Did Texas tax equipment sold for use in refurbishing a West Indies refinery?

Plain-English summary

ABC planned to buy items and resell them to EFG Constructors for a refinery-refurbishment project in the West Indies.

The Comptroller said ABC could purchase the items for resale only if the resale to EFG occurred within the United States. ABC otherwise had to collect Texas tax unless ABC, as seller, delivered the items to a carrier or freight forwarder for shipment out of the country.

If EFG took possession in Texas, EFG owed Texas tax. EFG could then seek a refund by proving the items were imported into Antigua.

What this means for you

The operative text focused on delivery and possession, not simply the foreign destination of the project. Seller delivery to a carrier or freight forwarder supported export treatment; buyer possession in Texas triggered tax under the facts described.

Common questions

Did a foreign project automatically make the sale exempt? No.

When could the seller avoid collecting Texas tax? When the seller delivered the items to a carrier or freight forwarder for shipment out of the country.

What if the purchaser took possession in Texas? The purchaser owed Texas tax.

Could the purchaser obtain a refund? The letter said it could prove importation into Antigua to obtain a refund of tax paid to the seller.

Citations and references

• 34 Tex. Admin. Code Rule 3.285(a) (resale certificates)
• 34 Tex. Admin. Code Rule 3.323(c) (imports and exports)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9012L1070F14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 14, 1990

Dear *:

Thank you for your recent letter concerning purchases by ABC, Inc.
of items that will be resold to EFG Constructors for use in refur-
bishing a refinery in the West Indies.

ABC may purchase the items tax free for resale only if the items
are resold to EFG CONSTRUCTORS within the United States. Please
review section (a) of Rule 3.285 on resale certificates. A sale
is defined in the sales tax law as a transfer of title to or pos-
session of a taxable item for a consideration.

ABC must collect Texas tax on all items sold to EFG CONSTRUCTORS
unless ABC (the seller) delivers the items to a carrier or freight
forwarder for shipment out of the country. Please review section
(c) of Rule 3.323 on exports and imports. If EFG CONSTRUCTORS (the
purchaser) takes possession of the items in Texas then EFG CONSTRUCTORS
will owe Texas tax. EFG CONSTRUCTORS will then be required to prove
that the items were imported into Antigua in order to obtain a re-
fund of Texas tax paid to the seller.

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

Please feel free to contact me if you have any additional questions.
You may write me, call toll free 1-800-252-5555 (ext. 3-4685) from
anywhere in the United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence