An out-of-state retailer ships goods into Texas that the purchaser will later export and use only outside Texas. Is Texas tax due on that shipment?

Plain-English summary

A taxpayer wrote to the Texas Comptroller's Tax Administration Division asking about sales tax on items being exported from the country. The Comptroller's response, signed by Bettie Peterson, explained that when a retailer ships an item into Texas from out-of-state, use tax (not sales tax) is normally due on that transaction.

However, the purchaser can instead give the retailer an exemption certificate. The letter says that certificate "is sufficient to exempt the transaction and export documentation is not required" — a notably lighter paperwork burden than requiring proof of actual export. In exchange, the purchaser must keep records showing the property was stored in Texas only temporarily and was used exclusively outside the state. The letter is explicit that this exemption applies only to transactions that would otherwise be subject to use tax, not to transactions subject to sales tax.

What this means for you

Out-of-state retailers shipping goods into Texas

If you ship goods into Texas from another state and your customer intends to use those goods only outside Texas (with Texas serving only as a temporary stop), the transaction is a use-tax matter, not a sales-tax one. Per this letter, you can accept an exemption certificate from the purchaser instead of collecting tax, and you are not required to demand export documentation to support that exemption.

Purchasers claiming the exemption

If you give your out-of-state supplier an exemption certificate on this basis, this letter says you're expected to keep records showing the goods were only stored in Texas temporarily and were in fact used exclusively outside Texas. Those records are what would support the exemption if the Comptroller later asks about the transaction — the letter doesn't require you to produce export documentation up front, but it does require you to be able to show temporary storage and out-of-state use.

Accountants and tax professionals

This letter draws a clean line between sales tax and use tax for goods shipped into Texas by an out-of-state seller: the exemption discussed here applies "only to transactions subject to use tax and not sales tax." It also confirms that an exemption certificate alone — without export documentation — can support the exemption, provided the purchaser's own records back up temporary storage and exclusively out-of-state use.

Common questions

Q: Is sales tax or use tax the issue when an out-of-state retailer ships goods into Texas?
A: Use tax. The letter states plainly that "when a retailer ships an item into Texas from out-of-state, use tax is due."

Q: Does the purchaser need export documentation to claim this exemption?
A: No. The letter says the exemption certificate "is sufficient to exempt the transaction and export documentation is not required."

Q: What does the purchaser need to keep on file?
A: Records "showing that the property was stored here temporarily and used exclusively out-of-state," per the letter.

Q: Does this exemption apply to sales tax transactions too?
A: No. The letter says "this exemption applies only to transactions subject to use tax and not sales tax."

Q: Can another business rely on this exact letter for its own transaction?
A: No. STAR letters generally may be relied on only by the taxpayer to whom they were issued, and the facts here (redacted in the letter) were specific to that taxpayer's situation.

Citations and references

No statutes, rules, or case citations appear in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9303L1233A14

Original ruling text

March 29, 1993

Dear **:

Thank you for your letter dated March 4, 1993, regarding sales tax as it
applies to items being exported from this country.

When a retailer ships an item into Texas from out-of-state, use tax is due. The
purchaser may issue an exemption certificate not used. The exemption
certificate is sufficient to exempt the transaction and export documentation is
not required. (This is what the competitors may be doing.) The purchaser is
then required to keep records showing that the property was stored here
temporarily and used exclusively out-of-state. This exemption applies only to
transactions subject to use tax and not sales tax.

If you have any questions or need more information, please write or call me
at 1-800-531-5441, extension 5-330, or 512/463-4600.

Sincerely,

Bettie Peterson
Tax Administration Division