Which purchases could a property manager make tax-free in Fannie Mae's name under the reviewed Texas management contract?

Plain-English summary

The Comptroller reviewed a proposed form contract for managers of Fannie Mae-owned property. Under that contract, managers could buy the items listed in section 3.G without Texas sales or use tax if the items were bought in Fannie Mae's name and incorporated into or used on the managed property.

The letter said qualifying items could potentially include utilities, vermin extermination, trash removal, grounds maintenance, and items incorporated into the property. A manager buying in Fannie Mae's name could give the supplier an exemption certificate.

The exemption did not cover property used by the manager for its own operations. The Comptroller assumed the manager used the telephone service or equipment, so those purchases did not qualify. Office supplies, office equipment, commodities, and other taxable items for the manager's own use also could not be bought tax-free merely because they supported property-management work.

What this means for you

The reviewed contract and whose name the manager used for each purchase were central to the result. The Comptroller expressly limited the conclusions to that form contract and warned that different language could change them.

Common questions

What had to be true for a purchase to qualify? It had to fall within the contract provision, be bought in Fannie Mae's name, and be incorporated into or used on the managed property.

What examples could potentially qualify? Utilities, vermin extermination, trash removal, grounds maintenance, and property-incorporated items.

Could the manager's telephone service or equipment qualify? No under the stated assumption that the manager used it.

Could office supplies or office equipment qualify? No. They were taxable items for the property manager's own use.

Citations and references

The letter did not cite a statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9101L1068A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller January 10, 1991

Re: Tax Exempt Status of Purchases by
Property Managers on behalf of Fannie Mae

Dear ***:

We have reviewed the "form contract" that you propose to use, or do use,
with persons that manage property owned by Fannie Mae.

We conclude that this contract is sufficient to allow those persons to
buy,
free of Texas Sales or Use Tax, items listed in Section 3.G. of the
contract
if those items are "bought in the name of Fannie Mae and are incorporated
into or used on the property being managed." Specifically, that would
potentially include utilities, vermin extermination, trash removal, and
grounds maintenance as well as items bought for incorporation into the
property.

The manager, buying under the name of Fannie Mae, could issue an
exemption
certificate to its supplier in order to make the tax-free purchase.

We assume that the telephone service or equipment is used by the
property
manager, so it would not qualify.

Further, the property manager may not buy "commodities" or any other
taxable
items for its own use tax-free even if the items are used to perform the
property management operation. Examples of this would include office
supplies or office equipment.

Our conclusions are limited to this contract. For your records, I am
returning a copy of this contract, date stamped with today's date by the
Legal Services Division. Of course, a differently worded contract could
cause our conclusions to be different too.

If you have any questions, please call me at 1/800/531-5441, extension
3-4085, or at 512/463-4085.

Sincerely,
Robert L. Frederick
Assistant Director
Legal Services Division