What Texas tax duties applied to an out-of-state fundraising seller with a salesperson soliciting orders in Texas?

Plain-English summary

A California seller sent a salesperson into Texas to solicit fundraising-product orders, with goods delivered by common carrier. That in-state solicitation required a Texas sales and use tax permit and collection of state use tax on taxable sales. The letter also required local use-tax collection in local areas where the company had representation or the salesperson visited.

Candy bars, boxes of candy, empty coffee mugs, candy-filled mugs, and gift wrap were taxable. A canister holding at least six prepackaged cookies was nontaxable when the cookies were worth more than the canister, but taxable when the canister had the greater value.

Organizations meeting the criteria described in Rule 3.293(c)(2) could buy candy for qualifying fundraising sales without tax by giving the seller an exemption certificate. Exempt religious, educational, and charitable organizations could also hold one tax-free sale or auction per calendar year. Resale customers needed a properly completed resale certificate. The seller still needed the Texas permit even if every Texas sale was for resale or to an exempt customer.

Common questions

Did common-carrier delivery from California eliminate the seller's Texas duty? No. Its salesperson solicited business in Texas.

Were all cookie canisters treated the same? No. The relative value of the cookies and canister controlled under the letter's facts.

Could exempt or resale customers buy without tax? Yes, when they qualified and supplied the appropriate certificate.

Was a permit still required if all customers were exempt or buying for resale? 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/8908L0950F01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

Dear ***:

Thank you for your letter concerning your company's sales tax
responsibilities in Texas. Based on our telephone conversation,
your company has a salesman that travels to Texas to solicit
orders; however, the company plant is located in California. All
of the Texas orders are delivered via common carrier.

The candy bars, boxes of candy, empty coffee mugs, coffee mugs
filled with candy, and gift wrap items are all taxable for sales
and use tax purposes in Texas.

Canisters of pre-packaged cookies containing six or more cookies
are not taxable when the value of the cookies (food product) is
greater than the value of the canister (non-food product). However,
the cookies are taxable if the canister has the greater value.

You indicated in your letter that most of your company's sales are
to schools, churches and youth organizations for fund-raising
activities. These organizations may qualify for an exemption from
sales of candy if they meet the criteria outlined in the enclosed
Rule 3.293(c)(2). If you sell candy to an organization that
qualifies for one of these exemptions, then the candy is not
taxable. The organization should issue an exemption certificate
to you explaining the exemption. See the enclosed Rule 3.287
concerning exemption certificates.

Religious, education and charitable organizations exempted under
the Sales Tax Law are authorized to hold a tax-free sale or
auction one day each calendar year. For that one day sale only,
sales tax need not be collected. The exempt organization should
issue an exemption certificate to you explaining the exemption.
See Rule 3.322 and the brochure relating to exempt organizations
which are enclosed.

If your customer's are going to resale your produces, then they
must furnish you with a properly executed resale certificate. See
the enclosed Rule 3.285 concerning resale certificates.

Because your company has a salesman soliciting business in Texas,
your company is required to obtain a sales tax permit and collect
the state use tax on all taxable sales. See the enclosed Rule
3.286(a)(1)(B). Your company is also required to collect the
local use tax for all local areas that your company has
representation or that the salesman visits. Also enclosed is a
copy of the Sales Tax Rates in Texas brochure and an application
for a Texas Sales and Use Tax Permit.

Your company must obtain a Texas sales and use tax permit even if
all the sales to Texas are for resale or to exempt customers.

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 free 1-800-252-5555 or our regular number is
512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence