Ezel / Tax Rulings / TX
TX 8802L0893G04 Sales and/or Use Tax (State,Local,MTA) 1988-02-02

Who collected Texas sales tax when a scholarship-matching business hired an out-of-state company to send matched information directly to students?

Short answer: The scholarship-matching business collected tax from students because it made the sale. The out-of-state supplier merely drop-shipped the matched information on the seller's behalf and could accept a resale certificate instead of tax.

Apply this to your situation

This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a taxpayer-specific February 1988 Texas Comptroller letter. It says the opinion may change if the facts differ and cites no statute or rule. STAR's caption mentions online access to a national database, but the operative body states only that an out-of-state company matched and sent information directly to students; this page does not add the caption's technology details to the holding. Information-service, drop-shipment, sourcing, and resale-certificate rules may have changed; verify current law. STAR documents may no longer represent current policy even when not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Students completed forms that the scholarship-matching business forwarded to an out-of-state company. That company matched the student's information with available scholarship information and sent the result directly to the student. The student paid the Texas business, which in turn paid the supplier.

The Comptroller treated the Texas business as making the sale to the student, so it had to collect tax. The out-of-state supplier was drop-shipping the information on the seller's behalf and could receive a resale certificate instead of tax.

What this means for you

The historical result followed the seller-customer relationship even though a third party performed the match and delivered the information directly.

Common questions

Who made the sale to the student? The scholarship-matching business.

Who collected sales tax? The scholarship-matching business.

How did the business buy the supplier's service? It issued the out-of-state supplier a resale certificate.

Citations and references

The letter cites no numbered statute or rule.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

February 2, 1988

Dear ****:

On behalf of Mr. Bullock, I hope you will accept my apology for the delay
in answering your question concerning changes in the sales tax law. This isn't
the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which would
not adversely affect businesses. In many instances, an answer to a question
just wasn't available when the question arrived.

In your letter, you stated that you match students with scholarship money
that is available. The student fills out a form that you forward to a company
that matches the student's information with information directly to the
student. You charge the student a fee, and the company charges you a fee.

You are considered to be making the sale to the students and should
collect tax. Your out-of-state supplier is drop-shipping the information on
your behalf, and you should issue it a resale certificate in lieu of tax.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-531-5441 or phone 512/463-4600.

Sincerely,
Wayne McDonald
Tax Policy Division

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