct-payment permit.

If the flux was only a consumable used while performing the repair, the repairer had to pay tax when buying it. Flux used to clean a surface remained a consumable even if some of it stayed on the item.

What this means for you

Physical residue was not enough. The historical distinction was between material incorporated and sold as part of the repaired property and a supply consumed in doing or cleaning for the repair.

Common questions

Could incorporated flux be bought for resale? Yes.

Who paid tax when the utility customer had a direct-payment permit? The letter allowed that customer to pay the tax under the permit.

Was surface-cleaning flux treated as incorporated merely because some remained? No. It was still a consumable.

Citations and references

The letter cites no numbered statute or 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/8802L0859D11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 5, 1988

Dear **:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay
in
answering your question involving changes in the sale tax law. This
isn't the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which
would
not adversely impact businesses. In many instances, an answer to a
question
just wasn't available when the question arrived.

You asked if flux used in welding repairs could be purchased tax-free.
If
the flux is actually incorporated into the property of your customer like
the welding material and sold to him, you may give your supplier a resale
certificate and allow your utility customer to pay the tax under its
direct payment permit.

If the flux is a consumable supply that is used in the performance of the
repair and is not physically incorporated into the property of the
customer, you must pay tax at the time of purchase. If the flux is used
to clean the surface of the item, it is a consumable even if part of the
flux remains on the item.

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

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

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division