Does a supplier still have to remit tax on sales it makes to mobile vendors, now that many mobile vendors operate independently rather than exclusively under one supplier?

Plain-English summary

This 1992 letter updates a supplier on how Comptroller Rule 3.293 applies to its sales to mobile vendors (e.g., vending-cart or truck operators selling candy and soft drinks). The supplier had previously been told to remit tax on all sales to the mobile vendors it supplied, back when mobile vendors almost exclusively operated under a single supplier. By 1992, the industry had changed: many mobile vendors had become independent operators who bought from multiple suppliers and local retailers rather than exclusively from one company.

The Comptroller drew a line based on the vendor's relationship to the supplier. Sales to mobile vendors who still operate under the company -- connected to it through leased vehicles -- remain within Rule 3.293, so the supplier must continue to remit tax on those sales. But for independent mobile vendors who don't operate under the company, the supplier is no longer required to report tax on those sales.

Instead, when selling to independent mobile vendors, the supplier must either collect tax on sales of taxable items (the letter gives candy and soft drinks as examples) or obtain a resale certificate from the vendor. Tax doesn't need to be collected or reported on sales of nontaxable food items regardless. The letter also reminds the supplier that independent mobile vendors are themselves required to collect sales tax on their own sales, and asks the supplier to advise any unpermitted independent vendors to contact the local enforcement office to get a sales tax permit.

What this means for you

Suppliers who sell to mobile vendors

Check whether each mobile vendor you sell to is still operating under your company (e.g., via a leased-vehicle arrangement) or is fully independent. For vendors still tied to you, keep remitting tax under Rule 3.293. For independent vendors, either charge tax on taxable items at the point of sale or collect a valid resale certificate -- don't keep reporting tax on their behalf as if the old single-supplier model still applied.

Independent mobile vendors

If you buy inventory from more than one supplier or from retail stores rather than operating exclusively under one company, you're treated as an independent vendor. That means you're responsible for holding your own sales tax permit and collecting sales tax on your own retail sales -- your supplier is no longer collecting or remitting on your behalf.

Accountants and tax professionals

This letter is a good illustration of how a Comptroller rule written for one industry structure (exclusive supplier relationships) gets applied once that structure changes. When reviewing a supplier's reporting practices, confirm the actual vendor relationship (leased vehicle/exclusive vs. independent) rather than assuming the original rule automatically covers every sale to a "mobile vendor."

Common questions

Q: Do I still have to remit tax on everything I sell to mobile vendors I supply?
A: Only for vendors who still operate under you and are connected through leased vehicles. For independent mobile vendors who buy from multiple sources, you instead either collect tax on taxable items or obtain a resale certificate.

Q: What should I do if an independent mobile vendor I sell to doesn't have a sales tax permit?
A: The letter asks suppliers to advise independent mobile vendors to contact the Comptroller's local enforcement office to obtain a sales tax permit, since independent vendors must collect sales tax on their own sales.

Q: Do I need to collect tax on food items I sell to independent mobile vendors?
A: Only on taxable items like candy and soft drinks. Tax need not be collected or reported on sales of nontaxable food items.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9205037L

Original ruling text

May 18, 1992

Dear **:

In the past you were advised to remit tax on sales made by you to mobile
vendors you supplied in accordance with Comptroller Rule 3.293.At the time the
rule was initially issued, mobile vendors almost exclusively operated under one
supplier. Since then, the industry has changed and many mobile vendors now
operate totally independent of any suppliers. They may make purchases from you
as well as local retail establishments.

Sales to mobile vendors operating under you and connected to your company
through leased vehicles still fall within the terms of the rule. However, you
are no longer required to report tax on sales to independent mobile vendors who
do not operate under you.

If you make sales to independent mobile vendors, you must either collect tax on
the sale of taxable items, e.g., candy and soft drinks, or obtain a resale
certificate from the vendor. Tax need not be collected or reported on sales of
nontaxable food items.

Independent mobile vendors are required to collect sales tax on their sales.
Consequently, please advise independent mobile vendors to contact our local
enforcement office to obtain a sales tax permit if they do not have one.

Your assistance in advising the independent vendors to obtain a sales tax
permit will be greatly appreciated.

Sincerely,

Michael D. Doyle
Director
Tax Administration