Could a direct-sales distributor claim a Texas refund for tax paid to a company manager on products bought for resale or sold below suggested retail price?

Plain-English summary

Distributors of the direct-sales company's products did not need Texas sales-tax permits. Company managers collected tax from distributors based on suggested retail price, and distributors were reimbursed for that tax as they sold the products.

For personal-use purchases, or sales below suggested retail price, the distributor was directed to ask the manager for a refund or credit for the difference. The distributor could not obtain a state refund for tax that the distributor had not paid to the state.

The Comptroller did not approve the requested state refund on the existing record. The distributor first had to show whether the same tax had actually been reported and paid twice—once by the manager and again on the distributor's return—and explain whether the products had been bought tax-free and whether customers were charged tax.

Common questions

Did the distributor need a sales-tax permit? No, under the arrangement described.

Who collected tax on suggested retail price? The company manager collected it from the distributor.

Where did the distributor seek an adjustment for personal use or a below-list-price sale? From the manager.

Was a state refund approved immediately? No. More facts were required to establish duplicate payment.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1022G05

Original ruling text

May 25, 1990

Dear **:

Your letter requesting a refund of taxes paid on ***
Products that you purchased for resale was forwarded to me by the
Credit Section in Revenue Accounting for review.

Distributors of *** Products are not required to hold a
Texas sales tax permit. The company managers' are to collect sales
tax from the distributors on the suggested retail sales price. You
are reimbursed for the tax you paid on items as you sell them.

If you buy something for your personal use, you should either
indicate that to the manager at the time of purchase or request a
refund or credit from the manager on the difference between the
suggested retail selling price and the wholesale price. You will
have to follow this procedure if you sell items to customers below
the suggested retail selling price. You cannot request a refund
from the state of tax that you did not pay to the state.

Please review the enclosed information on the refund procedure
for tax paid in error to a retailer. It is not clear from the
information provided in your letter whether the tax that you reported
on your sales tax return was actually reported and paid twice (by
you and by your *** manager). Did you buy these items tax
free for resale? Did you actually collect this tax from your customers?
You will need to provide this information before we can consider refunding
tax that you reported on your returns.

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