Texas Letter Ruling 9209L1192A07: Can a mail-order seller cancel its Texas sales tax permit after the Quill Corp. v. North Dakota Supreme Court decision?

Subject

Mail Order Seller — Cancellation Of Sales Tax Permit After Quill Corp. v. North Dakota

Plain-English summary

A taxpayer wrote to the Texas Comptroller's office asking that its Texas sales tax permit be cancelled, pointing to the U.S. Supreme Court's then-recent decision in Quill Corp. v. North Dakota. In this September 8, 1992 letter, the Comptroller's Tax Administration Division agreed: it directed that the taxpayer's sales and use tax permit be cancelled effective October 1, 1992.

The cancellation was based specifically on the taxpayer's own representation that it was not conducting any of the activities listed in Rule 3.286(a)(1)(A) through (E) — the criteria Texas used at the time to decide whether an out-of-state (mail order) retailer was "engaged in business" in Texas and therefore required to hold a permit. The letter notes this determination is based on the facts as presented, and that other, similar-looking facts could lead to a different result.

Note: the "Internet Seller" language in this document's title and the Wayfair alert paragraph that appears at the top of the original text below are a boilerplate disclaimer that the Comptroller's STAR system automatically attaches to older nexus-related letters. They describe the 2018 South Dakota v. Wayfair decision and Texas's later economic-nexus rules — neither of which existed in 1992 and neither of which is part of this letter's actual content. The real 1992 ruling concerns permit cancellation under the pre-Wayfair, physical-presence nexus standard established by Quill.

What this means for you

• This letter reflects the physical-presence nexus rule that governed Texas (and all states) from 1992 until the U.S. Supreme Court's 2018 Wayfair decision overturned Quill.
• If you are researching nexus obligations for a mail order or remote business today, this 1992 letter is not current law — it predates economic nexus. Texas (like other states) now requires many remote sellers exceeding revenue thresholds to collect tax regardless of physical presence, per the Wayfair-related update referenced in the alert paragraph at the top of the original text.
• The letter is a useful historical illustration of what "doing business in Texas" meant under the old physical-presence standard: it turned on the specific activities listed in Rule 3.286(a)(1)(A)-(E), not on sales volume alone.
• Because this ruling applies only to the specific taxpayer who requested it and was based on that taxpayer's particular facts, it cannot be relied on by other businesses — even ones with similar-seeming facts, as the letter itself warns.

Common questions

What did the taxpayer ask for?
The taxpayer asked the Comptroller's office to cancel its Texas sales tax permit, citing the U.S. Supreme Court's decision in Quill Corp. v. North Dakota.

Did the Comptroller grant the request?
Yes. The Comptroller's Tax Administration Division directed that the taxpayer's sales and use tax permit be cancelled effective October 1, 1992.

What was the cancellation based on?
It was based on the taxpayer's representation that it was not engaged in any of the activities described in sections (a)(1)(A) through (E) of Rule 3.286, Seller's and Purchaser's Responsibilities — the activities Texas used to determine whether a retailer was "engaged in business" in the state.

Does this letter still reflect current Texas nexus law?
No. This letter applies the pre-2018 physical-presence nexus standard from Quill. After the 2018 Wayfair decision, Texas adopted economic nexus rules requiring many remote sellers with $500,000 or more in Texas revenue to collect tax regardless of physical presence — see STAR document 201910005L, referenced in the alert notice at the top of this document.

Can another business rely on this letter?
No. Under STAR's rules, a letter ruling can only be relied on by the taxpayer it was issued to, and even then only based on the specific facts presented. The letter explicitly states that other, similar facts could produce a different result.

Citations and references

• Quill Corp. v. North Dakota, 504 U.S. 298 (1992) — cited in the taxpayer's request as the basis for seeking permit cancellation.
• 34 Tex. Admin. Code Rule 3.286, Seller's and Purchaser's Responsibilities — the rule whose subsection (a)(1)(A)-(E) activity list the Comptroller applied to determine "engaged in business" status.
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) — referenced only in the STAR system's standard alert paragraph, not part of the original 1992 letter.
• STAR document 201910005L — referenced in the same alert paragraph for current economic-nexus guidance.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9209L1192A07

Original ruling text

Alert: On June 21, 2018, the U.S. Supreme Court issued a decision allowing states to require remote sellers that have an economic presence in the state to collect sales tax. See South Dakota v. Wayfair, 138 S. Ct. 2080 (June 21, 2018). Any remote sellers with $500,000 or more in total Texas revenue (during the preceding 12 calendar months) must apply for a use tax permit and begin collecting use tax by Oct. 1, 2019. For additional information, see STAR 201910005L.

September 8, 1992

Dear ***:

This is in response to your letter requesting that your sales tax permit

*** be cancelled in light of the recent Supreme Court Decision in

Quill Corporation vs. State of North Dakota.

I have directed that your sales and use tax permit be cancel led effective

October I, 1992, based on your representation that *** is not

conducting any of the activities listed in sections (a) (1) (A) through (E) of

the enclosed Rule 3.286, Seller's and Purchaser's Responsibilities. These are

the activities that we currently consider in determining whether a retailer is

engaged in business in Texas.

This opinion is based on the facts presented. Other facts though similar may

provide a different result.

If you have other questions or need more information, you may call me at

1-800-252-5555, extension 3-4502. The regular number is 512/463-4600. You may

also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora

Tax Administration Division