Ezel / Tax Rulings / TX
TX 8508L0654B04 Sales and/or Use Tax (State,Local,MTA) 1985-08-08

Did an office-furnishings dealer have to collect tax from a freight carrier for repairing damaged inventory?

Short answer: No. The dealer could buy repair materials with a resale certificate, collect tax when the restored merchandise was sold, and did not have to collect tax from the carrier.

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This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1985 Texas Comptroller taxpayer-response letter about an office-furnishings dealer restoring freight-damaged inventory and billing the carrier. The STAR subject calls the property rental equipment, but the reproduced ruling body describes inventory received damaged from freight carriers; this page follows the body. The letter cites no numbered statute or rule and expressly says different facts could change the opinion. Current freight-damage, inventory, repair, resale-certificate, carrier-claim, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The office-furnishings dealer could give a resale certificate instead of paying tax when buying materials used to restore freight-damaged inventory. It would collect tax later when the restored merchandise was sold.

The dealer did not have to collect sales tax from the freight carrier on the amount billed for the damage-related restoration.

Common questions

Could the dealer buy repair materials tax-free? Yes, with a resale certificate for materials used to restore inventory that would later be sold.

When was tax collected on the merchandise? When the restored merchandise was sold.

Did the dealer have to collect tax from the carrier? No.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

August 8, 1985

Dear ***:

Thank you for your recent letter which is restated with response below.

The company I represent, CORP A, is having difficulty collecting sales
tax on a specific type of invoice. Being a dealer in office furnishings,
CORP A receives many items delivered by freight carriers. The volume of
items received damaged is very high. CORP A has a repair department to
correct the damaged items. The cost of the repair is then billed to the
carrier. CORP A bills this as a repair; the carrier views this as a
claim. While the definition is purely semantics, the issue is nonpayment
of sales tax. As a repair, tax should be included. (I have enclosed an
example of this form of invoice.)

Please furnish me rulings on this issue or suggestions of how to define to
our carriers, the tax statutes in this instance.

Response: You may give a resale certificate in lieu of tax when purchasing
materials to restore freight damaged inventory. You will collect tax when the
merchandise is sold. However, you are not required to collect tax from the carrier.

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

If you have any questions or need more information, please call us at 1-800-252-5555
toll free from anywhere in Texas. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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