Could an auctioneer refund Texas sales tax when a successful bidder returned equipment and received a full refund?

Plain-English summary

The Comptroller said the auction transaction was a sale and tax was initially due.

Section 151.007(c)(2), however, excluded the amount charged for tangible personal property returned by a customer when the total charge was refunded by cash or credit. If the auctioneer allowed the successful bidder to return the equipment for a full refund, the auctioneer could also refund the tax.

The auctioneer could then return the equipment to the consignor and receive compensation for its time and trouble.

What this means for you

The historical relief required a complete unwind of the customer's purchase price. Merely returning the item without a full cash or credit refund would not satisfy the condition described in the letter.

Common questions

Was the original auction sale taxable? Yes.

What allowed the tax refund? A full cash or credit refund when the equipment was returned.

Could the auctioneer still be compensated by the consignor? Yes, for its time and trouble.

Citations and references

• Texas Sales and Use Tax Law § 151.007(c)(2) — returned property excluded from sales price when the total charge is refunded.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8708L0850C03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 17, 1987

Dear **:

Thank you for your recent letter in regard to a purchase made at your
auction
which was subsequently returned to the consignor.

There is no doubt that a sale occurred and that tax is due. However,
your
customer may find some relief under Section 151.007 (c)(2) which exempts
from
the sale price,

"...the amount charged for tangible personal property
returned by a customer if the total amount charged is
refunded by cash or credit."

Therefore, if you allow the successful bidder to return the equipment for
a
full refund, you may also refund the tax. You may then return the
equipment
to the consignor and receive compensation for your time and trouble.

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 from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division