Did transferring title to a freight forwarder before export count as a sale supporting a resale certificate?

Plain-English summary

A retailer could give a resale certificate for inventory sold within the United States. For goods exported before sale, the October 2, 1984 definition of sale required title or possession to transfer to the customer for consideration before export if the retailer wanted to use a resale certificate.

A wholesaler accepting a certificate in good faith did not have to look behind it, but could ask the purchaser to state where title transferred when foreign or domestic resale was uncertain.

If the retailer sold after export, it could document the export and recover tax under Rule 3.323. Merely transferring title to a freight forwarder did not count as the sale unless the forwarder acted as the actual purchaser's agent under a written agency agreement.

Common questions

Did title to the freight forwarder establish a sale? No, unless the forwarder was the actual purchaser's written agent.

When could a resale certificate support an export transaction? When title or possession transferred to the customer before export under the stated rule.

Could previously paid tax be recovered? Yes, with the export documentation described in Rule 3.323.

Citations and references

• 34 Tex. Admin. Code Rule 3.323 — export documentation and tax recovery.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0727C11

Original ruling text

April 30, 1986

Dear ***:

Thank you for your recent letter which is restated in part with response
below:

When we purchase material from our vendors, we furnish our Texas
Sales Tax Resale Certificate. The material is shipped to a designated
freight forwarder - and title passes to the freight forwarder. Should
the material be lost or damaged, the freight forwarder would be responsible,
and would receive reimbursement under their own Bailee's Insurance.

Response: When a retailer purchases inventory to sell within the United
States, he may give his supplier a resale certificate in-lieu-of tax.
However, if the goods are to be shipped outside the United States prior
to sale, a resale certificate could not legally be given.

Effective October 2, 1984, the definition of a sale was limited to the
transfer of title or possession to tangible personal property for a
consideration. Therefore, when a retailer exports goods outside the United
States, unless title to the goods is transferred to the customer prior to
export, the retailer should not issue his supplier a resale certificate.

However, we do not require a wholesale to "look behind" a certificate if he
can take it in good faith. If there is any doubt in the wholesalers mind
as to whether his customer will be making a foreign or domestic sale, he may
require his purchaser to give information as to where title transfers on
his resale certificate.

If the retailer is going to sell the goods outside the United States he
may document the export and recoup the sales tax as shown in the attached
Rule 3.323.

Your act of transferring title to a freight forwarder would not be considered
a sale unless the freight forwarder were acting as an agent of the actual
purchaser under a written agency agreement.

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
1-800-242-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division