Would a multistate retailer owe Texas use tax on out-of-state printed materials mailed directly to Texas recipients?

Plain-English summary

This letter described a proposed revision to Texas Rule 3.346 after a U.S. Supreme Court decision involving catalogs printed out of state and mailed to recipients at the purchaser's direction.

Under the draft rule, a person doing business in Texas would be assessed use tax on out-of-state purchases of taxable items delivered to Texas recipients at that person's direction. The letter defined doing business for this purpose as being required to collect Texas sales or use tax or having some physical presence in Texas connected with a commercial enterprise.

Because the corporation operated five Texas retail outlets, the Comptroller said it appeared the company would have to report use tax on the percentage of its printed-material costs attributable to items delivered in Texas. The letter made the result prospective: tax would become due on the revised rule's effective date.

Common questions

Did the company physically receive the printed material? The ruling addressed material mailed directly to Texas recipients at the purchaser's direction.

Why was the purchaser doing business in Texas? It had five Texas retail outlets.

How was the taxable amount allocated? By the percentage of the printed-material cost delivered in Texas.

Was this an already-effective final rule? No. Rule 3.346 was under revision, and the letter described draft guidelines that would apply from the revision's effective date.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0951F05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

August 22, 1989

Dear **:

Your letter has been forwarded to me from our Correspondence
Section.

Rule 3.346, Use Tax, is currently under revision. A part of the
revision is due to the U. S. Supreme Court decision on a Louisiana
state tax case. Use tax was assessed on a retailer with operations
in Louisiana who ordered catalogs from an out-of-state printer. At
the retailer's direction, the catalogs were mailed to Louisiana re-
cipients.

The draft of our proposed ruling sets the following guidelines for
assessment of use tax on transactions similar to the Louisiana case:
tax will be assessed on out-of-state purchases made by persons doing
business in Texas if the taxable items purchased are delivered to
Texas recipient at the purchaser's direction.

A person is considered doing business in Texas if the person is re-
quired by the tax code to collect sales or use tax or if the person
has some physical presence in Texas in connection with a commercial
enterprise.

It appears your corporation with its five retail outlets in Texas,
would be required to report use tax on your out-of-state purchases
of printed material, based on the percentage of the cost of the ma-
terials that are delivered in Texas. Use tax will be due as of the
effective date of the revised ruling.

This opinion is based on the facts presented. If there are addition-
al facts, or if the circumstances change, the opinion may change.

Please call if you have any questions. You can call toll-free
800-531-5441. Our regular number is 512-463-3830.

Sincerely,
Larry Koenig
Legal Services Division, Taxability Section