Could two drilling rigs sold by an out-of-state company and shipped from Louisiana to Texas qualify as occasional sales exempt from Texas use tax?

Plain-English summary

The two drilling-rig sales appeared to qualify as occasional sales exempt from Texas use tax.

The seller was not engaged in activity that would require a Texas permit and had not sold, leased, or rented any other taxable item during the preceding 12 months. The rigs were to be shipped from Louisiana to Texas drill sites.

The outcome would change if the seller first bought the rigs from a joint venture in Texas for resale. It would then need a Texas permit to buy tax-free for resale, and that permit requirement would prevent use of Rule 3.316(b) or (c)'s occasional-sale exemption.

Common questions

Did the two sales qualify? They appeared to under the facts presented.

What seller history mattered? No other taxable sale, lease, or rental in the prior 12 months.

Could a required permit defeat the exemption? Yes.

Citations and references

• Comptroller Rule 3.316(b) and (c).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9007L1031G01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller

VIA TELECOPIER

July 16, 1990

Dear **:

Thank you for your letter dated July 10, 1990, concerning the
sale(s) of two drilling rigs by Company A to Company C.

You indicated that the rigs are to be shipped from Louisiana to
drill sites in Texas. The drilling rigs will be subject to Texas
use tax unless the sale(s) qualify for exemption from tax.

You stated that the seller, Company A, is not engaged in any
activity that would require it to hold a permit if it were do-
ing business in Texas. Company A has not sold, leased or rent-
ed any other taxable item in the preceding twelve month period.
Based on the facts that you have presented, it appears that the
sale(s) of the two rigs can qualify for exemption from Texas use
tax under sections (b) or (c) of Rule 3.316 as occasional sales.

Please note that if the Joint Venture sold the rigs to Company
A in Texas, Company A would be required to obtain a sales tax
permit in order to buy the rigs tax free for resale. Since Com-
pany A would be required to hold a permit, it could not make an
occasional sale under section (b) or (c) of Rule 3.316.

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 ques-
tions. 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