Is Texas sales tax refundable when an auction buyer takes possession of the item in Texas before the seller ships it out of state?

Plain-English summary

This 1993 letter answers a refund question about an auctioned machine. An auctioneer sold a Landis 2" Automatic Threading Machine to a buyer, and the buyer asked for a refund of the sales tax it paid because the machine ended up in Utah, not Texas.

The Comptroller's office explained that Texas sales tax is a transaction tax — it's triggered when title or possession of a taxable item passes to the buyer in exchange for payment. There is an exemption under Tax Code Section 151.330 for property that, under the sales contract, is shipped to a point outside Texas by the seller (using the seller's own facilities, delivery to a common carrier, or delivery to a forwarding agent). But that exemption only applies when the seller handles the out-of-state shipment without ever handing the item to the buyer in Texas.

Here, the buyer apparently took possession of the machine in Texas before it was later moved to Utah. Because of that, the tax was due and not refundable under Section 151.330. The letter notes this was an unusual auction arrangement, since auctioneers typically sell consignment goods "as is, where is." The Comptroller told the taxpayer that if its records actually showed the seller delivered the machine to the buyer in Utah without giving the buyer possession in Texas, then a refund could be claimed by amending the tax return.

What this means for you

Auctioneers and sellers shipping goods out of state

To qualify for the Section 151.330 interstate-shipment exemption, the seller must be the one who ships the property out of Texas — using its own trucks, a common carrier, or a forwarding agent — under the terms of the sales contract, and the buyer must never take possession of the item in Texas. If the buyer picks up or otherwise takes possession in Texas first, the exemption doesn't apply even if the item is later moved out of state.

Buyers seeking a sales-tax refund on out-of-state shipments

If you paid Texas sales tax on an item that was eventually shipped out of state, whether you can get a refund depends on exactly how the shipment happened — specifically, whether you (the buyer) ever had possession of the item in Texas. If you took possession here first, the tax stands and is not refundable, regardless of where the item ended up.

Common questions

Q: We paid sales tax on an item that was later shipped out of state. Can we get a refund?
A: Only if the seller shipped the item out of Texas under the sales contract (via its own facilities, a common carrier, or a forwarding agent) without the buyer ever taking possession of it in Texas. If the buyer took possession in Texas first, the tax is due and not refundable.

Q: Does it matter who arranges the shipping?
A: Yes. The exemption in Tax Code Section 151.330 requires the seller to be the one causing the shipment out of state. If the buyer takes delivery in Texas and then arranges to move the item themselves (or the seller ships it only after the buyer already had possession), the exemption does not apply.

Q: What if the seller says the buyer never had possession in Texas?
A: The letter says that if the taxpayer's records show the item was delivered directly to the customer out of state without the customer ever taking possession in Texas, a refund may be claimed by amending the return on which the tax was paid.

Q: Is this letter a general rule I can rely on?
A: This is a fact-specific letter ruling based on the facts submitted by one taxpayer. The letter itself states, "Other facts, though similar, may yield different results," so you should not assume it applies automatically to a different transaction.

Citations and references

Statutes:

• Tax Code Section 151.330 — Interstate Shipments, Common Carriers, and Services Across State Lines (quoted in relevant part in the letter, including the requirement that the seller ship the property out of Texas via its own facilities, a common carrier, or a forwarding agent)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9302L1221G10

Original ruling text

February 12, 1993

Dear ***:

This is to follow-up our phone conversation regarding the sale at auction
of a Landis 2" Automatic Threading Machine to ** of
**. You stated that ** auctioned off the assets
of ** on September 24, 1992. Standard is requesting a refund
of sales tax paid because the machine was shipped to them in Utah.

Sales tax is a transaction tax and is imposed when title or possession to
taxable items is transferred to a buyer for a consideration. However, if
the item sold is shipped to a point outside Texas by the seller, the sale
is exempted. This provision is found in Tax Code Section 151.330.

If the buyer takes possession of the item, even though the seller may
later ship it outside Texas, the tax is due and is not refundable under
Tax Code Section 151.330.

The exemption is restated below for your reference.

Sec. 151.330. Interstate Shipments, Common Carriers, and Services Across
State Lines.

(a) The sale of tangible personal property that under the sales contract
is shipped to a point outside this state is exempted from the sales tax
imposed by Subchapter C of this chapter if the shipment is made by the
seller by means of:

(1) the facilities of the seller;

(2) delivery by the seller to a carrier for shipment to a consignee at a
point outside this state; or

(3) delivery by the seller to a forwarding agent for shipment to a location
in another state of the United States or its territories or possessions.

In our phone conversation, you stated that ** sold the
machine to ** and shipped it to them by common carrier without
giving them possession of the machine at the time of sale. This seems unusual
since most auctioneers sell consignment goods with an "As is, where is"
disclaimer.

However, if your records show that *** caused the machine
to be delivered to the customer in Utah without giving them possession of
it in Texas, you may refund the tax to Standard and recoup the tax by
amending the return on which the tax was paid.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

If you have questions or need more information, please call or write. You
may reach me by calling toll free, (800) 531-5441 (ext. 34680). My direct
line number is (512) 4634680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division