If I buy something from an out-of-state company that delivers it into Texas, who has to pay or collect the use tax — me or the company?

Subject

Use Tax On Purchases From An Out-Of-State Vendor — Permitted Vendor Must Collect, Otherwise Purchaser Must Report

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9312877L

Plain-English Summary

An individual wrote to the Comptroller asking whether they were responsible for paying sales tax on purchases made through "COMPANY A." Comptroller John Sharp personally responded that the purchaser is responsible for tax on those purchases, and explained the underlying framework: Texas sales tax has always included a complementary use tax on items purchased from out of state. The use tax applies to any property delivered into Texas for use in Texas, at the same rate as the sales tax, and it exists specifically to keep out-of-state vendors from having an unfair price advantage over Texas vendors.

The letter then draws a distinction based on the seller's own tax status in Texas: any vendor that holds a Texas sales/use tax permit is required to collect the use tax on items it sells and delivers into the state. Because COMPANY A was permitted in Texas at the time, it was required to collect the tax on the purchaser's orders. The letter notes that the rule works differently for vendors that are not permitted in Texas — in that situation, the statute requires the purchaser, not the seller, to report and pay the use tax directly to the state.

What This Means For You

If you're buying from an out-of-state company that ships into Texas: Check whether that seller is permitted to do business in Texas. If it is, the seller is legally required to collect Texas use tax on your purchase at checkout — you don't have to separately report it. If the seller is not permitted in Texas, this letter says the burden shifts to you as the purchaser to report and pay the use tax directly to the state.

If you're an out-of-state vendor shipping into Texas and you hold a Texas permit: This letter confirms the Comptroller's position that being permitted triggers a collection obligation on all items you sell and deliver into Texas — collecting isn't optional once you're permitted.

Note on scope: This letter does not cite any specific statute or rule by number; it describes the use tax framework only in general terms (complementary tax, same rate as sales tax, purpose of protecting Texas vendors from unfair out-of-state competition). It is addressed to an individual purchaser about their own purchases from one named (redacted) vendor, not a general nexus determination for the vendor's other customers.

Q&A

Q: I bought something from an out-of-state company — do I owe Texas tax on it?
A: According to this letter, it depends on whether the seller is permitted in Texas. If the seller holds a Texas permit, the seller is required to collect the use tax from you. If the seller is not permitted in Texas, you as the purchaser are required to report and pay the tax directly to the state.

Q: What is the "use tax" this letter talks about, and why does it exist?
A: The letter describes it as a complementary tax to the sales tax, imposed on property delivered into Texas for use in Texas, at the same rate as the sales tax. It was created when the sales tax was originally passed, specifically to prevent out-of-state vendors from undercutting Texas vendors on price by avoiding Texas tax.

Q: Does a company have to collect Texas use tax just because it ships products into Texas?
A: This letter ties the collection duty to whether the vendor is "permitted in Texas" — it states that any vendor permitted in Texas is required to collect the use tax on items it sells and delivers into Texas. It does not otherwise explain what makes a vendor become permitted or required to be permitted.

Original ruling text

December 6, 1993

Dear **:

Thank you for inquiring about your responsibility to pay sales tax on purchases
made through the COMPANY A. You are responsible for tax on your purchases.

When the sales tax was originally passed, it included a provision that imposed
a complementary use tax on items purchased from out-of-state. The use tax is
imposed on any property delivered into Texas for use in Texas at the same rate
as the sales tax. The use tax was passed to protect Texas vendors from unfair
competition from out-of-state vendors.

Any vendor permitted in Texas is required to collect the use tax. Because
COMPANY A is currently permitted in Texas, it is required to collect the tax on
items it sells and delivers into Texas. On out-of-state purchases from
companies that are not permitted, the statute requires the purchaser to report
the tax directly to the state.

I hope this satisfactorily answers your questions. Should you have further
questions, please write Wade Anderson, Assistant Director of Tax
Administration, at 111 East 17th Street, Austin, Texas 78774, or call him at
1-800-531-5441, extension 3-4004.

Sincerely,

John Sharp
Comptroller of Public Accounts

cc: Michael D. Doyle, Director, Tax Administration
Wade Anderson, Assistant Director, Tax Administration