Was Texas use tax due on a Mexican company's bagged mineral product delivered to Texas customers, and who had to collect it?

Plain-English summary

A Mexican company sold a bagged mineral product to Texas businesses. The product crossed the border and was delivered in Texas, while a Texas-based agent performed services for the Mexican company.

The Comptroller said use tax was due. The Mexican seller was responsible for collecting the tax from its Texas customers and remitting it to the agency. If the agent handled billing and collections for the seller, the agent had to collect the tax.

The letter also said the tax could be collected from the Texas customers if the seller did not collect or pay it. On audit, a customer could owe the tax plus applicable penalty and interest.

What this means for you

Buying from a foreign seller did not eliminate Texas use tax on goods delivered into Texas. The collection duty started with the seller and any agent handling its billing, but the purchaser remained exposed if the tax went unpaid.

Common questions

Was tax due because the goods entered from Mexico? Yes, the letter said use tax was due on the described sale.

Who collected it first? The Mexican seller, or the agent if the agent handled billing and collections.

Could Texas collect from the buyer? Yes, if the seller did not collect the tax.

What could an audited buyer owe? The tax plus any applicable penalty and interest.

Citations and references

• No statute or administrative rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9106L1118A12

Original ruling text

June 17, 1991

Dear **:

Thank you for your recent letter which is restated in part
with responses below.

Facts: I act as agent for a Mexican company that sells a
bagged mineral product to Texas companies. The customers
send payment to the Mexican company at a McAllen bank
account, and I am paid for my services directly by the
Mexican company. The product is shipped to the border in
Mexican trucks and reloaded onto other trucks. It crosses
the border and is delivered into Texas.

Question: Is sales or use tax due on the sale of the
material?

Response: Use tax is due.

Question: Who is responsible for the collection/payment of
this tax?

Response: The Mexican firm is responsible for collecting
the tax from their Texas customers and remitting it to this
agency. If you do the billing and collections on behalf of
the firm, then you must collect the tax. However, if the
tax is not collected and we audit one of your Texas
customers, we will collect the tax plus any applicable
penalty and interest from them.

Question: Since the producer of this material is a Mexican
company, how will enforcement of unpaid taxes due (if any)
be handled?

Response: If tax cannot be collected from the seller, it
will be collected from the customers.

This opinion is based on the facts you presented. Other
facts, though similar, may yield different results.

If you have questions or need more information, please call
or write. You may reach me by calling toll free, (800)
531-5441. My direct Line number is (512) 463-4680. The number
for FAX transmissions is (512) 475-0900. You may write to
me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division