Is a Texas sale exempt from sales tax when an out-of-state customer hires a common carrier to pick up the items at the seller's place of business, rather than the seller arranging the shipment itself?

Plain-English summary

A seller asked the Comptroller's office about the taxability of sales to an out-of-state customer in a specific situation: the customer hires its own common carrier to pick up the purchased items at the seller's place of business, rather than the seller arranging the shipment.

The Comptroller pointed to Tex. Tax Code § 151.330(a)(2), which exempts the sale of tangible personal property from Texas sales tax when, under the sales contract, the property is shipped to a point outside Texas — as long as the shipment is made by the seller delivering the goods to a carrier for shipment to an out-of-state consignee. Applying that rule, the Comptroller concluded that the sale is exempt as long as the seller obtains a copy of the bill of lading from the carrier as proof that the goods were delivered to the carrier for shipment out of Texas. That result holds "regardless of whether you or the purchaser paid for the shipping cost" — in other words, it doesn't matter who hired the carrier or who paid the freight charge, only that the goods were actually handed off to a carrier bound for a destination outside Texas.

What this means for you

Retailers and sellers shipping goods out of state

If your out-of-state customer arranges for a common carrier to pick up goods at your location, the sale can still qualify for the Section 151.330(a)(2) exemption. Who pays the carrier is not the deciding factor — what matters is that you deliver the goods to the carrier for shipment to a point outside Texas, and that you document it.

Anyone claiming this exemption

Keep a copy of the bill of lading from the carrier for every exempt out-of-state shipment. The letter treats that document as the proof needed to support the exemption if the sale is later questioned.

Accountants and tax professionals

This letter is a useful, narrow confirmation that the identity of who pays for freight (seller or purchaser) does not affect exemption eligibility under Section 151.330(a)(2); the controlling fact is delivery to a carrier for out-of-state shipment, evidenced by the bill of lading.

Common questions

Q: Is a sale still exempt if the out-of-state customer's own carrier picks up the goods, instead of the seller shipping them?
A: Yes. As long as the seller delivers the goods to a common carrier for shipment to a point outside Texas, the sale can qualify for the Section 151.330(a)(2) exemption even though the customer arranged for the carrier.

Q: Does it matter who pays the shipping cost?
A: No. The letter states the exemption applies "regardless of whether you or the purchaser paid for the shipping cost."

Q: What documentation is needed to support the exemption?
A: A copy of the bill of lading from the carrier, showing that the seller delivered the goods to the carrier for shipment outside Texas.

Citations and references

• Tex. Tax Code § 151.330(a)(2) (exemption for property shipped to a point outside Texas by delivery by the seller to a carrier for shipment to an out-of-state consignee)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9410L1320D01

Original ruling text

October 11, 1994

Dear **:

Thank you for your letter of September 29,1994. You question the
taxability of sales to an out-of-state customer when the customer
hires a common carrier to pick up the items at your place of business.

Section 151.330(a)(2) of the Texas Tax Code states:

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 delivery by the seller to a carrier for shipment to a
consignee at a point outside this state.

Therefore, the sale of the taxable item is exempt provided you receive
a copy of the bill of lading from the carrier as proof you delivered the
goods to the carrier for shipment outside of Texas. This would be the
case regardless of whether you or the purchaser paid for the shipping cost.

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

You may call me toll free at 1-800-531-5441, ext. 5-0037. The direct line is
512/475-0037. You also may write to Tax Administration Division, Comptroller
of Public Accounts.

Sincerely,

Lindey Osborne
Tax Administration Division

NOTE: Previous Accession Number 9410683L