Was a boat broker's commission subject to Texas sales tax when the principal's boat sale qualified as an occasional sale?

Plain-English summary

The requester sold boats while acting as a broker. The Comptroller said a broker had to disclose the principal's identity to the purchaser and could not transfer title without further action by the owner, citing Rule 3.352(a)(1).

The underlying boat sale was not taxable if the principal was not a "seller" under Rule 3.286(a) and the principal's sale qualified as an occasional sale under Rule 3.316(b). In that situation, the broker's commission was also not subject to sales tax. The commission nevertheless had to be reported as part of gross sales on the sales-tax return.

What this means for you

The nontaxable result depended on genuine disclosed-broker status and on the principal's own eligibility for occasional-sale treatment. The letter did not create a general exemption for every boat transaction handled by an intermediary.

Even when the commission was not taxed, it remained reportable in gross sales under the letter's instructions.

Common questions

Was the broker's commission taxable? No, on the stated facts.

What made the business a broker? It disclosed the principal and could not transfer the boat without further action by the owner.

When was the boat sale nontaxable? When the principal was not a seller under Rule 3.286(a) and the transaction qualified as an occasional sale under Rule 3.316(b).

Did the broker omit the commission from its sales-tax return? No. The letter said to report the commission as part of gross sales even though it was not subject to sales tax.

Citations and references

• 34 Tex. Admin. Code Rule 3.352(a)(1) — brokers and factors.
• 34 Tex. Admin. Code Rule 3.286(a) — seller definition referenced in the letter.
• 34 Tex. Admin. Code Rule 3.316(b) — occasional-sale qualification.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9108L1124A10

Original ruling text

August 6, 1991

Dear **:

Thank you for your recent letter regarding the taxability of boats sold by your
business, when your business is acting as a broker.

A broker must disclose the principal's identity to the purchaser and cannot
cause title to property to be transferred to a purchaser without further action
on the part of the owner (principal). See Rule 3.352 (a)(1) - Brokers and
Factors.

The sale is not taxable as long as the principal is not a seller as defined in
section (a) of Rule 3.286 and the sale by the principal qualifies as an
occasional sale under section (b) of Rule 3.316.

The broker's commission is not subject to sales tax; however, the commission
should be reported as part of gross sales on the sales tax return.

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

If you have any questions or need more information, you may call me toll free
at 1-800-531-5441, extension 5-0330. The regular number is 512/463-4600, or
write Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division