Can a retailer buy decorative wrapping items like colored tissue and ribbon tax-free for resale on the theory that they're 'part of the gift,' and does the same rule apply to the wicker or straw baskets the gift is arranged in?

Plain-English summary

This is a follow-up letter after a tax professional disagreed with the Comptroller's earlier answer about the taxability of wrapping/packaging purchases from another company (referred to as "Company A"). The taxpayer's business ("Company B") argued that colored tissue paper and ribbon used to wrap gifts should be purchasable tax-free for resale, on the theory that they're as much "part of the gift" as the basket the items sit in.

The Comptroller held firm on the tissue and ribbon: no such distinction exists in the Tax Code between "decorative" wrapping/packing items and "common" ones. The background is the same 1991 legislative change discussed elsewhere in this corpus — the Legislature repealed former § 151.321 (which had allowed tax-free wrapping/packaging purchases) effective October 1, 1991, and added subsections (c) and (d) to § 151.302 to make clear no wrapping, packing, or packaging supplies are exempt for retailers. Because "exemptions in the Tax Code are expressed and not implied," the Comptroller wouldn't read in an unwritten decorative-items carve-out.

But there's a genuine, narrower exception buried in this letter: straw and wicker baskets are treated differently. The Comptroller found they "do not clearly fall within the statutory definition of wrapping, packing and packaging supplies," and so MAY be purchased tax-free for resale — unlike the tissue and ribbon that wrap the gift inside them.

What this means for you

Gift basket and gift-wrapping retailers

Don't assume every component of a gift arrangement gets the same tax treatment. Tissue paper, ribbon, and similar decorative wrapping supplies are taxable purchases for you regardless of how "part of the gift" they feel — but the basket itself (straw or wicker) sits outside the statutory wrapping/packaging definition and can be purchased tax-free for resale.

Retailers pushing back on a prior Comptroller ruling

If you disagree with guidance you've received, you can write back and get a reasoned response — but be aware the Comptroller reads exemptions narrowly and won't extend an exclusion (like the wrapping-supplies carve-out) to cover items not expressly within its statutory definition, no matter how intuitive the argument feels.

Accountants and tax professionals

This letter usefully illustrates where the wrapping/packaging exclusion's boundary actually sits: items that function as "packaging" in the ordinary sense (tissue, ribbon, boxes) are captured; a container like a wicker/straw basket, which arguably has independent value/identity beyond mere packaging, falls outside the statutory definition and remains resale-certificate eligible.

Common questions

Q: Can I buy decorative gift wrap, tissue, or ribbon tax-free because it's part of the finished gift?
A: No — the Tax Code makes no distinction between decorative and common wrapping/packaging supplies; both are excluded from the resale exemption since the 1991 legislative change.

Q: Are wicker or straw gift baskets treated the same way as wrapping supplies?
A: No — this letter specifically finds baskets don't clearly fall within the statutory definition of wrapping, packing, and packaging supplies, so they may be purchased tax-free for resale.

Q: Why doesn't the Comptroller read in a "decorative items" exception?
A: Because Texas exemptions are expressed, not implied — if the statute doesn't explicitly carve out decorative wrapping, the Comptroller won't infer one.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.302(c), (d) (resale exemption exclusions for wrapping/packaging supplies)
• Tex. Tax Code § 151.321 (repealed effective 10/1/1991 — formerly allowed tax-free wrapping/packaging purchases)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200005338L

Original ruling text

May 19, 2000

Dear **:

Thank you for your recent letter expressing your disagreement with my response
on the taxability of your client's purchases of items from COMPANY A.

We disagree with your contention that COMPANY B may purchase wrapping and
packaging materials tax free for resale.

Your client could have purchased wrapping, packing and packaging supplies
before the Legislature amended the Tax Code effective October 1, 1991. The
amendments repealed Section 151.321 that had allowed retailers to buy wrapping,
packing and packaging supplies tax free under an exemption certificate and
added subsections (c) and (d) to Section 151.302. These changes made it clear
that the Legislature did not intend to exempt any wrapping, packing and
packaging supplies bought by retailers.

You assert that the color tissue, ribbon, etc., are a part of the gift as much
as the basket allowing them to be purchased for resale. This implies that Texas
Tax Code Section 151.302(c) and (d) make a distinction between decorative
wrapping, packing and wrapping items and common wrapping, packing and packaging
items. There is no such distinction. Exemptions in the Tax Code are expressed
and not implied.

The straw and wicker baskets do not clearly fall within the statutory
definition of wrapping, packing and packaging supplies and may be purchased
tax-free for resale.

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

You may call me toll free at 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, Austin, Texas 78711-3825.

Sincerely,

Eddie C. Washington
Tax Policy Division

c: **
COMPANY A