Did MTA tax apply when a common carrier bought parts inside an MTA for its own use and transported them on its own freight system to a shop outside the MTA?

Plain-English summary

A common carrier bought parts from vendors inside a metropolitan transit authority area for use in its own maintenance shops. Parts for an out-of-area shop moved under a bill of lading through the carrier's regular freight system.

The Comptroller said the carrier's shipping role did not erase its role as purchaser and consumer. Goods sold to the carrier inside the MTA were possessed there and remained subject to MTA tax even when that same carrier transported them to a point outside the MTA.

Common questions

Did the carrier avoid MTA tax by shipping the parts outside the area? No.

Why was the tax due? The carrier possessed the goods within the MTA after buying them for its own use.

Did using a bill of lading and the regular freight system change the result? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8608L0762A01

Original ruling text

August 5, 1986

Dear ***:

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

We recently have experienced some inconsistency in the way MTA tax is
being assessed in the state by the Comptroller of Public Accounts Audit
Staff and would like clarification from your department.

*** is a common carrier which operates throughout the State of
Texas and likewise has various facilities throughout the state. Our
purchasing department and primary maintenance shop are located in **;
however, we have large shops in * and **** with similar
ships in various other locations.

We buy parts from various vendors located throughout Texas. We may
utilize a vendor locally to supply our local shop as well as utilize the vendor
to supply a shop in another city. When parts are ordered from a vendor
for a local shop, those parts are either delivered to our shop or picked up
by our local maintenance people at the vendor. These parts are consumed
locally. When parts are ordered from a vendor for a shop in another city, that
vendor completes a bill of lading and calls our local pickup and delivery
department indicating they have a shipment. As a common carrier we handle
that shipment like each of our other shipments. The shipment moves on a
freight bill and at destination the consignee must sign for receipt of the
freight.

As I understand the issue, the question is whether our status as a common
carrier can be ignored when we are the consumer, regardless of any other
circumstances. It is our contention that our status as a common carrier
cannot be ignored when we are performing that function. The very nature
of the transaction involves seller, common carrier, and purchaser-consumer
regardless of the common carrier involved in delivery.

We urge you for a favorable ruling that is in tune with the spirit of the
law. Should you require additional information, please do not hesitate
to contact me.

Response:
Taxpayers who claim exemption from taxation must show that their situation
clearly fits within the confines of the exemption claimed. Goods which
are sold to a carrier within an MTA and shipped to a point outside the MTA on
that carrier are nevertheless possessed by the carrier in the MTA and
are subject to MTA tax.

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 Administration Division