Could an airline buy or temporarily store materials tax-free before shipping them to Saudi Arabia?

Plain-English summary

Materials shipped to Saudi Arabia aboard the purchasing airline qualified for the common-carrier exemption because they were sent outside Texas for the carrier's business outside the state. The airline could give suppliers its exemption certificate and declaration instead of tax.

For materials purchased in Texas and shipped to Saudi Arabia by sea, the airline had to give its supplier a copy of the sea carrier's bill of lading as proof of export.

Items purchased outside Texas could also qualify when stored temporarily in Texas and then removed for use solely outside Texas. The airline could claim that exemption with an exemption certificate.

Common questions

Did the exemption apply when the airline carried its own materials abroad? Yes, for the stated shipment to Saudi Arabia for use in the airline's common-carrier business outside Texas.

What proof was required for sea shipments of Texas purchases? A copy of the sea carrier's bill of lading had to be provided to the supplier.

Could out-of-state purchases be stored temporarily in Texas? Yes, if they were then removed and used solely outside Texas under the described exemption.

Citations and references

• Tex. Tax Code Sec. 151.330(b) — common-carrier exemption described in the letter.
• Tex. Tax Code Ann. Sec. 151.330(d) — temporary Texas storage of out-of-state purchases for use solely outside Texas.
• 34 Tex. Admin. Code Rule 3.323 — new exports rule said to reflect amendments to Tex. Tax Code Secs. 151.330(a) and 151.307; the enclosure is not reproduced.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8508L0659D09

Original ruling text

August 22, 1985

Dear ***:

Thank you for sending copies of your exemption certificate and letter of
declaration for our review.

You explained that as the Materials Management Division for AIRLINES X your
office purchases, receives and ships to Saudi Arabia all materials coming
from the United States and Canada. The materials, used in maintenance, repair
and operation of the airlines, are shipped to Saudi Arabia by both air and sea.

As we discussed in our telephone conversation, Tex. Tax Code Sec. 151.330(b)
exempts the sale of taxable items to a common carrier if the items are shipped
via the purchasing carrier to a point outside Texas for use by the carrier in
conducting its business as a common carrier outside Texas. This exemption applies
to those items shipped to Saudi Arabia via your airline. The exemption certificate
and letter of declaration you submitted may be accepted by your suppliers in lieu
of tax when you are claiming this exemption.

When you ship materials to Saudi Arabia by sea, you must provide a copy
of the bill of lading from the carrier to your supplier as proof of export if
the materials were purchased in Texas.

Tex. Tax Code Ann. Sec. 151.330(d) exempts items purchased outside Texas which
are stored temporarily in Texas and then removed from Texas for use solely outside
Texas. You may issue an exemption certificate to your suppliers when you claim
this exemption.

I am enclosing a copy of our new Rule 3.323 on exports which reflects the recent
legislative amendments to Tex. Tax Code Sec. 151.330(a) and Sec. 151.307 and a
copy of the bill for your use.

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