Were repair parts installed in Texas on foreign-plated vehicles exempt when the vehicles were immediately driven back to Mexico?

Plain-English summary

A seller installed motor-vehicle repair parts on vehicles that would be driven from Texas to Mexico. The buyer sought export treatment.

The Comptroller said the seller had to collect sales tax. An exported item had to retain its export character, and any use in Texas before export—no matter how brief—destroyed that status. Operating the installed part while driving the vehicle out of Texas counted as use of the part in Texas.

The letter said the Comptroller had taken the same position for other tangible personal property operated before or while being transported to Mexico.

What this means for you

Repair shops near the border

Foreign plates and immediate departure did not make installed parts exempt. Once the vehicle operated with the parts in Texas, the parts were used here.

Export buyers and tax professionals

Distinguish property transported unused from property installed and operated before crossing the border. The latter lost export treatment under this ruling.

Common questions

Did immediate travel to Mexico preserve the exemption? No.

Why did the parts lose export character? They were operated in Texas while the vehicle traveled toward the border.

Did the length of Texas use matter? No. The letter said use for any period before export was enough.

Citations and references

The letter cited no specific statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9202L1155D01

Original ruling text

February 11, 1992

Dear *****:

Thank you for your letter concerning the acceptance of export
documentation for motor vehicle repair parts used on vehicles that
are taken to Mexico.

In order for an exported item to be exempt from sales tax, the
item must retain its character as an export. An item that is used
in this state prior to export, regardless of the period of time,
loses its character as an export.

Operating the item (repair part) while transporting the item out
of state is use of the item; thus, the seller must collect tax on
the sale of the repair part. We have taken the same position on
other tangible personal property operated while or prior to being
transported to Mexico.

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

If you have any questions please give me a call at 463-4684.

Sincerely,

Curt Swenson
Tax Administration Division