Could the Comptroller waive a nonprofit mail-order seller's prior Texas tax liability when it volunteered to register and collect tax prospectively?

Plain-English summary

Counsel for a religious nonprofit mail-order corporation asked Texas to allow prospective registration and collection without liability for earlier sales to Texas residents.

After referring the request to the Tax Policy Committee, the Comptroller said the agency had no authority to waive the tax. It would waive penalties and interest. The letter also instructed the organization to complete the enclosed use-tax permit application and begin collecting tax if it was engaged in business in Texas.

The STAR subject label mentions insolvency, but the preserved ruling body does not make insolvency part of the holding. This page therefore reports only the relief actually stated in the letter.

Common questions

Would Texas forgive the prior tax? No.

What would Texas waive? Penalties and interest.

What did the organization need to do going forward? Obtain a use-tax permit and begin collecting tax if it was doing business in 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/8902L0928G02

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 23, 1989

Dear ***:

Thank you for your letter of January 25, 1989, concerning your
request for a waiver of tax liability.

In my letter of June 21, 1988, I told you I would send your re-
quest to our Tax Policy Committee. The committee considered your
request, and unfortunately, we have no authority to waive tax. We
will waive any penalty or interest.

I enclosed an application for a use tax permit in my last letter.
If the organization is engaged in business in Texas, the organiza-
tion should complete the application and begin collecting tax.

If you have any questions or need more information, please call
our toll-free number 1-800-531-5441. The regular number is
512/463-4614. (FAX (512) 475-0900) You may write me at the Tax-
ability Section, Legal Services Division.

Sincerely,
Adina Whittemore
Taxability Section
Legal Services Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 21, 1988

Dear ***:

Thank you for your letter of June 6, 1988, and the copy of your
previous letter. Ms. Shoemate is no longer with us. I have
searched our files for your previous letters. I found your letter
of December 2, 1988, and a letter from *** dated
April 1, 1988. Unfortunately, I did not find your letters con-
cerning a religious non-profit mail order company.

I'm enclosing an application for a use tax permit. I will send a
copy of your letter to our Tax Policy Committee for a decision on
your request for a waiver of any previous tax liability.

If you have any questions or need more information, please call
our toll-free number 1-800-531-5441. The regular number is
512/463-4614. You may write me.

Sincerely,
Adina Whittemore
Tax Correspondence

December 10, 1987

FEDERAL EXPRESS

Mrs. Mona Shoemate
Tax Policy Shoemate
111 West Sixth Street
Austin, Texas 78701

Dear Mrs. Shoemate:

As we discussed on December 10th, I am writing to you on behalf of
a religious non-profit corporation that has a Section 501(c)(3) sta-
tus. In order to further its charitable, educational, and religious
missions, the corporation began a small mail order business in the
mid-1970's which has grown and prospered over the years. As the
business grew, the non-profit corporation sought professional advice
from a regional accounting firm in the Midwest with respect to its
responsibilities to charge and collect tax on its mail order sales.
It was advised that it did not have any legal responsibility to do
so because of the National Bellas Hess case. The non-profit corpora-
tion followed that advice.

However, over the last year the non-profit corporation became con-
cerned about its tax responsibilities after reading in the press
about federal legislation to overturn the National Bellas Hess case.
The non-profit corporation is also a member of the Direct Marketing
Association and carefully reviewed the reports in that association's
news letters and periodicals about the federal legislation. After
making inquiry of the Direct Marketing Association, the non-profit
corporation retained me as outside counsel several months ago.

Subsequently, we have conducted a review of the history of the non-
profit corporation and the current mail order business. We have
concluded that there is now some doubt as to whether the non-profit
corporation enjoys the protection of the National Bellas Hess case,
especially in light of subsequent case law decisions by various
states and the passage of legislation by your state of Texas and
other states such as California, Oklahoma, Nebraska, and Florida.
Because the non-profit corporation supports a great range of reli-
gious and educational as well as charitable activities with the
funds gained from the direct mail business, it wishes to be in
compliance with the developing law and not risk the possibility of
incurring substantial tax penalties in the future if it does not
collect tax on its mail order sales. Such penalties would seriously
hamper the good works in which the non-profit corporation is engaged
and adversely affect the lives of many people.

Accordingly, the non-profit corporation wishes to voluntarily register
as a vendor with the State of Texas and commence collecting Texas tax
on its sales to Texas residents, without any liability for past years.
The registration can be done as promptly as possible and tax could be
collected beginning with the first version of the catalog to be printed
after the execution of an agreement with the State of Texas. It would
not be possible to collect Texas tax now as the fall, 1987, and Christ-
mas season catalogs have already been printed and mailed to Texas resi-
dents and the spring, 1988, catalogs have already been finalized at the
printers.

The State of Texas has not contacted the non-profit corporation and it
is approaching you voluntarily at this time.

Your consideration of this request would be greatly appreciated. I under-
stand that you will discuss this matter with others in your office and
then contact me with your answer.

Respectfully submitted,