Ezel / Tax Rulings / TX
TX 8905L0936D06 Sales and/or Use Tax (State,Local,MTA) 1989-05-24

When did Texas use tax accrue on imported machinery held in a foreign-trade zone before delivery to a plant?

Short answer: Tax accrued only when the machinery was used inside the zone or removed from it; local tax at the outside plant site then applied.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
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 an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
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

A company bought machinery abroad, brought it into a Texas foreign-trade zone, and later removed it for incorporation into a plant outside the zone.

Texas use tax did not become due merely when the items entered the zone. It accrued when the machinery was either used inside the foreign-trade zone or removed from the zone. When removed to the plant, the local taxes imposed at the plant site applied.

Common questions

Did entry into the foreign-trade zone trigger Texas tax? No.

What triggered the tax? Use inside the zone or removal from the zone.

Which local taxes applied after removal? The local taxes imposed at the plant site described in the ruling.

Source

Original ruling text

BOB BULLOCK
COMPTROLLER OF PUBLIC ACCOUNTS
AUSTIN, TEXAS 78774

May 24, 1989

Dear **:

In response to your letter of May 16, 1989, tax is not due on items
entering a foreign trade zone until they are either used in the trade
zone or removed to a location outside the foreign trade zone.

Under the facts you set out, ABC purchases machinery and equipment in a
foreign country. The items are shipped to ABC FOB seller's docks in the
foreign country. Upon entry into the U.S., they are retained in a
foreign trade zone (assumed in Texas) established under 19 U.S.C. 812,
et seq. Thereafter, the items are removed from the foreign trade zone
and delivered to the buyer's plant site outside the zone for incorpora-
tion into the plant.

It was your belief that the use tax on the equipment and machinery did
not accrue until the items were removed from the foreign trade zone and
the importation process was completed. Your conclusion is correct. Tax
will not be due on the equipment and machinery until the items are either
used in the trade zone or are removed from the trade zone. The local
taxes imposed at the plant site would be applicable.

I hope this satisfactorily answers your question.

Sincerely,
Wade Anderson

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