Did a September 1991 purchase order preserve an exemption for packaging supplies delivered after the Texas law changed?

Plain-English summary

Texas changed its Tax Code in August 1991 to tax wrapping and packaging supplies sold to sellers other than manufacturers and processors. The change applied to sales made on or after October 1, 1991.

A buyer asked whether a purchase order signed in September 1991 preserved the former treatment. The Comptroller said no because the Legislature had not included a prior-contract exemption. The sale date controlled, so post-October 1 sales were taxable despite the earlier purchase order.

What this means for you

Sellers and purchasers using old contracts

An agreement signed before a tax-law effective date does not automatically preserve the old rules. The Legislature must actually provide transition or prior-contract protection.

Accountants and tax professionals

This letter addressed the specific 1991 packaging change and distinguished manufacturers and processors from other sellers. Verify current law before using the historical classification.

Common questions

Did the September purchase order avoid tax? No.

Which sales did the letter say were taxable? Wrapping and packaging supplies sold on or after October 1, 1991, to persons other than manufacturers and processors.

Why was there no prior-contract relief? The 1991 legislation did not include it.

Citations and references

The letter referred generally to the August 1991 Tax Code changes but cited no bill number or Code section.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9202L1163F10

Original ruling text

February 27, 1992

Dear ****:

Thank you for your recent letter asking about a prior contract
exemption for wrapping and packaging supplies.

Each time the legislature makes changes to the Texas Tax Code, the
legislature also states the effective date of the changes. The
legislature may make specific provisions, called prior contract
exemptions, that allow the changes to be delayed.

In August 1991, when the legislature made changes to the Tax Code
taxing wrapping and packaging supplies to all sellers other than
manufacturers and processors, the legislature did not include prior
contract exemptions. Therefore, all sales of wrapping and
packaging supplies made on or after October 1, 1991, to persons
other than manufacturers and processors, are taxable regardless of
the fact that there is a purchase order signed in September 1991.

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

If you have any additional questions or need more information, you
may call me toll free at 1-800-252-5555, extension 3-4633. The
regular number is 512/463-4633. You may also write to the Tax
Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division