Can a Texas border retailer accept a customs broker's certificate of exportation on an installed car radio or stereo sold to a Mexican customer, and refund the tax?

Plain-English summary

This March 10, 1993 letter, signed by Comptroller John Sharp, answers a policy question raised by radio and stereo sellers along the Texas-Mexico border: can they accept a customs broker's certificate of exportation on a radio or stereo that has already been installed in a vehicle sold to a Mexican customer, and refund the sales tax on it?

The Comptroller's answer is yes, with one condition. Because items used in Texas before being exported are subject to tax, an installed radio or stereo is normally hard to tell apart from one that was never used here at all — the customer drives off with it already in the car. The letter resolves this by treating radios and stereos the same way the Comptroller already treats clothes and jewelry sold at the border:

• If a customer buys a watch and carries it out of the store in a box, the retailer can accept a customs broker's certificate in good faith, because the retailer has no way of knowing whether the watch was ever worn in Texas.
• If the customer puts the watch on and wears it out of the store, the retailer cannot accept the certificate, because the retailer knows it was used in Texas.

Applying that same logic, a retailer may accept a customs broker's certificate and refund the tax on an installed radio or stereo unless the customer actually used it in the retailer's presence after buying it (for example, turning it on and playing it in the store or lot before leaving). The letter also notes, in passing, that retailers selling tires and batteries are in a different position, because those items must be used in Texas as soon as the car is driven.

The letter closes by noting it was originally issued under accession number 9303980L and has been reissued under this new number.

What this means for you

Border-area car radio and stereo retailers

You can generally take a customs broker's export certificate at face value on an installed radio or stereo and refund the sales tax, the same way you would on a boxed item like a watch or a piece of jewelry. The only thing that should stop you is direct, personal knowledge that the customer used the radio or stereo in Texas before leaving — for instance, if they tested it out in front of you. Absent that kind of firsthand knowledge, good-faith acceptance of the certificate is allowed.

Sellers of tires, batteries, or other items a car must use immediately

The letter draws a contrast: unlike a radio that a customer might not turn on before crossing the border, items like tires and batteries are necessarily put into use in Texas the moment the vehicle is driven. The reasoning in this letter (based on whether the retailer can plausibly not know the item was used here) does not extend the same treatment to those goods.

Common questions

Q: Does this mean every installed radio or stereo sold to a Mexican customer is automatically tax-exempt?
A: No. The sale is still generally taxable unless it qualifies for the export exemption, and the retailer still needs a valid customs broker's certificate of exportation. What this letter clarifies is that the certificate can be accepted (and the tax refunded) even though the item was installed and technically capable of being used, as long as the retailer doesn't actually know it was used in Texas.

Q: What would disqualify a retailer from accepting the certificate?
A: Actual knowledge that the customer used the radio or stereo in Texas — the letter's example is the customer using it "in your presence after purchase." That mirrors the jewelry example: wearing a watch out of the store (visible use) versus carrying it out in a box (no way to know).

Q: Why does the letter also mention tires and batteries?
A: It's drawing a distinction, not extending the same rule to those items. Tires and batteries must be used in Texas as soon as the vehicle is driven, so a retailer of those items cannot plausibly claim not to know the goods were put to use here.

Q: Is this letter binding on other taxpayers?
A: No. Under Texas STAR policy, a letter like this can only be relied on by the specific taxpayer it was addressed to, and even then only to the extent described in the disclaimer above. It shows the Comptroller's general reasoning at the time but isn't a guarantee for anyone else's situation.

Citations and references

No statutes or rules are cited in 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/9303L1228G01

Original ruling text

March 10, 1993

Dear **:

I enjoyed seeing you again at the meeting last Thursday. Thank you for taking
the time and trouble to let me know the problems you and other radio and
stereo sellers on the border are experiencing. After considering our policy
concerning the taxation of items used prior to export, I have concluded
customs brokers' certificates may be accepted on installed radios and stereos
unless the retailer knows it was used in Texas by the customer.

Essentially, this treats radios and stereos just like clothes and jewelry.
For example, if a Mexican citizen purchases a watch in Laredo and takes it out
of the store in a box, the retailer may accept a customs broker's certificate
in good faith because the retailer cannot know whether the watch was put to
its intended use (worn) in this State. On the other hand, if the customer
puts the watch on and wears it out of the store, the retailer may not accept a
customs broker's certificate because the retailer knows t was used in Texas.
Similarly, retailers selling tires and batteries because they know they
must be used in the State if the car is moved. Consequently, unless the
customer uses the installed radio or stereo in your presence after purchase,
you may accept a customs brokers' certificate and refund the tax on the
purchase.

Should you have additional questions, please call Mike Doyle, Director of Tax
Administration, at 1-800-531-5441, extension 3-4783 or Wade Anderson at
extension 3-4004.

Sincerely,

JOHN SHARP
Comptroller of Public Accounts

NOTE: Previous Accession Number 9303980L