Can an out-of-state retailer that ships goods into Texas only to have them forwarded out of the country claim a use tax exemption for temporary storage?

Plain-English summary

The Comptroller's Tax Administration Division followed up in writing on a phone conversation about goods that CORP A shipped from its New Jersey location into Texas. The letter explains that the Mexican Navy may issue an exemption certificate to CORP A claiming the temporary storage exclusion found in Texas Tax Code Section 151.011(f). The goods qualify for the exclusion because they were shipped from CORP A's New Jersey location to a freight forwarder, and were then taken out of Texas for use exclusively outside Texas.

The letter also notes a general point about how Texas taxes goods that arrive from out of state: goods shipped into Texas from out of state are subject to "Use" tax rather than sales tax, and Section 151.011(f) is specific to use tax. The Comptroller's office told the requester they could give CORP A a copy of the letter, together with the exemption certificate, to claim the exclusion. The letter closes by noting that this opinion is based on the facts submitted, and that other facts — even if similar — may yield different results.

What this means for you

Out-of-state sellers routing goods through Texas

If your company ships goods into Texas only so they can be forwarded (by a freight forwarder, for example) out of Texas for use exclusively outside the state, this letter shows the Comptroller treating that scenario as eligible for the temporary storage exclusion under Section 151.011(f), so the goods pass through Texas without becoming subject to use tax.

Buyers who need documentation for their supplier

The letter indicates the recipient (CORP A's contact) could supply the buyer — here, the Mexican Navy — with a copy of the letter along with an exemption certificate to support claiming the exclusion. Keeping a paper trail like this, showing the letter plus a completed exemption certificate, was the mechanism described for documenting the exclusion.

Accountants and tax professionals

Note the letter's distinction between sales tax and use tax: goods shipped into Texas from out of state are subject to use tax rather than sales tax, and the temporary storage exclusion in Section 151.011(f) applies specifically to use tax, not sales tax generally. Also note the letter's own caveat that it is based on the specific facts submitted, and that similar but different facts could produce a different result.

Common questions

Q: What tax applies when goods are shipped into Texas from another state?
A: The letter states that goods shipped into Texas from out of state are subject to "Use" tax rather than sales tax.

Q: What let these goods qualify for the temporary storage exclusion?
A: The goods were shipped from CORP A's New Jersey location to a freight forwarder and were then taken out of Texas for use exclusively outside Texas.

Q: Who could rely on this letter?
A: The letter was addressed to a specific requester who could share a copy of it, along with an exemption certificate, with CORP A to support the exemption certificate claim. The letter itself notes the opinion is rendered based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

• Texas Tax Code Section 151.011(f) — temporary storage exclusion (referenced as applicable to use tax).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9503L1345G14

Original ruling text

March 2, 1995

VIA FAX

Dear ** :

I want to take a minute to follow up our telephone conversation with a
written response.

The Mexican Navy may issue an exemption certificate to CORP A claiming the
temporary storage exclusion in Texas Tax Code Section 151.011(f). The goods
qualify for the exclusion from tax since you say that they were shipped from
CORP A's New Jersey location to the freight forwarder, and were then taken
out of Texas for use exclusively outside Texas.

Goods that are shipped into Texas from out of state are subject to "Use" tax
rather than sales tax. And, Section 151.011(f) is peculiar to use tax. Please
feel free to supply CORP A with a copy of this letter along with the
exemption certificate to claim the exclusion.

This opinion is rendered based on the facts you submitted. Other facts,
though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9503066L