Were Texas-printed forms exempt merely because some were later sent by UPS to out-of-state branches?

Plain-English summary

The printer manufactured and stored business forms in Dallas for a customer with Texas and Ohio offices, then sent forms to multiple branches by UPS. Storage was included in the sales price, was not separately agreed or invoiced, and the customer bore the risk of loss or damage while the forms were stored.

The Comptroller required tax on all the forms. Although goods shipped out of Texas under the sales contract could qualify for an interstate-sale exemption, these forms were first being stored in Texas for the customer rather than shipped outside Texas under the sales contract.

UPS or other transportation charges were also taxable when the printer billed them to the customer under Rule 3.303.

Common questions

Did later shipment outside Texas make the forms exempt? No, under the described storage arrangement.

Why did the letter distinguish storage from shipment under the sales contract? The printer was holding the customer's forms in Texas before later branch deliveries.

Were billed UPS charges taxable? Yes.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8907L0953C01

Original ruling text

July 11, 1989

Dear ***:

I have received your letter regarding the taxability of business forms that you
manufacture, store, and ship outside Texas.

You indicate that your customer whose headquarters are in Ohio has a regional
office in Ellis County, Texas. You manufacture and store printing for both
offices in your Dallas location. You invoice both the Ohio location and the
Ellis location for the material ordered by these locations. Both locations
have several branches under their authority, therefore, the merchandise is sent
to several locations (by U.P.S.).

In our phone conversation of May 12, 1989, you also indicated that the charge
for storage is included in the sales price. In particular, the charge for
storage of the business forms isn't separately stated on your invoice and there
is no written agreement to charge for storage. Furthermore, you also stated
that the customer is responsible for any loss or damage to the forms while they
are in your storage.

You should charge tax to your customer on all forms that you print and store.
Specifically, sales tax is imposed on each sale of a taxable item (such as
business forms) in Texas. "Sale" means a transfer of title or possession of
tangible personal property.

Although sales of tangible personal property shipped into other states under
the sales contract are exempt from tax, you are initially storing the forms for
your customer. Therefore, you are storing the forms, not shipping them outside
Texas under the sales contract.

Moreover, you should note that transportation charges such as U.P.S. charges
are taxable when you bill these charges to your customer as stated in the
enclosed Comptroller's Rule 3.303 (Transportation and Delivery Charges).

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

If you have any questions, please contact Tax Correspondence. You may call
toll fee 1-800-2552-5555, or our regular number is 512/463-4600. My extension
is 3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence