How could State Fair concessionaires document tax-free purchases for resale when the fair collected their sales tax?

Plain-English summary

Fairgoers bought tickets and used them instead of cash at concession booths. Booth operators exchanged the tickets for cash, and the State Fair collected and remitted sales tax for operators with which it had agreements.

To satisfy the resale-certificate requirement created by a 1987 law change, the fair could issue certificates on behalf of those booth operators. For example, it could give a soft-drink supplier a certificate together with a list of the operators for whom the fair had agreed to collect tax during the fair.

The combined STAR record includes the June 15 answer, a June 6 acknowledgment, and an April 18 internal referral describing the supplier's documentation question. The June 15 letter provides the operative answer.

Common questions

Who could the fair issue certificates for? Booth operators for whom it collected and remitted sales tax.

How could a supplier know which operators were covered? The fair could provide a list with the certificate.

Why did the documentation matter? The letter said a wholesaler selling tax-free without the proper resale documentation could face problems in an audit.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L0943G06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

June 15, 1989

Dear ***:

I just want to take a minute to follow-up our conversation with a
written account. And, I want to thank you and the State Fair
organization for your willingness to collect and remit sales tax
for so many of your booth operators.

As I understand it, purchases at the fair are made by way of
tickets. The fair sells tickets to the public who use them rather
than cash to make their purchases. The booth operator exchanges
the tickets for cash and the fair handles the tax for those booth
operators with whom it has agreements.

A 1987 law change that made resale certificates the only documents
a merchant could accept to prove that a sale was exempt for resale
could cause a problem. If a wholesaler sold tax free and didn't
get the right documentation, he could be in a bind when he was
audited.

This would be avoided if the state fair would issue certificates
on behalf of the booth operators for whom they collect and remit
tax. For example, the fair could issue a certificate to each soft
drink supplier along with a list of soft drink booth operators for
whom they had agreed to collect tax during the period of the fair.
Most of the information on the form can be filled out once and
photocopied to reduce paper work.

No one likes paper work and this is obviously a burden for you and
your staff so I really appreciate your willingness to help in all
this. I am enclosing a sample resale certificate form for your
review.

Feel free to call or write me if you have questions. You can
reach me by calling toll free 800-531-5441 or FAX (512) 475-0900.
My direct number is (512) 463-4680.

Sincerely,
Al Van Allen
Taxability Section
Legal Services Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

June 6, 1989

Dear ***:

I received your second request for information on proper
documentation for sales to State Fair concessionaires.

Please accept my apology for any inconvenience caused by the
delay in responding to your first request. Again, I had to
forward your request to the Taxability Section in Legal Services.
Please feel free to contact that section by calling the toll-free
number (1-800-252-5555) or dialing direct (512) 463-3830.

Sincerely,
Julie Pesl
Tax Correspondence

BOB BULLOCK
INTEROFFICE COMPTROLLER OF
MEMORANDUM PUBLIC ACCOUNTS

DATE: April 18, 1989

TO: Taxability Section
Legal Services

FROM: Julie Pesl
Tax Correspondence

Please answer this letter from COMPANY ABC.

Background Info: All of the sales tax collected by concessionaires
at the State Fair is remitted by the State Fair Organization. (permit
number ***) A lot of the concessionaires do not have sales
tax permits in their own names. According to ** with the
State Fair, (phone ****) the State Fair approves all the con-
cessionaires and the vendors that can sell to the concessionaires, but
does not get involved with sales between the two groups.

Should the concessionaires issue resale certificates with the State
Fair's number or what? COMPANY ABC wants to know how to document these
sales for resale. COMPANY ABC is to be audited by Dallas West but has
not been assigned to an auditor as yet. Please send a copy of your re-
sponse to ***** in that office and he'll give it to whoever gets
the audit.