When did Texas sales tax apply to trained drug-detection dogs sold to law-enforcement or investigation agencies?

Plain-English summary

The requester trained drug-detection dogs and sold them nationwide to law-enforcement and private-investigation agencies. Some customers came to Texas for handler training and took their dogs with them; in other cases the seller delivered a dog and provided training outside Texas.

When the seller delivered the dog to an out-of-state location, no Texas tax had to be collected, but the seller had to retain proof of delivery. When a customer took possession in Texas, sales tax applied unless the purchaser qualified as an exempt entity.

Tax Code Section 151.309 limited the governmental exemption described by the letter to Texas, its political subdivisions, the United States, and federal instrumentalities. Agents of other states or foreign governments taking possession in Texas had to pay tax.

What this means for you

Delivery documentation and the place where the customer took possession controlled the interstate result. Governmental status alone was insufficient; the buyer had to fall within the specific Texas exemption.

Common questions

Was seller delivery outside Texas taxable? No, with retained proof. What if the customer took the dog in Texas? Tax applied unless the buyer qualified for exemption. Were other states automatically exempt? No.

Citations and references

• Texas Tax Code Section 151.309

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9111L1142F01

Original ruling text

November 20, 1991

Dear ****:

I am writing in response a letter from Senator Krier and as a
follow up to our phone conversation.

As, I understand it, you train dogs that are able to detect
drugs and sell them to law enforcement and private investigation
agencies throughout the nation. Some customers come to
Texas to be trained in handling their dogs and take them with
them when they leave. Others have you delivered the dog to
an out-of-state location where you conduct the training on the
spot.

When you deliver a dog out of state, you take the dog as excess
baggage and thus save your customer the additional costs
of air freight. You are not required to charge Texas tax when
you sell and deliver a dog to a point outside Texas. But, you
must retain documentation to show that you delivered the dog
to a point outside Texas.

When a customer takes possession of a dog in Texas, they are
required to pay sales tax unless they are recognized by the
Texas Tax Code as an exempt entity. Tax Code Section 151.309
limits the types of governmental entities that are exempted
from payment of sales tax on their purchases to the State of
Texas and political subdivisions of this state and the U. S.
Government and its instrumentalities. When an agent of another
state or a foreign government purchases and takes possession
of taxable items in Texas they are required to pay tax just as
agents of the State of Texas pay other states sales taxes when
they make purchases in those states.

If you have any other questions concerning this, please call
or write. You may reach me by calling toll free, (800)
531-5441. My direct line number is 512/463-4680. The number for
FAX transmissions is (512) 475-0900. You may write to me in
care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division