Could a Texas auction purchase avoid sales tax when the buyer, rather than the seller, hired a common carrier for immediate shipment to New York?

Plain-English summary

A joint venture bought construction equipment at a Texas auction for a project in New York. The buyer, rather than the seller, planned to hire the common carrier and arrange delivery to the New York job site.

The Comptroller said the buyer could hire the carrier without creating Texas sales tax, but the goods had to be delivered immediately to the carrier at the auction site for shipment out of state. The auctioneer had to retain a copy of the bill of lading.

If the buyer stored the goods in Texas before shipment, Texas sales tax was due.

What this means for you

Who hired the carrier was not decisive. Immediate outbound delivery and the auctioneer's shipping records controlled the result, while any buyer storage in Texas defeated the treatment described in the letter.

Common questions

Did the seller have to hire the carrier? No.

What had to happen at the auction site? The goods had to go immediately to a common carrier for out-of-state shipment.

What record did the auctioneer need? A copy of the bill of lading.

What if the buyer stored the equipment in Texas first? Texas sales tax was due.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8707L0823D01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller July 15, 1987

Dear ***:

Thank you for your letter of June 8, 1987 concerning the taxability of a
situation you described as follows:

ABC, a joint venture which was formed to provide construction services
for one project in New York, purchases a piece of construction from an
auction in Texas held by AUCTIONEER of ***, Oregon. The pur-
chaser hires the common carrier and arranges for the equipment to be
delivered to its job site in New York.

Question: Given the facts above and a copy of the purchase order, does
the seller have to hire the common carrier and arrange for delivery out-
side of Texas in order to be exempted from the tax?

Response: The purchaser may hire a common carrier to pick up the goods
in Texas for delivery out-of-state and not owe Texas sales tax on the
transaction.

However, auctioneers ordinarily sell "as is, where is". In other words,
the goods belong to the purchaser at the auction site. The auctioneer
must collect tax on the sale if the goods are not delivered immediately
to a common carrier at the auction site for shipment out of state. The
auctioneer must obtain a copy of the bill of lading for his records.

If the goods are stored in Texas by the purchaser prior to shipment out
of state, Texas sales tax is due on the transaction.

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 me at
1-800-252-5555 toll free anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Julie Pesl
Tax Policy Division