Could a private purchasing agent for NASA buy items tax-free, and what happened when the agent used the items itself?

Plain-English summary

A private company acted as a purchasing agent for NASA's Johnson Space Center. The Comptroller said the company was not itself exempt and could not obtain a general Texas “tax exempt number.” Items it used rather than transferred to the federal government were taxable.

Items purchased for resale could be bought with a resale certificate when title and possession would pass to the federal government. On the resale to NASA, NASA could provide an exemption certificate; a NASA purchase voucher was also sufficient proof of exempt status under the letter.

Sales to a contractor operating or maintaining a NASA plant, or to a service provider for NASA, were taxable because those buyers were not the exempt federal entity.

Common questions

Was the private purchasing agent exempt? No.

When could it use a resale certificate? When the purchased item's title and possession would be transferred to the federal government.

Were sales to NASA contractors exempt? No under the letter; the exemption applied to the federal entity, not its contractor or service provider.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8901L0921E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

January 5, 1989

Dear ****:

Thank you for your letter of December 15, 1988, requesting information on
your sales tax responsibilities.

You stated that * is a purchasing agent for the Johnson Space
Center. Since the federal government is tax exempt, you want to know whether
* needs to establish a tax exemption number with the State of Texas for
these purchases.

There is no provision in the sales and use tax law for an "exemption
number" or a "tax exempt number". * is not an exempt entity and owes
Texas sales or use tax on its purchases. However, if you purchase for resale
(title and possession are transferred) to the federal government, these items
could be purchased tax-free with a resale certificate. Items purchased that
never physically pass to the federal government, but instead, are used by
*, are taxable.

*** needs to apply for a sales tax permit which enables it to issue
a resale certificate for items purchased for resale. When these items are
resold to the federal government (N.A.S.A.), the exempt entity (N.A.S.A.) will
issue an exemption certificate to you. If not, a purchase voucher issued to
you by N.A.S.A. is sufficient proof of the entity's exempt status. If the sale
is made to a "contractor" who manages, maintains -and/or operates the plant
for. N.A.S.A. or to the provider of a service for N.A.S.A., then those sales
are subject to the sales tax.

In my telephone conversation with *, he indicated that a copy of
the contract between ** and N.A.S.A. will be mailed to me. Please send
a copy of a purchase order issued by * *** to its vendors along
with the copy of the contract.

Enclosed are sales tax rulings 3.285, 3.286 and 3.287. A sales tax
application is also enclosed.

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 additional information, please call our
toll-free number 1-800-252-5555. The regular number is 512/463-4600. You may
write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Julie Pesl
Tax Correspondence