How long does the statute of limitations run on the manufacturing phase-in exemption, and does it differ if the exemption was claimed at the time of purchase versus refunded later?

Subject

Phase-In Exemption — Four Year Statute Of Limitations Applies When Exemption Is Claimed At The Time Of Purchase

Plain-English summary

This letter confirms, in writing, a phone conversation about how long the state has (or a taxpayer has) to deal with claims involving the manufacturing phase-in exemption.

The Comptroller drew a distinction between two situations:

• Exemption claimed at the time of purchase (Subsection (h)): for purchases made during the last quarter of 1993, 1994, and later periods, the four-year statute of limitations applies when the exemption was claimed up front, at the time of purchase.
• "Refunds" under Subsection (g): this term applies specifically to purchases made during 1990 and 1991, when the tax was required to be paid at the time of purchase and a claim for refund was then filed with the Comptroller in the following calendar year.

The letter also clarifies what does not count as a "refund" under Subsection (f): if a buyer simply neglected to claim the partial exemption at the time of purchase and later issued an exemption certificate to fix that, that situation is not treated as a "refund" for these purposes.

As with other STAR letters of this era, the Comptroller notes the opinion is based on the facts presented and could change if the facts are different.

What this means for you

Manufacturers claiming the phase-in exemption

If you claimed the manufacturing phase-in exemption at the time of purchase for purchases made in the last quarter of 1993, 1994, or later, the four-year statute of limitations applies to that claim under Subsection (h).

Businesses with older (1990-1991) exemption claims

If your situation involves tax paid up front in 1990 or 1991 followed by a refund claim filed with the Comptroller the next calendar year, that falls under the "refunds" language in Subsection (g), not the time-of-purchase exemption rule.

Accountants and tax professionals

Be careful not to conflate "claiming the exemption at purchase" with "refunds" as the letter uses that term -- they are governed by different subsections ((h) versus (g)/(f)) and, per this letter, different statute-of-limitations treatment. Also note that a buyer's late issuance of an exemption certificate, after failing to claim the exemption at purchase, is explicitly not a "refund" under Subsection (f).

Common questions

Q: How long is the statute of limitations for the manufacturing phase-in exemption when claimed at the time of purchase?
A: Four years, for purchases during the last quarter of 1993, 1994, and following periods, under Subsection (h).

Q: What does "refunds" mean under Subsection (g) of the rule?
A: It refers to purchases during 1990 and 1991, when tax was required to be paid at the time of purchase and a refund claim was filed with the Comptroller in the following calendar year.

Q: If I forgot to claim the exemption at purchase and later gave the seller an exemption certificate, is that a "refund"?
A: No. Subsection (f) does not treat that situation as a "refund."

Q: Could this answer change under different facts?
A: Yes -- the letter states the opinion is based on the facts presented, and could change if there are additional or different facts.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9609790L

Original ruling text

September 17, 1996

Dear Mr. **:

Thank you for asking for written confirmation of our telephone conversation
regarding the statute of limitations for the manufacturing phase-in exemptions.

The four year statute of limitations applies to purchases during the last
quarter 1993, 1994, and following periods when the exemption is claimed at the
time of purchase. Subsection (h) addresses purchases during those periods.

Subsection (g) of the rule refers to "refunds" provided for during the phase in
exemption. "Refunds" apply to purchases during the 1990 and 1991 period when
the tax was required to be paid at the time of purchase and a claim for refund
filed with the comptroller in the following calendar year. Subsection (f) does
not include in the term "refunds," situations where the buyer neglected to
claim the partial reduction at the time of purchase and later issues an
exemption certificate.

This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 3-4675. The direct line is
(512) 463-4675. You also may write to Tax Administration Division, Comptroller
of Public Accounts.

Sincerely,

Tom Soto
Tax Administration Division