Which supplies could a Texas word-processing business buy tax-free for resale, and which items were taxable business-use purchases?

Plain-English summary

A word-processing business could give suppliers a resale certificate for tangible personal property only when care, custody, and control of that property would pass to the client. The letter listed paper, mailing labels, and report covers as examples that could be bought tax-free.

Items used by the provider rather than transferred to the client were taxable when purchased. The examples were printer ribbons, computer hardware, and software.

What this means for you

Under the letter, the key distinction was transfer to the customer. A consumable or business asset used to perform the service did not become a resale item merely because it helped produce the customer's work.

STAR now directs readers to the amended Rule 3.285 for specific current guidance on care, custody, and control of tangible personal property in a taxable service.

Common questions

Could paper and mailing labels be bought for resale? Yes, when transferred to the client.

Could report covers be bought for resale? Yes, on the same transfer condition.

Were printer ribbons taxable to the provider? Yes.

What about computer hardware and software? They were taxable when bought for the provider's own use.

Citations and references

• 34 Tex. Admin. Code Rule 3.342, enclosed with the original letter as the information-services rule.
• 34 Tex. Admin. Code Rule 3.285, identified in STAR's alert as amended November 1, 2017.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8804L0882A13

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale amended 11/01/2017.

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller April 11, 1988

Dear **:

Thank you for your letter regarding supplies used in your word processing
business.

You can issue a resale certificate in lieu of tax to suppliers of
tangible
personal property only if care, custody, and control of the property will
be
transferred to your client. For example, paper, mailing labels, and
report
covers may be purchased tax free.

Items purchased for your own use such as printer ribbons and computer
hardware and software are taxable to you at the time of purchase.

Enclosed is Rule 3.342 Information Services, for your reference.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may write
me
at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division