Does an out-of-state company owe Texas use tax on catalogs it directs to be mailed to Texas customers, even though the catalogs are printed and mailed from outside Texas?

Subject

Printed Materials/Catalogs/Coupons — Distribution Under Direction Of Direct Mailer Doing Business In Texas Constitutes Use — Printing And Mailing Costs Are Taxable

Plain-English summary

An out-of-state company sold cutlery through sales representatives working in Texas, and it arranged for catalogs to be mailed to Texas consumers on its behalf. The company asked the Comptroller's office not to treat those catalogs as subject to Texas use tax, arguing that the Texas statute taxes "use" of tangible personal property, not mere "distribution," and that mailing catalogs was just distribution.

The Comptroller disagreed. The ruling explains that Texas Tax Code § 151.011(a) defines "use" broadly as "the exercise of a right or power incidental to the ownership of tangible personal property over tangible personal property." Because the company decided which Texas addresses would receive its catalogs, it was exercising an ownership right over those catalogs inside Texas — and that counts as a taxable "use," regardless of whether the printing and initial mailing happened outside the state. As a result, the company owed Texas use tax on the catalogs it directed to be sent to Texas addresses.

What this means for you

Out-of-state sellers who mail catalogs, coupons, or other printed materials into Texas

If you have any presence in Texas — such as sales representatives — and you control or direct where printed marketing materials get mailed within the state, Texas can treat that direction as a taxable "use" of the materials, separate from any sales tax that might apply to the goods being advertised. It generally does not matter that the materials were printed and physically mailed from outside Texas.

Businesses relying on a "distribution isn't use" argument

This ruling directly rejects the argument that distributing printed materials falls outside the statutory definition of "use." The Comptroller reads "use" broadly enough to cover the act of directing where property goes, not just physically possessing or consuming it.

Accountants and tax professionals

The key statutory hook is the definition of "use" in Texas Tax Code § 151.011(a). Because that definition covers any "exercise of a right or power incidental to ownership," it can sweep in activities like directing catalog mailings that clients might not intuitively think of as taxable "use." Consider this ruling when advising clients on direct-mail marketing campaigns that touch Texas addresses.

Common questions

Q: Does it matter that the catalogs were printed and mailed from outside Texas?
A: No. The ruling turned on the company directing which Texas addresses would receive the catalogs — an exercise of ownership rights occurring in connection with Texas — not on where the printing or initial mailing took place.

Q: Is "distribution" the same as "use" under Texas law?
A: According to this ruling, yes, for these purposes. The Comptroller found that directing distribution (choosing which Texas addresses receive catalogs) is itself an exercise of a right or power incidental to ownership, which is exactly how Texas Tax Code § 151.011(a) defines "use."

Q: Who owed the tax in this ruling — the mailer or the company that owned the catalogs?
A: The company that owned the catalogs and directed their distribution (the letter's recipient) was found to owe the use tax, not merely the mailing service.

Q: Can other taxpayers rely on this letter?
A: No. Per Texas Comptroller policy, STAR letters can support a detrimental-reliance claim only for the taxpayer who received the letter directly, and the letter itself notes its conclusion is "based on the facts presented" and that different facts could produce a different result.

Q: Does this ruling still reflect current Texas Comptroller policy?
A: It may not. This is a 1992 letter ruling, and STAR documents can become outdated even when not explicitly marked as superseded. Confirm current treatment with a Texas tax professional or the Comptroller's office before relying on it.

Citations and references

• Texas Tax Code § 151.011(a) (statutory definition of "use" as the exercise of a right or power incidental to ownership of tangible personal property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9208L1186G11

Original ruling text

August 17, 1992

Dear ***:

This is in response to your recent letter regarding the taxability of catalogs
mailed to Texas consumers on behalf of ***. ** has sales
representatives in Texas soliciting sales of *'s cutlery. You have
asked that I direct our **** Audit Office Auditor, Surinder Chawla, to
not set up the catalogs as being subject to Texas use tax.

Your basis for this request is your contention that the Texas statute does not
authorize the taxing of "distribution" as a form of use.

It is our position that the Texas statutory definition of "use" is broad
enough to encompass distribution:

. . ."use" means the exercise of a right or power incidental to the ownership
of tangible personal property over tangible personal property . . .

Texas Tax Code Section 151.011 (a). Directing the U.S. Mail as to which Texas
addresses are to receive Vector's catalogs is the exercise of a right or power
by *** incidental to the ownership of the catalogs. Consequently, it
is our position that ***** owes use tax on catalogs distributed in
Texas.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

If you have other questions or need more information, you may call me at
1-800-252-5555, extension 3-4502. The regular number is 512/463-4600. You
may also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division