Could a natural-gas marketer making only exempt sales issue a resale certificate without holding a Texas sales-tax permit number?

Plain-English summary

Some natural-gas marketing companies held no sales-tax permit because they made no taxable gas sales. Texas did not then require a permit solely to report exempt sales, but an exempt-only seller still had to give a resale certificate when a supplier requested one.

A supplier could accept a natural-gas resale certificate without a permit number if the buyer claimed all sales were for resale or to exempt customers and the supplier had no actual knowledge that the claim was invalid.

The letter described properly executed resale or exemption certificates as the only proof offered to show a specific gas transaction qualified for exemption. A supplier was entitled to demand one before making a tax-free sale, and auditors could require proof based on their independent judgment. If exempt-only sellers were found making taxable sales without collection and remittance, Texas could require all sellers to obtain permits.

What this means for you

The absence of a permit number did not automatically invalidate this certificate, but it did not eliminate documentation or good-faith requirements for either party.

Common questions

Did an exempt-only gas seller need a permit solely for exempt sales? No, under the practice stated in the letter.

Did it still provide a resale certificate when asked? Yes.

When could a supplier accept a certificate without a permit number? When the buyer made the stated resale-or-exempt-customer claim and the supplier lacked actual knowledge it was invalid.

Citations and references

• No numbered statute or rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1045D14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller September 18, 1990

Re: Resale Certificate for Natural Gas Purchases

Dear ****:

This is in response to your letter to Tom Soto concerning
resale certificates requested by suppliers on natural gas
purchases made by *, * and **.
Tom referred your letter to me for response. I apologize
for the delay in responding to your request.

You indicated that of some of your marketing companies do
not have a sales tax permit since they do not make taxable
sales of natural gas and are therefore not able to supply
a resale number when requested by suppliers.

We currently do not require persons who make only exempt
sales of natural gas to hold a sales tax permit solely to
report those exempt sales. However, these sellers must
issue a resale certificate to a supplier who asks for one.
A resale certificate for natural gas without a permit num-
ber may be accepted if the buyer claims all sales are for
resale or are to exempt customers and the seller does not
have actual knowledge that the claim is invalid.

Natural gas is subject to limited sales tax and properly
executed resale or exemption certificates are the only
proof that may be offered to show that a particular trans-
action qualifies for exemption. Sellers of natural gas who
demand a resale or exemption certificate before making a
tax free sale are completely within their rights.

Our tax auditors use independent judgement in asking for
proof on different sales categories of tangible personal
property. It is unlikely that an experienced auditor will
insist on seeing a certificate for an obvious sale for re-
sale of natural gas. Conversely, an experienced auditor who
suspects that a particular purchaser is not qualified to
issue an exemption or resale certificate, or who is aware
of abuses of an exemption for a particular category of
items, will probably insist on the certificate.

If we determine that sellers without permits are making
taxable sales and are not collecting and remitting tax, it
will become necessary to require all sellers to obtain per-
mits.

This opinion is based on the facts presented. If there are
different or additional facts, this opinion could change.

If you have further questions or need more information feel
free to call me at 1- 800-531-5441. The regular number is
(512) 463-4502. You may write me at Taxability, Legal Ser-
vices Division. [FAX (512) 475-0900]

Sincerely
Gilbert Zamora
Taxability, Legal Services Division