What receipt did a Texas business need to prove sales tax was paid on company credit-card purchases?

Plain-English summary

A company planned to put taxable purchases under $1,000 on a corporate credit card. The card statement likely would show only a total purchase amount without itemizing vendor tax.

The Comptroller said the purchaser needed a receipt from a Texas retailer or Texas-permitted out-of-state retailer showing that the proper tax was paid. The bill, contract, invoice, or receipt had to separately state the tax or contain a written statement that the price included tax. An out-of-state retailer also had to identify it as Texas tax.

A verbal tax-included agreement did not bind the state. Without written vendor proof, an audit could assess tax, penalty, and interest.

For out-of-state shipments or vendors outside a local jurisdiction, local tax followed the delivery point. The receipt needed to identify the collected local taxes so the purchaser could determine whether more was due.

A direct-payment permit holder was not required to buy every item tax-free and self-accrue, but the threshold for obtaining and keeping the permit was at least $800,000 of taxable purchases for its own use in a calendar year.

What this means for you

The credit-card company's summary was not a substitute for transaction-level vendor documentation. Purchasers also needed enough local-tax detail to verify delivery-location tax.

Common questions

Was a verbal “tax included” agreement enough? No.

What written proof worked? A receipt separately stating tax or saying the price included tax.

What could happen without proof? Assessment of tax, penalty, and interest.

How was local tax determined for shipped goods? By the delivery point under the facts described.

Did a direct-payment permit require every purchase to be tax-free? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.286(d)(3) (seller and purchaser responsibilities)
• 34 Tex. Admin. Code Rule 3.288 (direct payment permits)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9010L1048B11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 3, 1990

Dear ****:

Thank you for your letter regarding the tax implications of *
* proposed credit card purchases.

You stated that * * is proposing that all purchases under
$1,000.00 be charged on a company credit card; the use of this
credit card will be restricted to taxable purchases from Texas
registered vendors. The taxability of the purchase is solely
determined by the expense account to which a proposed request
for purchase is attributed to. No purchase order will be issued
to your vendors. They will be communicated the item description
and credit card number and be instructed to charge tax. The cred-
it card company will provide a statement which very likely will
not itemize on a purchase by purchase basis the amount of tax
collected by your vendors. A one line entry covering the total
cost of the purchase (tax, freight, etc.) will be booked at the
time the request for purchase is passed on to the purchasing
department.

A purchaser is not relieved from sales and use tax liability un-
less a receipt is obtained from either a Texas retailer or a
Texas-permitted, out-of-state retailer which shows that the ap-
propriate tax has been paid. As stated in Rule 3.286 (d)(3), the
amount of the sales tax must be separately stated on the bill,
contract, or invoice to the customer or there must be a written
statement to the customer that the state price includes tax. Out
of-state retailers must identify the tax as Texas tax.

The state is not bound by a verbal agreement between a seller and
a purchaser that the price includes the tax. Without a receipt
from the vendor that separately state the tax amount or a state-
ment on the receipt that the price includes the tax, the tax plus
applicable penalty and interest would be assessed in an audit.

If items are shipped to you from out of state or are shipped to
you from a vendor that is located outside a local taxing juris-
diction(s), the local taxes are due based on point of delivery.
The receipt from the vendor should indicate the amount of tax
collected and identify the local taxes collected. Without this
information, you will not be able to determine that the proper
local taxes were paid to the vendor and that you do not owe addi-
tional local taxes.

A direct payment permit holder is not required to purchase all
items for its use tax free and accrue the tax. However, the
first requirement to obtain and to hold a direct payment permit
is that you purchase $800,000 or more in taxable items in a cal-
endar year for your own use. Enclosed is Rule 3.288 for your
information.

This opinion is based on the facts you presented. If there are
additional or different facts, the opinion may 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