Was Texas sales tax due on printed goods bought under a contract that included storage in Texas before later distribution, including shipments out of state?

Plain-English summary

The requester asked whether Texas sales tax applied to merchandise shipped out of state. The submitted contract covered composition where applicable, printing, storage, and distribution.

The Comptroller concluded that the purchaser bought taxable items for its own use both inside and outside Texas. Because the purchaser exercised direct control or ownership rights over goods bought in Texas, including through the contractual storage arrangement, it was treated as taking possession in Texas. Texas tax was therefore due.

The letter also said states belonging to the Multi-State Compact would credit Texas sales tax against their use-tax imposition.

Common questions

Did later out-of-state shipment prevent Texas tax? No. The purchaser was treated as taking possession in Texas because it exercised control or ownership rights over the stored goods here.

What did the contract price include? Composition where applicable, printing, storage, and distribution.

Could another state also impose use tax? The letter said Multi-State Compact member states would give credit for Texas sales tax against their use tax.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8608L0753D13

Original ruling text

August 27, 1986

Dear ***:

Thank you for your letter requesting a ruling on whether Texas sales tax
is due on merchandise that is shipped out of state.

I have examined the contract you submitted and have come to the following
conclusions:

1) COMPANY X is making purchases of taxable items for its own use both in
state and out of state.

2) The purchase price includes, "composition (where applicable), printing,
storage (emphasis added), and distribution..." (Section IV, Part 4)

3) Since COMPANY X is exercising direct control or rights of ownership of
goods purchased in Texas. COMPANY X is considered to have taken possession
of the goods in this state and Texas tax is due.

4) States which are a member of the Multi-State Compact will give COMPANY
X credit for sales tax paid to Texas against their use-tax imposition.

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. The regular number is
512/463-4600. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division