What information did the Comptroller require before processing this direct payment permit application?

Plain-English summary

The Comptroller did not approve or deny the permit. It requested more information before processing the application.

The applicant had to explain whether it bought construction materials itself or had a lump-sum or separated labor-and-materials contract, identify who would own the building and whether it acted as purchasing agent for affiliates, complete officer contact details, and explain its role as paymaster.

The letter stated a minimum of $800,000 in annual taxable purchases for a direct payment permit and asked the company to reconcile inconsistent purchase figures. It also required the company to state that it would issue direct-payment exemption certificates to vendors.

For tax calculation, the proposed spreadsheet needed invoice or voucher detail sufficient for an audit trail. Tax had to be accrued when payables were booked and reported in the month vendor billings were received, not when the invoice was paid.

Common questions

Was the permit approved? No decision was made; more information was required.

What annual taxable-purchase minimum did the letter state? $800,000.

When did the letter require tax to be accrued? When payables were booked.

Was a direct payment permit alone enough for vendors? The application statement also needed to say a direct-payment exemption certificate would be issued to each supplier.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0970B12

Original ruling text

September 8, 1989

Dear ***:

The Application for Direct Payment Permit that you submitted has been reviewed.
However, additional information as outlined below is needed before the
application can be processed.

Is the corporation purchasing materials for the building and only construction
labor from a contractor; or, does the corporation have a contract with a
contractor to construct the building, including materials and labor? If you
have a contract for materials and labor, is the contract lump-sum (a single
charge for materials and labor) or separated (separated charges for materials
and labor)?

Information on your application indicates that CORP X, has no fixed assets in
Texas. Who will own the building? Is this corporation a purchasing agent for
the affiliated companies?

Item 13 - zip codes for the three officers addresses. Home phone numbers for
the three officers. The business phone number is not acceptable.

Item 19 - please explain "paymaster for affiliated corporations."

Item 20 - the minimum taxable purchases to qualify for a direct payment permit
is $800,000 a year. Your application shows $1,000., but your letter indicates
purchases of about two million over the next two years.

Item 21 - In paragraph 2, you state "All such purchases will be made with the
direct pay permit . . ." This statement should include that a direct payment
exemption certificate will be issued to the supplier/vendor.

In paragraph 3, you state that the split between taxable materials and
nontaxable labor will be done on a PC spreadsheet at the time of payment. Some
of the labor could be taxable manufacturing labor or taxable service like
security service, garbage collection, etc. Will the spreadsheet detail vouchers
or invoices so that there is an audit trail? The tax has to be accrued where
you book payables, not when the invoice is paid. The tax is to be reported in
the same month that you receive the vendor's billings.

Please return the completed application and additional information to me at the
following address:

Jo Ann Dieck
Tax Correspondence
P.O. Box 13528
Austin, Texas 78711

If you have any questions or need additional information, please call me toll
free at 1-800-252-5555, extension 3-4666.

Sincerely,

Jo Ann Dieck
Tax Correspondence