Could restaurants and caterers buy disposable cheesecloth lemon wraps without Texas sales tax?

Plain-English summary

Caterers, hotels, and other eating establishments could buy nonreusable decorative cheesecloth lemon wraps without tax by giving the manufacturer a valid, properly completed resale or exemption certificate.

Without a certificate, the manufacturer correctly charged sales tax. A customer that paid tax in error could later provide a valid certificate and request a refund from the manufacturer, which could then seek its refund from the state.

The letter limited refunds to tax paid within its stated four-year limitations period.

Common questions

Could an eating establishment buy lemon wraps tax-free? Yes, with the appropriate certificate.

What if no certificate was provided? The manufacturer had to collect tax.

Could a certificate be provided later for a refund? Yes, subject to the stated refund procedures and limitations period.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0948B01

Original ruling text

August 7, 1989

Dear ***:

Thank you for your inquiry regarding the taxability of "lemon wraps" which are
manufactured by CORP ABC.

You state that the lemon wraps are decorative cheese cloth wraps which are
placed around a cut lemon for proper distribution of the juices. I understand
that the lemon wraps are non-reusable. You also indicated that CORP ABC has
charged sales tax to customers who didn't issue a valid resale certificate.

Caterers, hotels, and other eating establishments may issue CORP ABC a valid,
property completed resale or exemption certificate in lieu of sales tax on the
lemon wraps. If the customer doesn't issue a valid, property completed resale
or exemption certificate, CORP ABC must charge tax on the sale of the lemon
wraps. That is, CORP ABC properly charged tax if the customer didn't issue the
appropriate certificate.

However, any customers who erroneously paid tax on their purchases of lemon
wraps, may issue a valid, properly completed resale or exemption certificate on
those purchases and obtain a refund of tax from CORP ABC. CORP ABC can then
obtain a refund of the tax from the state. In any case, refunds are only
allowed for tax paid within the statute of limitations (four years). You
should consult the enclosed Comptroller's Rule 3.325 (Refunds, Interest and
Payments Under Protest) and Refund Procedure for Tax Paid in Error to a
Retailer regarding the appropriate procedures forobtaining refunds and credits.

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

If you have any questions, please contact Tax Correspondence. You may call toll
free 1-800-252-5555, or our regular number is 512/463-4600. My extension is
3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence