Texas Letter Ruling 9210L1200F06: Representation/Nexus In Texas — Displaying Products And Providing Order Forms At University Bookstore By Oos Seller

Subject

Representation/Nexus In Texas — Displaying Products And Providing Order Forms At University Bookstore By Oos Seller

Plain-English summary

An out-of-state company that sold college insignia items and similar products through a university bookstore and university alumni associations asked the Texas Comptroller whether it had to collect Texas tax. The company had sent in its sales brochures showing how it sold through the bookstore and alumni associations.

The Comptroller's answer: yes, this creates a Texas connection (nexus). An out-of-state seller that displays its products and provides order forms for those products in Texas is treated as "engaged in business" in Texas because doing so amounts to having a "sample room" in the state. Separately, the Comptroller noted that a seller is also engaged in business in Texas if it has a representative or an independent sales agent in Texas taking orders for taxable items on its behalf.

The Comptroller forwarded the taxpayer's letter and the sales brochures to its Audit Section for further investigation, and noted that the opinion was based on the specific facts presented — other, even similar, facts could lead to a different result.

What this means for you

Out-of-state sellers using campus bookstores or similar outlets

If you sell products through a display of merchandise and order forms placed at a Texas location — such as a university bookstore or an alumni association — the Comptroller treats that display as a "sample room" in Texas. That is enough, on its own, to be considered "engaged in business" in Texas, which can trigger a Texas sales/use tax collection obligation.

Sellers using Texas representatives or sales agents

Separately from the display/order-form scenario, having a representative or an independent sales agent physically in Texas who takes orders for taxable items on your behalf is also treated as engaging in business in Texas.

Accountants and tax professionals

This letter is a narrow, fact-specific nexus determination from 1992 involving a "sample room" theory of nexus (product displays plus order forms) and a separate representative/agent theory. The Comptroller explicitly cautioned that the ruling was based on the facts presented and that similar but different facts could produce a different result. Note also that this file's original-text section carries a STAR-added alert about the 2018 South Dakota v. Wayfair decision and the resulting economic nexus threshold — that alert is boilerplate STAR now attaches to older physical-presence nexus letters and is not part of the 1992 letter's own reasoning.

Common questions

Q: Does displaying products and leaving order forms at a Texas retail location create nexus?
A: According to this letter, yes — the Comptroller treated that arrangement as equivalent to having a "sample room" in Texas, which counts as being engaged in business in the state.

Q: What if I use a sales agent in Texas instead of a physical display?
A: The Comptroller stated that a seller with a representative or an independent sales agent in Texas who takes orders for taxable items on the seller's behalf is also considered engaged in business in Texas.

Q: Does this ruling guarantee the same result for my situation?
A: No. The Comptroller specifically said the opinion was based on the facts presented and that other facts, even if similar, might lead to a different result.

Q: What happened after this letter was issued?
A: The Comptroller forwarded the taxpayer's letter and sales brochures to the Audit Section for further investigation.

Citations and references

No statutes, rules, or cases are cited in the body of this 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/9210L1200F06

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. See also Rule 3.286 amended January 1, 2019.

October 7, 1992

Dear *****:

Thank you for your recent letter regarding sales of college insignia items and

similar products at college bookstores by out-of-state companies. You enclosed

sales brochures from *****, an out-of-state company selling their

products through the University ** and the ** University

Alumni Associations.

An out-of-state seller displaying products and providing order forms for those

products in Texas would be considered to be engaged in business in this state

by virtue of having a "sample room" in Texas. A seller having a representative

or an independent sales agent in Texas taking orders for taxable items on its

behalf would also be considered to be engaged in business in Texas.

I have forwarded a copy of your letter and the accompanying sales brochures to

our Audit Section for further investigation.

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