Was a bunker receipt enough to document Texas's sales-tax exemption for fuel consumed by a vessel operating exclusively in foreign or interstate commerce?

Plain-English summary

A bunker receipt alone did not establish the sales-tax exemption for bunker fuel.

Fuel could qualify when consumed in operating a vessel exclusively in foreign or interstate commerce. The purchaser had to give the supplier a valid, complete exemption certificate accepted in good faith.

Under Rule 3.297(b)(4)(C), the certificate had to state the title or position of the signer, the name of the vessel receiving the fuel, and the vessel's destination. The purchaser became liable if the fuel was later used in a taxable manner.

Common questions

Was the bunker receipt enough? No.

What vessel use qualified? Exclusive operation in foreign or interstate commerce.

What information did the certificate require? The signer's title or position, vessel name, and destination.

Citations and references

• Comptroller Rule 3.297(b)(4)(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/9008L1044G06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller August 29, 1990

Dear *:

Thank you for your letter regarding required documentation to
satisfy exemption for sales of bunker fuel to ships or vessels
engaged in foreign commerce.

You stated that Company X is engaged in the purchase for resale
of bunker fuel worldwide to vessels engaged in foreign commerce.
Generally speaking, the ships or vessels being sold to are under
foreign flag and their next port of call is outside the United
States. Company X's method of sale is as follows:

A. An inquiry is placed with Company X by an owner, charterer,
agent, broker or by another trading company requesting price
and availability of fuel at a specific port within specified
dates.

B. Company X contacts suppliers at the appropriate port and
returns an offer to the entity who placed the inquiry. An of-
fer consists of a price for a quantity of fuel to be delivered
to the vessel during its port visit.

C. If the offer is accepted, confirming contracts are exchanged.
These contracts simply state the parameters of the deal and are
subject to Company X's general terms and conditions of sale and
delivery.

D. Company X then coordinates delivery of fuel to the vessel.

You asked if Company X's brinker receipts alone are satisfac-
tory documentation that sales of bunker fuel to vessels en-
gaged in foreign commerce are exempt from the sales and use
tax or the motor fuel tax.

The Bunker Receipt is not acceptable in lieu of an exemption
certificate. The Tax Code provides that the gross receipts
of a seller are subject to the sales or use tax unless the
seller accepts a valid and complete exemption certificate or
resale certificate in good faith from the purchaser. The pur-
chaser is then liable for the tax if the item(s) purchased
are used in a taxable manner.

The bunker fuel will qualify for sales tax exemption if it
is consumed in the operation of a vessel operating exclusive-
ly in foreign or interstate commerce. The purchaser must is-
sue a valid and complete exemption certificate to the supplier.
As provided in Rule 3.297 (b) (4) (C), the exemption certifi-
cate must include the title or position of the person issuing
the certificate, the name of the vessel on which the fuel
will be loaded, and the destination of the vessel.

This opinion is based on the facts presented. If there are ad-
ditional or different facts, the opinion my change.

If you have any questions or need additional information, you
may call toll free 1- 800- 252- 5555 or the regular number
512/463-4600. My extension is 3-4666. You may write to Tax
Correspondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence