Did a seller owe Texas sales tax when a Texas buyer accepted an aircraft and took title in South Carolina before bringing it to Texas?

Plain-English summary

The aircraft-sale and delivery documents showed that the seller delivered the aircraft in South Carolina, where the Texas buyer accepted it and took title. The full purchase price was released upon acceptance, and the buyer assumed title and risk of loss there.

The Comptroller therefore treated the transaction as a South Carolina sale, not a Texas sale, so the seller did not have to collect Texas sales tax. The letter cautioned that South Carolina tax might apply.

When the buyer brought the aircraft into Texas for use, the buyer owed Texas state and applicable local use tax on the purchase price and had to accrue and remit it directly. The buyer could receive credit for South Carolina sales tax that was legally due and paid. Texas tax already collected by the seller should be refunded if it was not due to South Carolina and the seller was not required to remit it there.

STAR lists an issued date of January 8, 1992, while the published letter itself is visibly dated January 8, 1993. This page retains STAR's date in metadata and preserves the letter's date in the original text below.

What this means for you

Aircraft-sale documents should state where delivery, acceptance, title transfer, payment release, and risk of loss occur. An out-of-state closing can avoid treatment as a Texas sale without eliminating Texas use tax when the aircraft is brought into Texas.

Common questions

Did the seller owe Texas sales tax? No. Did the Texas buyer escape Texas tax entirely? No; Texas use tax applied when the aircraft entered Texas for use. Was credit available for another state's tax? Yes for South Carolina sales tax legally due and paid.

Citations and references

• The letter bases its answer on the Aircraft Sales Agreement and Aircraft Delivery and Acceptance documents; it does not cite a numbered tax provision.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9301L1214F08

Original ruling text

January 8, 1993

Dear *****:

Thank you for your letter and copies of the Aircraft Sales Agreement and
Aircraft Delivery and Acceptance documents concerning a sale of an aircraft to
** (*) ****, Texas.

The documents show that you delivered the aircraft to **, South
Carolina, where * accepted delivery and took title to the aircraft.
The entire purchase price of the aircraft was released to you upon
*'s acceptance of the aircraft. The Aircraft Sales Agreement further
provides that title and risk of loss or damage shall be borne by *
following acceptance of the aircraft in ****, South Carolina.

Based on the documents, the sale of the aircraft occurred in South Carolina and
not in Texas; therefore, you were not required to collect Texas sales tax on
the sale. However, you may be required to collect South Carolina tax if it is
due on this transaction. ** would owe Texas state and applicable local
use taxes on the purchase price of the aircraft when it was brought into Texas
for use. * was responsible for accruing and remitting the use tax
taxes directly to this state. **** would be allowed credit for any South
Carolina sales tax that was legally due and paid to that state.

The Texas state tax that you collected from ** should be refunded to
them provided the tax is not due to South Carolina and you are not required to
collect and remit that tax on this transaction. ** should accrue the
appropriate Texas tax due and remit it for the proper reporting period in which
it was due.

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

If you have any questions or need additional information, you may call me toll
free at 1-800-531-5441 extension 3-4666, or the regular Austin number
512/463-4666. You may write to Tax Administration Division.

Sincerely,

Jo Ann Dieck
Tax Administration Division