Were a paper distributor's cutting and freight charges taxable when the customer bought the paper for resale and supplied a valid resale certificate?

Plain-English summary

Paper cutting and freight charges were taxable because they formed part of the paper's selling price.

When the customer bought the paper for resale and provided a valid, properly completed resale certificate, however, the distributor did not collect sales tax on the paper, cutting, or freight charge.

Common questions

Were cutting charges taxable? Yes, as part of the selling price.

Were freight charges treated the same way? Yes.

Did the distributor collect tax from a valid resale purchaser? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1038A11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 28, 1990

Dear **:

Thank you for your letter concerning the taxability of cutting and
freight charges.

Cutting charges are taxable; however, if your customer has issued
you a valid, properly completed resale certificate no sales tax
should be collected from your customer because this is part of the
paper's selling price.

The same would apply to freight charges.

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, please contact Tax Correspondence or
you may write to me at the above address. You may call toll free
1-800-252-5555, or our regular number is 512/463-4600. My exten-
sion is 3-4278.

Sincerely,
Onofre Guerra
Tax Correspondence

August 16, 1990

Sales Tax Correspondence
Capitol Station
Austin, TX 78774

Dear Sir:

Our company is a distributor of Fine paper and Industrial paper
products. We need a ruling from the State of Texas on sales tax
charged on cutting and freighting.

When a customer orders paper from us that requires being cut to
a specific size we charge for that service. If the customer has
a resale certificate on file with us for the paper should they
be charged tax on the cutting service. The customer feels that
the cutting charge is built into the resale price and should not
be taxed.

On the subject of freight we charge tax on merchandise sent to
our customers by a freight line. If the customer is going to re-
sale the product should they be charged this tax or would it also
be included in the resale price.

We would appreciate a ruling from the State on these two areas in
writing. If you have any questions please feel free to call me at
** .