Could a direct-payment permit holder obtain a later refund if it did not give the supplier a direct-payment exemption certificate when buying taxable items?

Plain-English summary

A direct-payment permit holder could give its supplier a direct-payment exemption certificate when buying taxable items for its own use and then accrue and remit tax directly to Texas. It was not required to use that method for every purchase.

But if the permit holder did not give the certificate at the time of purchase and instead properly paid sales tax, it could not later seek a refund merely by issuing a certificate retroactively. The certificate submitted for the 1985–1989 purchases also lacked required information under Rule 3.288.

Common questions

Did holding a direct-payment permit automatically make every purchase tax-free? No.

Could a certificate be issued later to recover properly paid tax? No.

Did the submitted certificate satisfy the rule? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.288

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8912L0976E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

December 1, 1989

Dear ****:

Your corrected sales and use tax return for year ending December
31, 1988, and letter requesting a refund of sales tax collected
from CORP X were forwarded to me for response.

A direct payment permit holder can issue a direct payment exemp-
tion certificate to a supplier for the sales tax at the time the
permit holder purchases taxable items for its own use. The direct
payment permit holder is then responsible for accruing and re-
mitting the tax directly to the state. The direct payment permit
holder is not required to purchase all items for its own use tax
free.

A direct payment permit holder who does not issue a direct payment
exemption certificate to a supplier at the time of purchase of
taxable items may not later request a refund of the sales tax that
was properly due and paid.

In the situation described in the letter from CORP M, CORP X may not
issue you a direct payment exemption certificate and obtain a refund
of tax paid to you on taxable purchases from 1985 through 1989.

Enclosed is Rule 3.288 which contains a direct payment exemption
certificate that can be reproduced as needed. The certificate
you received does not contain all of the information required.
Also, the correct direct payment permit number is ***.

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

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 3-4666 or write to
me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence