Can a customs broker who refunds sales tax to an exporting customer recover that money from the vendor?

Subject

Tax Refund — Exported Goods — Retailers May Refund Tax To Purchaser'S Assignee

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9407L1311G01

Plain-English Summary

This short letter corrects an earlier one. On May 31, 1994, the Comptroller's Tax Administration director had told the recipient that customs brokers who refund Texas sales tax directly to their exporting customers might have no way to recover that money — not from the vendor and not from the state — because the statute lets a broker pay tax refunds to customers but doesn't say how the broker gets reimbursed.

This July 11, 1994 follow-up walks that back. The Comptroller's office had since learned that it had been allowing brokers to recover those refunds directly from vendors — but only if the broker first obtains (1) an assignment of the customer's refund claim and (2) a power of attorney from the customer. Because the statute itself doesn't authorize this recovery mechanism, the letter is explicit that the practice is grounded in common law, not in any Tax Code provision.

What This Means For You

Customs brokers handling export sales

If you refund Texas sales tax to a customer on an exported item, you are not left empty-handed. You can recover that amount from the vendor who originally collected the tax, provided you get a written assignment of the refund claim and a power of attorney from your customer authorizing you to pursue it.

Retailers/vendors dealing with exported goods

A vendor may be asked to refund tax to a broker rather than the original purchaser. This letter confirms the Comptroller has accepted that arrangement when the broker presents a valid assignment and power of attorney — even though nothing in the statute itself requires or describes it.

Tax professionals and accountants

Because this mechanism is common-law based rather than statutory, it is administrative practice rather than a codified right. Document the assignment and power of attorney carefully, since that paperwork is the entire legal basis for the broker's claim against the vendor.

Q&A

Q: Does the Texas Tax Code itself let a customs broker recover a tax refund from the vendor?
A: No. The letter says the statute allows brokers to pay refunds directly to customers but contains no mechanism for the broker to then recover that money from the vendor or the state.

Q: So how can a broker get reimbursed?
A: By obtaining an assignment of the refund claim and a power of attorney from the customer, then seeking reimbursement directly from the vendor. The Comptroller's office confirmed it has allowed this in practice, based on common law rather than the statute.

Citations

No statutes are cited in this letter. The Comptroller expressly describes the broker-reimbursement practice as resting on common law rather than any Tax Code provision, so there is no statutory citation to record.

Original ruling text

July 11, 1994

Dear *****:

On May 31, 1994, I wrote you concerning reimbursement directly to customs
brokers who refunded the tax to their customers. In my letter, I stated
that this might not be possible under the statute (While the statute
allows customs brokers to pay tax directly to customers, the statute does
not contain a mechanism which would allow them to recover the money from
either the vendor or the state).

However, after I wrote you, I was made aware that we have allowed brokers
to obtain refunds of tax from vendors if they obtain assignments for the
refunds and powers of attorney from their customers. This is based on common
law, rather than the statute. Because this avenue is available to make refunds
directly to customs brokers, I felt I should make you aware of it.

Should you have any further questions, please feel free to write or call
me at 1-800-531-5441, extension 5-0220.

Sincerely,

Glen D. Hunt
Director, Tax Administration

NOTE: Previous Accession Number 9407502L