In this January 1993 Texas ruling, an Arkansas printer bought manufacturing equipment in Louisiana tax-free and later brought it into Texas — did Texas use tax apply?

Plain-English summary

This January 6, 1993 Texas Comptroller letter ruling answers a question about the "one-year rule" for tangible personal property brought into Texas from another state. The taxpayer described an Arkansas client in the printing business who bought manufacturing equipment in Louisiana (where the purchase was not subject to sales tax) and planned to use it in Arkansas before eventually moving it to Texas.

The Comptroller's office explained that the answer turns on how long the equipment was used outside Texas before it entered the state:

• One year or more of use outside Texas before the move: no Texas use tax is due.
• Less than one year of use outside Texas before the move: Texas presumes the equipment was purchased for use in Texas, so use tax is due.

Even where use tax applies, the taxpayer gets a credit against Texas sales/use tax for any sales tax legally paid to another state on the same equipment. The letter also flags that, separately from the one-year issue, the manufacturing equipment might qualify for the phased-in manufacturing exemption described in section (f) of Comptroller Rule 3.300 (Manufacturing; Custom Manufacturing; Fabricating; Processing).

What this means for you

Businesses moving equipment into Texas from another state

If you buy equipment out of state and use it there before relocating to Texas (or moving the equipment into Texas), track how long the equipment was in service outside Texas. Reaching the one-year mark before the equipment enters Texas avoids Texas use tax entirely. If you move it sooner, Texas will presume the purchase was for Texas use and tax it, but you can offset that with a credit for any sales tax you already legally paid to another state.

Manufacturers

Separately from the one-year timing question, check whether your manufacturing equipment qualifies for the phased-in manufacturing exemption under Rule 3.300(f), which the ruling notes could apply on these facts.

Accountants and tax professionals

This is a facts-specific letter ruling — the Comptroller expressly notes the opinion is based on the facts presented and that other, similar facts could produce a different result. Treat the one-year threshold and the presumption of Texas-use as the operative rule, but confirm current status, since STAR letters from 1993 may no longer reflect current Comptroller policy.

Common questions

Q: If equipment is used out of state for less than a year and then brought to Texas, is Texas use tax automatically due?
A: Yes — the letter says the equipment "will be presumed to be purchased for use in Texas," and Texas use tax will be due, if it's used in another state for less than one year before being moved to Texas.

Q: Does paying sales tax in the other state help at all if use tax ends up being due in Texas?
A: Yes. The ruling confirms "a deduction against Texas sales or use tax is allowed for any sales tax legally paid to another state on the equipment."

Q: Could this equipment also qualify for a manufacturing exemption?
A: The letter says the manufacturing equipment "may qualify for the phased-in manufacturing exemption described in section (f) of the enclosed Rule 3.300, Manufacturing; Custom Manufacturing; Fabricating; Processing" — a separate, additional avenue beyond the one-year timing rule.

Q: Can I rely on this letter for my own situation?
A: Only if you are the taxpayer it was issued to. The letter itself states the opinion "is based on the facts presented" and that "other facts though similar may provide a different result." Under STAR's rules, only the original recipient can claim detrimental reliance on it.

Citations and references

Rules cited in the letter:

• 34 Tex. Admin. Code Rule 3.300, Manufacturing; Custom Manufacturing; Fabricating; Processing (phased-in manufacturing exemption, section (f))

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9301L1217F09

Original ruling text

January 6, 1993

Dear **:

This is in response to your recent letter concerning the taxability of
equipment purchased in Louisiana and brought into Texas.

SITUATION/QUESTION

In the example you provide, you have an Arkansas client in the printing
business. Manufacturing equipment that he purchases for his business is
not subject to sales tax in Arkansas. If he uses this equipment in
Arkansas and then moves the equipment to Texas, would Texas sales tax be
due?

RESPONSE

If the equipment is used for a period of one year or more in Arkansas
before it is transferred to Texas, no Texas use tax will be due. The
equipment will be presumed to be purchased for use in Texas, and Texas
use tax will be due, if it is used in another state for a period of less
than one year before it is moved to Texas. A deduction against Texas
sales or use tax is allowed for any sales tax legally paid to another state
on the equipment. Additionally, the manufacturing equipment may qualify
for the phased-in manufacturing exemption described in section (f) of the
enclosed Rule 3.300, Manufacturing; Custom Manufacturing; Fabricating;
Processing.

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
1-800-531-5441, 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