Is wrapping and packaging material used to ship shucked and unshucked oysters exempt from Texas sales tax?

Subject

Oysters — Shucked/Unshucked Oysters — Wrapping/Packaging Used For Shipping — Before And After 9/30/91

Plain-English summary

A seller of shucked and unshucked oysters asked the Comptroller's office to refund sales tax it had paid on wrapping and packaging materials used to ship oysters to customers. The seller was careful to exclude from its refund request any packaging used only in its internal business operations (i.e., not shipped to customers).

The Comptroller drew a line at September 30, 1991, because Texas law changed on that date:

• Through September 30, 1991: Wrapping and packaging used to ship either shucked or unshucked oysters to customers was exempt from sales tax, under the old rule that exempted wrapping and packaging that "furthered a sale."
• After September 30, 1991: That broader exemption was eliminated. From then on, wrapping and packaging was only exempt if it was used to ship a processed product. Shucked oysters count as processed. Unshucked oysters do not — the ruling states that cleaning, grading, sorting, and packaging unshucked oysters "is not processing." So packaging used to ship unshucked oysters became taxable after that date, while packaging for shucked oysters stayed exempt.

The Comptroller approved the taxpayer's refund request for the pre-October 1991 period as submitted, but told the taxpayer it would need to amend its refund request for the later period to include only the packaging used for shucked oysters. The taxpayer had already told the Comptroller it could separate the two because shucked and unshucked oysters ship in different containers, which made that adjustment straightforward. The amended request was forwarded internally to Revenue Accounting for processing.

What this means for you

Seafood processors and shippers

If you ship both raw/unprocessed and processed seafood (or other goods), track your wrapping and packaging purchases separately for each. Packaging tied to genuine processing activities (like shucking) has a much better chance of qualifying for an exemption than packaging used merely to clean, sort, or grade an unprocessed product.

Anyone relying on a "furthers a sale" packaging exemption

This ruling is a reminder that the general Texas exemption for wrapping and packaging that "furthers a sale" ended on September 30, 1991. If you're looking at older transactions, purchases before that date may qualify for treatment that would not apply to identical purchases made afterward — the applicable exemption depends on the purchase date, not just the nature of the product.

Businesses requesting sales tax refunds

The taxpayer's own careful separation of internal-use versus customer-shipment packaging, and its ability to distinguish container types by product, made the refund review straightforward. Keeping this kind of documentation and separation makes refund requests easier to substantiate and process.

Common questions

Q: Was wrapping and packaging for oysters always exempt from Texas sales tax?
A: No. It was exempt through September 30, 1991, under a general exemption for wrapping and packaging that furthers a sale. After that date, the exemption narrowed to apply only to packaging used to ship processed products.

Q: Why does shucking matter for tax purposes?
A: Shucking (removing the oyster from its shell) is treated as processing. Cleaning, grading, and sorting unshucked oysters is not — the Comptroller explicitly said this activity does not amount to processing, so unshucked oysters aren't treated as a processed product for this exemption.

Q: Does packaging used for a business's internal operations qualify for this exemption?
A: This ruling doesn't address that directly — the taxpayer specifically excluded internal-operations packaging from its refund request, so the Comptroller wasn't asked to rule on it here.

Q: Can I rely on this 1992 ruling for my own business today?
A: No. Texas letter rulings can only be relied upon by the taxpayer to whom they were issued, and this ruling is over three decades old — current law, rules, or Comptroller policy may have changed since 1992. Consult a Texas tax professional and check current guidance, including 34 Tex. Admin. Code Rule 3.314, before relying on this reasoning.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.314 (wrapping and packaging supplies) — referenced as enclosed with the original 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/9210L1198C10

Original ruling text

October 16, 1992

Dear ***:

Thank you for your letter concerning your requested refund of sales tax on
wrapping and packaging materials. The information you provided in our phone
conversation was helpful.

You requested a sales tax refund on wrapping and packaging materials used to
ship shucked and unshucked oysters to your customers. The unshucked oysters
are washed and sorted prior to shipment to customers. You stated that you did
not include in your refund request the wrapping and packaging supplies' used in
your internal business operations.

The wrapping and packaging used to ship shucked and unshucked oysters to your
customers is exempt for wrapping and packaging purchases through September 30,
1991. After September 30, 1991, the exemption for wrapping and packaging to
further a sale was eliminated. Only the wrapping and packaging used to ship
processed products (shucked oysters) is exempt for your purchases of wrapping
and packaging after September 30, 1991. Cleaning, grading, sorting and
packaging unshucked oysters is not processing. I have enclosed Rule 3.314 on
wrapping and packaging supplies.

Your requested refund on purchases through September 30, 1991, is acceptable.
However, you will need to amend your requested refund amounts for purchases
after September 30, 1991, to include only the wrapping and packaging used to
ship shucked oysters. You stated that you could distinguish between the
wrapping and packaging purchases because shucked and unshucked oysters are
shipped in different containers. I have forwarded your amended refund request
to Sandi Skaggs in Revenue Accounting.

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

You may call me toll free at 1-800-252-5555, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Administration Division