Who owed Texas use tax when an out-of-state seller without Texas nexus shipped customer-branded note pads into Texas?

Plain-English summary

An out-of-state company produced customer-branded note pads and arranged for them to be delivered into Texas by common carrier for universities to distribute.

Assuming the seller had no Texas nexus, the Comptroller said the seller was not responsible for collecting Texas use tax. Its customers that did have Texas nexus were responsible for paying the use tax directly to the Comptroller.

The letter tied that result to the position Texas adopted after a U.S. Supreme Court decision upholding Louisiana use tax on catalogs printed out of state and mailed to Louisiana recipients at the purchaser's direction.

Common questions

Did the out-of-state seller have to collect Texas use tax? No, assuming it truly had no Texas nexus.

Who paid the tax instead? Customers with Texas nexus paid use tax directly to the Comptroller.

How did the note pads enter Texas? By common carrier, at the customers' direction.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0948F08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

August 21, 1989

Dear *****:

Your recent letter to Wade Anderson was given to me for response.

From your letter and our follow-up phone conversation it appears
that your client is soliciting business from national accounts and
advertising agencies but has no nexus in Texas. Your client produces
note pads with the name of their customers and solicits universities
to distribute them. The note pads are delivered into Texas by common
carrier. You asked who if anyone may be liable for tax on the note pads?

In a recent decision, the U. S. Supreme Court upheld an assessment
by the state of Louisiana. Louisiana charge use tax to a purchaser
doing business in that state who had catalogs printed and mailed to
recipients in Louisiana by a printer in another state. The high court
held that Louisiana use tax did not violate the Commerce Clause of
the U.S. Constitution. Texas has adopted this position.

Assuming that your client has no nexus in Texas, they would not be
held liable for collecting Texas Use Tax on the sale of note pads.
However, their customers who do have nexus in Texas would be
responsible for paying use tax directly to this agency.

Feel free to call or write me if you have questions. You can reach
me by calling toll free 800-531-5441 or FAX (512) 475-0900.

Sincerely,
Al Van Allen
Taxability Section
Legal Services Division