If I supply mobile vendors, do I have to remit tax on sales to vendors who now operate independently of my company instead of exclusively under me?

Plain-English Summary

The Texas Comptroller told a supplier of mobile vendors that its tax-remittance obligations now depend on how closely a given vendor is still tied to the supplier. Under Comptroller Rule 3.293, the supplier had previously been advised to remit tax on all sales it made to the mobile vendors it supplied, because at the time the rule was written, mobile vendors almost always operated under a single supplier.

By 1994 the industry had changed: many mobile vendors had become fully independent, buying inventory from multiple suppliers and retail stores rather than just one company. The Comptroller drew a line based on that independence:

• Vendors still connected to the supplier (for example, through leased vehicles) remain within Rule 3.293, so the supplier still must remit tax on sales to them.
• Truly independent vendors, who do not operate under the supplier, are different. The supplier is no longer required to report tax on those sales. Instead, the supplier must either collect tax on the taxable items sold (like candy and soft drinks) or obtain a resale certificate from the vendor. No tax needs to be collected or reported on sales of nontaxable food items.

Because independent mobile vendors are themselves required to collect sales tax on what they sell to the public, the ruling also directs the supplier to advise any independent vendors who lack a permit to contact the Comptroller's local enforcement office and obtain a sales tax permit.

What This Means For You

Wholesalers and suppliers to mobile vendors

Whether you must remit tax on a sale to a mobile vendor now turns on the nature of your relationship with that vendor, not simply on the fact that you supply it. If the vendor is still connected to your company (for example, operating a vehicle you lease to them), Rule 3.293 still applies and you remit the tax. If the vendor is independent, you must instead either charge tax on taxable items or collect a valid resale certificate.

Independent mobile vendors (food trucks, carts, etc.)

If you operate independently of any single supplier -- buying stock from multiple sources -- you are responsible for obtaining your own sales tax permit and collecting sales tax on your own retail sales. You cannot rely on a supplier to remit tax on your behalf once you are no longer operating "under" them.

Accountants and tax professionals

This ruling illustrates how the Comptroller applies a decades-old rule (3.293) to an industry structure that has evolved. When classifying a client's mobile-vendor sales, look past labels and examine the operational facts -- vehicle leasing arrangements and exclusivity are the kind of connections that keep a vendor "under" the supplier for Rule 3.293 purposes.

Q&A

Q: Do I still have to remit tax on sales to mobile vendors I supply?
A: Only for vendors still connected to your company under Rule 3.293 (for example, through a leased vehicle arrangement). For independent vendors who no longer operate under you, you do not remit tax on those sales; instead you either collect tax on taxable items sold or obtain a resale certificate.

Q: What should I do if a mobile vendor I sell to is fully independent?
A: Collect tax on the sale of taxable items (such as candy and soft drinks) or obtain a resale certificate from the vendor. You do not need to collect or report tax on sales of nontaxable food items to that vendor.

Q: Does an independent mobile vendor need its own sales tax permit?
A: Yes. Independent mobile vendors are required to collect sales tax on their own sales and should contact the Comptroller's local enforcement office to obtain a sales tax permit if they do not already have one.

Citations

• 34 Tex. Admin. Code Rule 3.293 (tax treatment of sales by suppliers to mobile vendors)

Subject

Mobile Vendors Operating Under One Supplier Vs. Independent Mobile Vendors

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9409L1316G14

Original ruling text

September 12, 1994

Dear **:

In the past you were advised to remit tax on sales made by you to mobile
vendors you supplied in accordance with Comptroller Rule 3.293. At the time the
rule was initially issued, mobile vendors almost exclusively operated under one
supplier. Since then, the industry has changed and many mobile vendors now
operate totally independent of any suppliers. They may make purchases from you
as well as local retail establishments.

Sales to mobile vendors operating under you and connected to your company
through leased vehicles still fail within the terms of the rule. However, you
are no longer required to report tax on sales to independent mobile vendors who
do not operate under you.

If you make sales to independent mobile vendors, you must either collect tax on
the sale of taxable items, (e.g., candy and soft drinks), or obtain a resale
certificate from the vendor. Tax need not be collected or reported on sales of
nontaxable food items.

Independent mobile vendors are required to collect sales tax on their sales.
Consequently, please advise independent mobile vendors to contact our local
enforcement office to obtain a sales tax permit if they do not have one.

Your assistance in advising the independent vendors to obtain a sales tax
permit will be greatly appreciated.

If you have any questions or concerns, please feel free to call me toll-free at
I -800-541-5331, extension 5-0220.

Sincerely,

Glen D. Hunt
Director, Tax Administration

NOTE: Previous Accession Number 9409587L