What resale certificates and shipping proof did Texas require for interstate sales, exports, and Section 151.324 goods?

Plain-English summary

For supplies shipped by carrier from Texas to an Oklahoma customer, Company A could give its supplier a resale certificate. The sale qualified for the interstate exemption under § 151.330(a)(1) or (2), including when A's supplier shipped directly to Oklahoma under an existing customer order.

For goods ultimately exported to Singapore, A could also give its supplier a resale certificate because title or risk of loss passed to its customer in a Texas sale. A then needed proper records proving the later export. Delivery to a freight forwarder did not by itself prove export. The letter identified only an airway, ocean, or railroad bill of lading; formal entry documents from the destination country; or certification from a licensed customs broker as acceptable proof.

Goods qualifying for the specific § 151.324 exemption followed a different path. Export criteria did not apply. A could give its supplier an exemption certificate and had to obtain a customer exemption certificate claiming § 151.324; no other documentation was required of A.

Common questions

Did the Oklahoma transaction qualify for interstate exemption? Yes, when delivered by carrier to Oklahoma under the described arrangements.

Did delivery to a freight forwarder prove export? No.

What export proof did the letter accept? A qualifying carrier bill of lading, destination-country entry documents, or licensed-customs-broker certification.

Did § 151.324 goods use the ordinary export-proof rules? No. They used exemption certificates under the specific statutory exemption.

Citations and references

• Tex. Tax Code § 151.330(a)(1)-(2) — interstate-commerce exemption applied to the Oklahoma shipments.
• Tex. Tax Code § 151.324 — specific exemption for the third situation.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8512L0689E11

Original ruling text

December 18, 1985

Dear ***:

Thank you for your letter requesting confirmation and clarification on
goods which will be ultimately exported or other exempt under Sec. 151.324 of
the Code.

Situation 1: COMPANY A buys certain supplies from X and has the supplies
delivered to A's warehouse in CITY. A is purchasing the supplies for
resale and gives X a resale certificate. A receives an order to ship
the supplies to Oklahoma. The sale transaction by A is exempt from
Texas sales tax because the shipment is in interstate commerce if A
delivers the supplies purchased to a carrier to be delivered in Oklahoma.
If A purchases the supplies based on a purchase order already received
from its Oklahoma customer with shipping instructions to ship directly
from X to Oklahoma, A may still give its vendor a resale Certificate
and rely on the interstate exemption.

Response: This is correct. The transactions would qualify for exemption
under Sec. 151.330(a) (1) or (2) of the Code.

Situation 2: A purchases supplies from X to be shipped to A's warehouse
in CITY. At a subsequent time, A sells the supplies to company Y who directs
that the supplies be shipped to Singapore. A should provide a resale certificate
to its vendor upon purchase. Upon sale by A, A will discharge its sales tax
obligation by requiring maintaining of its customer's purchase order stating
the destination of the supplies and a packer's receipt indicating receipt of
the goods from A for shipment. If the supplies purchased do not go directly into
A's inventory but rather are shipped directly from A's supplier to the packer for
shipment to Singapore, A should deliver an exemption certificate indicating that
the goods purchased will be exported. A should maintain for its records the
purchase order of its customer, along with the packer's receipt indicating
received at a freight forwarding point.

Response: Per our telephone conversation on December 16th, 1985, your client,
A, passes title or risk of loss for the goods being exported to their customer.
Because of this it is considered a Texas sale and A may issue a resale certificate
to its supplier under both circumstances. A will be required to obtain the proper
shipping documents to show the goods were ultimately exported for their records to
substantiate the exemption. Items shipped directly to a freight forwarder, although
part of the export process, does not automatically prove exemption as an export.
As delineated in the rule, the only acceptable proof is

l) The Airway, Ocean or Railroad bill of lading,
2) Formal Entry documents from the country of destination, or
3) Certification from a licensed customs broker that the goods were exported.

Situation 3. A purchases goods that are exempt from taxation under
Section 151.324. These goods are delivered to A's warehouse. A may
properly give a resale certificate to its discharges its responsibility by
receiving an exemption certificate from its customer so stating the exempt use.
If the materials purchased by A are of the type exempt under 151.324 and A
directs its supplier to ship the goods directly to either the purchaser or the
purchaser's forwarder, what type of documentation may A's supplier demand from
A? How may A discharge its obligation to its vendor to either pay the tax or
provide appropriate exemption certificates and how may A in such case discharge
its sales tax obligation with respect to its customer?

Response: Since there is a specific exemption available for goods that
qualify under Sec. 151.324, the export criteria is not applicable.
Your client may issue an exemption certificate in lieu of tax when
purchasing items that qualify under Sec. 151.324 of the Code. Your
client should obtain an exemption certificate from their customer
claiming the applicable exemption under Sec. 151.324 of the Code. No other
documentation is required of your client, A.

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