Did a mail-order seller of boat service contracts have Texas collection duties when it had no office, employee, agent, or advertising in Texas but may have shared a name with a Texas business associate?

Plain-English summary

The Comptroller could not give a final nexus answer because the seller had not explained its legal relationship with a Texas business associate.

The seller said it operated by mail, with no Texas outlet, employee, sales representative, agent, or advertising. But Rule 3.286(a)(1)(H) treated a company as engaged in business in Texas when a franchisee or licensee operated under its trade name.

If the seller and Texas associate both operated under the same name, the seller had to obtain a Texas permit and collect and remit tax on extended service contracts sold to Texas boat owners.

Common questions

Did the letter conclusively find nexus? No. The legal relationship was unclear.

What fact could create nexus? The Texas associate operating under the same trade name.

What duties would follow? A Texas permit and collection and remittance of tax on the Texas sales.

Citations and references

• Comptroller Rule 3.286(a)(1)(H).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9007L1033B01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

July 16, 1990

Dear **:

We received your letter questioning your responsibility to collect
and remit Texas sales taxes on extended service contracts sold to
boat owners within Texas.

According to your letter, your business is conducted through the
mail. You don't have a retail or wholesale outlet, employee, sales
representative or agent within Texas. You don't advertise in Texas
now and have no plans to advertise in Texas in the future.

The enclosed Rule 3.286 relating to seller's and purchaser's re-
sponsibilities outlines activities that cause a retailer to be en-
gaged in business in Texas and responsible for collecting and
remitting the Texas sales and use tax. According to Section (a)(1)(H)
of Rule 3.286, if a company allows a franchisee or licensee to
operate under its trade name, then the franchisee or licensee is
required to collect Texas sales or use tax.

I can't determine from your letter what your legal relationship
is with your business associate in Texas. H owever, if you both
operate under the same name, then you would be considered engaged
in business in Texas and you should obtain a Texas tax permit and
collect and remit Texas tax on your sales of extended service con-
tracts sold to Texas boat owners.

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 you may call or write Tax Correspondence.
You may call toll free 1-800-252-5555, or our regular number is
512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence