Ezel / Tax Rulings / TX
TX 9101L1065G13 Sales and/or Use Tax (State,Local,MTA) 1991-01-03

Could a Texas direct-payment-permit holder use its certificate and seek an Enterprise Zone Project tax refund on construction purchases?

Short answer: Yes for a separated contract, but not a lump-sum contract. The permit holder could accrue tax on materials and seek a refund for qualifying purchases and new jobs.

Apply this to your situation

This page answers the general question as of 1991. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1991
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A direct-payment-permit holder with an Enterprise Zone Project designation asked whether it could qualify for a tax refund on construction purchases.

The Comptroller distinguished lump-sum and separated contracts. The permit holder could not issue a direct-payment exemption certificate for purchases under a lump-sum new-construction contract. Under a separated contract, it could issue the certificate to the contractor and accrue tax on its material purchases.

After accruing the tax, the permit holder could apply for a refund based on the number of new jobs and tax paid on qualifying material and equipment purchases.

What this means for you

The contract form controlled whether the direct-payment certificate could be used. The letter did not promise a refund merely because the project had an Enterprise Zone designation; the refund depended on new jobs and qualifying purchases on which tax was paid.

Common questions

Could the certificate be used under a lump-sum new-construction contract? No.

Could it be used under a separated contract? Yes. The permit holder could issue the certificate and accrue tax on material purchases.

What supported the refund application? The number of new jobs and tax paid on qualifying purchases of materials and equipment.

Citations and references

The letter did not cite a statute or administrative rule.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

JOHN SHARP
Comptroller January 3, 1991

Dear *:

Ms. Glover has asked me to respond to your letter regarding
the eligibility of a Direct Payment permit holder with Enter-
prise Zone Project designation to qualify for a tax refund.

A direct payment exemption certificate may not be issued for
purchases under a lump-sum contract for new construction.
Otherwise, you may issue your Direct Payment exemption certi-
ficate to ** and accrue tax on your purchases of
materials if the construction contract is a separated contract.

You may then apply for the tax refund based on the number of
new jobs and ta x paid on qualifying purchases of materials
and equipment.

If you have other questions or need more information please
call or write. The toll-free number is 1-800-531-5441; my
extension is 3-4675. The regular number is (512)463-4675.

Sincerely,
Tom Soto
Tax Administration

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