Can a retailer buy the shopping bags it hands out to customers tax-free from its bag supplier, treating them as wrapping/packaging supplies purchased for resale?

Plain-English summary

A gift store and eatery sold shopping bags to customers buying other merchandise, and asked the Comptroller whether it could purchase those bags tax-free from its supplier — its position was that the bags weren't really part of its "wrapping and packaging" (customers who declined a shopping bag got their purchase packaged in a regular brown bag instead, at no charge). The store wanted a taxability letter to forward to its supplier.

The Comptroller ruled against the exemption on two independent grounds. First, Texas sales tax law simply does not exempt wrapping and packaging supplies for retailers generally. Second, and more specifically, the resale exemption does not apply to shopping bags provided to customers who are buying other items — even if the retailer separately states a charge for the bag on the receipt. The store must pay sales tax to its shopping bag supplier on all such bags.

There is one narrow exception: if a customer buys only a bag — no other merchandise — and the store's sales records (receipts) can prove that a standalone bag sale occurred, the store may take a credit on its own sales tax return for the tax it already paid its supplier on those specific bags.

What this means for you

Retailers providing shopping bags to customers

You cannot buy your shopping bags tax-free under a resale certificate just because you separately charge customers for them — pay tax to your bag supplier as a cost of doing business, the same as any other wrapping/packaging supply.

Retailers who occasionally sell a bag as a standalone item

Keep receipts that clearly show when a bag was the ONLY item purchased. That documentation lets you claim a credit on your own sales tax return for the tax you paid on those specific bags — but only for genuinely standalone bag sales, not bags handed out alongside other merchandise.

Accountants and tax professionals

This letter forecloses a common retailer argument (that a separately stated bag charge converts the bag into a resold item eligible for a resale certificate). The separate charge does not matter; what matters is whether the bag accompanies another purchase (taxable to the retailer as the buyer) or is sold entirely on its own (creditable if documented).

Common questions

Q: Can I buy my shopping bags tax-free with a resale certificate since I charge customers for them?
A: No. The resale exemption does not apply to shopping bags provided to customers buying other items, even with a separately stated bag charge — you must pay tax to your bag supplier.

Q: Is there any way to recover the tax I paid on bags?
A: Yes, but only for bags sold as the customer's sole purchase (no other items bought). If your sales records/receipts document that, you can claim a credit for the tax paid on those specific bags on your own sales tax return.

Q: Does it matter that I package purchases in a free plain bag if the customer declines the branded shopping bag?
A: No — the letter doesn't distinguish based on that practice; the core rule is that shopping bags accompanying other purchased items are taxable to the retailer regardless of billing structure.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200005365L

Original ruling text

May 31, 2000

Dear **:

Thank you for your letter dated May 22, 2000, concerning sales tax on shopping
bags sold in your store.

In your letter, you stated that you needed to know about the taxing of shopping
bags sold in your store. You are a gift store and eatery. You sell your
shopping bags to your customers for items that they want to purchase. You
believe the shopping bags are not part of your wrapping and packaging. If the
customer does not pick up a shopping bag, you will package his purchase in a
regular brown bag. You need to have a taxability letter from our office to
forward it to your supplier.

The sales tax law does not exempt wrapping and packaging supplies for
retailers. The resale exemption is not applicable to shopping bags you provide
to customers buying other items even if you make a separated charge. You must
pay sales tax to the shopping bag supplier. If you have a customer who only
purchases a shopping bag and your sales records (receipts) prove that only a
bag was sold, you may take a credit on your sales tax return for tax you paid
on those bags that are sold without other purchases.

This opinion is 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. 3-4358. The direct line is
512/463-4358. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

Nina Roberts
Tax Policy Division