Were materials for an out-of-state lump-sum construction contract taxable when a Texas seller delivered them to a Texas fabricator that then sent the assembled product out of state by common carrier?

Plain-English summary

The May 1, 1990 letter corrected the Comptroller's August 22, 1989 answer for materials bought in Texas for an out-of-state lump-sum construction contract.

Materials were nontaxable when the Texas seller delivered them to a third-party Texas fabricator and the fabricator then delivered the assembled product to a common carrier for shipment out of state. The fabricator's assembly charge was also nontaxable when the fabricator made that carrier delivery.

The earlier letter had incorrectly treated the materials delivered to the Texas fabricator as taxable. The client could request a refund of tax paid in error. Materials delivered by the seller directly to a common carrier for out-of-state shipment were also nontaxable.

Common questions

Did intermediate delivery to a Texas fabricator make the materials taxable? No under the corrected answer.

Who had to deliver the assembled product for out-of-state shipment? The fabricator delivered it to a common carrier.

Could tax paid under the old answer be refunded? The client could request a refund of tax paid in error.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1018G05

Original ruling text

May 1, 1990

Dear ****:

This letter is to change my August 22, 1989 response to your letter dated
August 16, 1989 (copies attached).

The materials in situation #2 are not subject to Texas sales tax if the
seller delivers the materials to a third-party fabricator in Texas, who then
delivers the assembled product to a common carrier for shipment out-of-state.

Your client may request a refund of sales tax paid in error to suppliers.
I have enclosed information on the refund procedure for your reference.
Please accept my apology for any inconvenience this may cause you or your
client.

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

Please feel free to contact me if you have any additional questions. You
may write me, call toll free 1-800-252-5555 (ext. 3-4685) from anywhere in
the United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence

August 22, 1989

Dear ***:

Thank you for your letter dated August 16, 1989, concerning the
taxability of materials purchased in Texas for use in a lump-sum
construction contract out-of-state.

The taxability of the materials in the specific situations that you
described is as follows:

Situation 1: The materials are not taxable if the seller delivers the
materials to a common carrier for shipment out of state.

Situation 2: The materials are taxable to the contractor at the time
of purchase. The seller should collect Texas sales tax since the seller
delivered the materials to a location in Texas at the contractor's direction.

The third-party fabricator would not be required to collect tax on the
assembly/fabrication charges if the fabricator delivers the assembled
product to a common carrier for shipment out-of-state.

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

Please feel free to contact me if you have any additional questions. You
may write me, call toll free 1-800-252-5555 from anywhere in the United
States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence