Can an individual paying with personal funds still buy items tax-exempt for a school district, and can a school district use an identification card instead of an exemption certificate for its purchasers?

Plain-English summary

A school district's finance office asked the Comptroller's office to approve an identification card that qualifying purchasers (such as staff making purchases on the district's behalf) could carry and show to vendors, to save a second trip to deliver a paper exemption certificate. The Comptroller approved the card — including the district's proposed additions like the school name, an expiration date, and internal control numbering — as an acceptable way to identify people authorized to buy on behalf of the school or school district.

But the card is a supplement, not a substitute. It cannot take the place of a written purchase order or an exemption certificate, and it can only be used together with one of those, on sales made directly to the school or school district. Under the Comptroller's rule, every vendor selling to governmental entities (including public school districts) must keep a properly completed exemption certificate or a written purchase order/voucher on file to prove the sale was exempt. A school district can give a vendor a single exemption certificate covering all of its purchases from that vendor, and the identification card can then be used alongside that certificate. The Comptroller also noted that, while not ideal, a vendor may accept an exemption certificate after the sale if the vendor agrees to it.

The letter then addresses a separate, more specific question: purchases made by individuals (for example, teachers) using their own money are generally taxable, since the individual — not the exempt school district — is the buyer. However, Tax Code § 151.155(b) creates a narrow exception: an individual who gives the vendor an exemption certificate is not liable for the tax if they donate the purchased property to an organization exempt under § 151.309 or § 151.310(a)(1) or (2) — which includes a school district. The catch is timing: the donation must happen, and the individual must not put the item to any other use (beyond retention, demonstration, or display), before the donation. If the individual uses the item first, tax is due.

What this means for you

School districts and other exempt organizations

You can use an identification card to help vendors recognize authorized purchasers, but it does not replace your exemption certificate or purchase order — keep issuing one of those to each vendor (a single certificate can cover all future purchases from that vendor), and use the card only as a supplement.

Individuals purchasing on behalf of a school or nonprofit with personal funds

If you pay with your own money intending to donate the item to the school or school district, you can still avoid sales tax by giving the vendor an exemption certificate — but only if you donate the item to the exempt organization before putting it to any other use. Using, wearing, or consuming the item first before donating it will make the purchase taxable.

Vendors selling to school districts and other exempt governmental entities

Keep a properly completed exemption certificate or a written purchase order/voucher on file for every exempt sale to a governmental entity, since you need one of these to substantiate the exemption on audit. An identification card presented by the purchaser is not, by itself, sufficient documentation.

Common questions

Q: Can a school district's identification card replace an exemption certificate?
A: No. The Comptroller approved the card as a way to identify authorized purchasers, but it must be used together with a written purchase order or exemption certificate — it cannot substitute for either one.

Q: Are purchases made by teachers or other individuals with their own money exempt?
A: Generally not, because the individual — not the exempt organization — is the purchaser. But under Tax Code § 151.155(b), the individual can give the vendor an exemption certificate and avoid the tax if they donate the item to the school district before making any other use of it.

Q: Can a vendor accept an exemption certificate after the sale has already happened?
A: Yes, although the Comptroller notes it's not desirable — a vendor can choose to accept a certificate submitted after the sale if the vendor agrees to it.

Q: Does one exemption certificate cover multiple purchases from the same vendor?
A: Yes. A school or school district may submit an exemption certificate to a vendor to cover all of the district's purchases from that vendor going forward.

Citations and references

• Tex. Tax Code § 151.155(b) (exemption certificate for property later donated to an exempt organization)
• Tex. Tax Code § 151.309 (exempt governmental entities, including school districts)
• Tex. Tax Code § 151.310(a)(1), (2) (exempt organizations)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9501336L

Original ruling text

January 5, 1995

Dear **:

Your letter addressed to Neo Flores dated December 9, 1994 has been forwarded
to me for response. You submitted an identification card for review.

As I understand it, you wish to provide qualifying purchasers with an
identification card to be used when making purchases on behalf of the school
district. Mr. Flores explained, your intension is to save a second trip to
deliver an exemption certificate to the vendor.

The identification card as submitted along with your suggested additions
(school name, expiration date, etc.) is acceptable as a method of identifying
persons qualified to make purchases on behalf of the school or school district.
However, this card cannot take the place of a written purchase order or an
exemption certificate and must be used in connection with these items and only
on sales made directly to the school/school district.

The rule requires each vendor selling to governmental entities (including
public school districts) to maintain properly completed exemption certificates
or to have written purchase orders/vouchers available for audit review to
substantiate the exempt sale(s). The school/school district may submit an
exemption certificate to the vendor to cover all purchases made by the
school/school district from that vendor. The identification card may be used in
conjunction with this exemption certificate from the school/school district.
Although not desirable, it is permissible to submit an exemption certificate
after the sale, if the vendor agrees to accept it after the sale.

Generally, sales made to individuals (teachers, etc.) paid with the
individual's own funds are not exempt. However, in Section 151.155(b) the
statute states:

A purchaser of tangible personal property who gives an exemption certificate is
not liable for the tax imposed by this chapter if he donates the property to an
organization exempted under Section 151.309 or 151 .310(a)(1) or (2) of this
code; except that any use by the purchaser of the property other than
retention, demonstration, or display shall be subject to taxes imposed by
Subsection (a) of this section.

This means individual; may give an exemption certificate to vendors even when
purchasing items with the individual's own funds, but only when the item is
donated to the school/school district before the individual makes any use of
the item.

This opinion is based upon the facts presented; if there are additional or
different facts, this opinion may change. If you have other questions or
require additional information, you may call 1-800-531-5441. You may also write
to Tax Administration Division, Comptroller of Public Accounts.

Sincerely,

Tax Administration Division

December 9, 1994

Mr. Noe Flores
State Comptroller's Office
Audit Division

Dear Mr. Flores,

Enclosed is a sample of the I.D. card that I spoke to you back in October.
Could you please submit it to ** for a written approval? We are
considering adding the school name, definite expiration date, numbering for
internal control purposes and possibly a picture.

Your assistance in this matter is greatly appreciated.

Sincerely,

Adm. Accountant for Finance