When did a yearbook seller or school have to collect Texas sales tax on yearbooks bought for students?

Plain-English summary

A yearbook seller asked how Texas sales tax applied when public schools, private schools, and universities purchased books for students or shared the cost with students.

Schools and universities that were not automatically exempt could apply for exempt status. A qualifying exempt school could use an exemption certificate to buy yearbooks it would give away. Texas state universities were automatically exempt and could use either an exemption certificate or official purchase voucher.

When students paid the seller directly, the seller collected tax on the amount charged to students. An exempt school's separately paid portion was not taxed if the seller received proper exemption documentation. If an exempt school bought all the books and then charged students, it could buy with a resale or exemption certificate but generally had to collect tax on the student payments. A nonexempt school could buy for resale with a resale certificate and likewise had to collect tax from students.

The letter described a limited exception allowing an exempt school one 24-hour tax-free sale each year, including designated yearbook sales. It said orders and pickups could occur over longer periods if the books were delivered to the school on one day and the school designated the sale accordingly. Nonexempt schools could not use that exception. The STAR subject says "two" one-day sales, while the body says one; this page follows the body and flags the discrepancy rather than choosing an unstated answer.

Proper resale or exemption certificates could remain effective while their information stayed accurate and had to be retained at least four years after the last covered purchase. The seller generally had to collect tax when engaged in business in Texas unless it received proper documentation; direct-payment permits were addressed separately under Rule 3.288.

What this means for you

Yearbook tax treatment turned on the purchaser's exempt status, who paid the seller, whether the school resold the books, and whether the seller held a valid certificate. The source itself contains a one-versus-two-sale inconsistency, and the letter's 1991 rules should be checked against current law.

Common questions

Could an exempt school buy yearbooks to give students? Yes, with the required exemption documentation.

Were payments made directly by students taxable? Yes, on the amount charged to the students.

Could a school buy yearbooks for resale? Yes, using the appropriate resale certificate, but the school generally collected tax from students.

Did the letter allow a tax-free fundraising sale? It described one 24-hour tax-free sale each year for exempt schools; nonexempt schools were excluded.

How long were certificates retained? At least four years after the last purchase they covered.

Citations and references

• 34 Tex. Admin. Code Rule 3.322 — exempt organizations, exemption and resale documentation, and the tax-free-sale rule discussed in the letter
• 34 Tex. Admin. Code Rule 3.288 — direct-payment permit qualifications and procedures

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1109B11

Original ruling text

May 10, 1991

Dear ****:

Thank you for your recent letter, pertaining to yearbook
sales to schools. I have restated, verbatim, your specific
questions below, followed by answers.

1. Are yearbooks tax exempt when purchased by public
   schools, private schools, state universities, and private
   universities in the following situations?

a. The yearbooks are purchased by the school to be
given away to the students.

Answer: Public and private schools, private universities,
and non-Texas public universities are not automatically
exempt from Texas sales tax, but they may apply to this
agency for exempt status. See Rule 3.322, enclosed.

If it has received notice of tax exempt status from this
agency, a school may issue an exemption certificate to buy,
tax-free, yearbooks that will be given away to students.

Texas state universities are automatically exempt from sales
tax. They may issue either an exemption certificate or an
official purchase voucher to the seller instead of paying
tax on yearbooks that will be given away to students.

b. The school pays for half of the yearbook and the
student pays for the other half.

Answer: If the students pay their half directly to the
yearbook seller, the yearbook seller should collect tax from
the students on the total amount charged to the students.
The seller is not required to collect tax from exempt
schools on the portion of the purchase price they pay,
provided the seller obtains an exemption certificate (or,
from a Texas state university, a purchase voucher or an
exemption certificate). The seller should document these
transactions carefully, in case of audit.

If the school is not tax-exempt, the seller would be
required to collect tax from both the students and the
school, under the same circumstances.

If an exempt school pays the yearbook seller directly for
the full amount of the books, and subsequently charges the
students for their contribution, then the school may issue a
resale or an exemption certificate instead of paying tax on
the yearbooks. The school would be required to collect tax
from the students on the total amount remitted to the school
by students for yearbooks (except in the case of a one-day,
tax-free sale, discussed below).

Under these same circumstances, a nonexempt school may issue
a resale certificate (but not an exemption certificate) for
the yearbooks. The school would be required to collect tax
from the students on the total amount remitted to the school
by students for yearbooks. (One-day, tax-free sales are not
allowed for nonexempt schools).

2. If the schools are exempt on yearbook purchases, what
   information does ** need to keep on file? If
   certificates are required, send copies for reference.

Answer: A yearbook seller, where appropriate under the
above scenarios, must collect tax or obtain a properly
completed and signed resale or exemption certificate from
the purchaser. Blank certificates are enclosed for
reference. A blanket resale or exemption certificate is
acceptable.

3. If schools are exempt on yearbook purchases, are there
   any exceptions where tax must be collected?

Answer: See Answer 1. A yearbook seller must collect tax
from nonexempt schools that given yearbooks away. A yearbook
seller must collect tax from students who pay the yearbook
seller directly. A school, exempt or nonexempt, must
collect tax on yearbooks it resells to students.

There is a limited exception whereby a tax-exempt school may
hold a one-day tax-free sale, that could include tax-free
yearbook sales to students. Exempt schools may hold 24-hour
tax-free sales once each year. If yearbooks are delivered
to the school on a single day, and the school designates the
yearbook sale as the one-day tax-free from the students even
if orders were taken over an extended period of time, and
even if students pick up the books over an extended period.
See enclosed Rule 3.322 for more on this. As noted
previously, nonexempt schools may not hold 24-hour tax-free
sales.

4. Can schools buy for resale where they would collect and
   pay the tax? If resale certificates are required, send
   copies for our reference.

Answer: See Answer 1. A blank resale certificate is
enclosed for reference.

5. Can schools direct pay the sales tax?

Answer: If you are referring to direct payment permits, it
is unlikely that many schools, public or private, would have
the minimum volume of purchases to qualify for a direct
payment permit under Rule 3.288. However, I have enclosed a
copy of Rule 3.288 for direct payment qualifications and
procedures, for your information. In general, a yearbook
seller who is "engaged in business" in Texas is required to
collect applicable sales or use tax, absent a properly
completed and signed resale or exemption certificate.
Absent any exemption, a purchaser would be required to
accrue and remit use tax directly to the state if the seller
failed to collect tax.

6. How often should exemption certificates and resale
   certificates be revised?

Answer: A properly completed and signed resale or exemption
certificate can survive for as long as the information
contained thereon is accurate. New certificates should be
issued when information changes. A certificate must be
retained for at least four years beyond the date of the last
purchase covered by the certificate, in case of audit.

This opinion is based on the facts presented. Different
facts, though similar, might lead to different answers. If
you have further questions, feel free to write or call
1-800-252-5555. My direct extension is 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration