A seller ships forms into Texas for a customer who will export them to Mexico. The customer's exemption certificate isn't enough to cover the purchase — what are the options for handling the transaction without charging Texas tax?

Plain-English summary

The Texas Comptroller's Tax Policy Division responded to a seller who wrote in about purchases made by "MANUFACTURING CO." for export to Mexico. The customer had sent the seller an exemption certificate, but the Comptroller told the seller that certificate, as sent, was not sufficient to exempt the customer's purchases of forms.

That didn't mean the sale had to be taxed, though. The letter laid out several alternative ways the transaction could be handled so that Texas tax would not apply:

1. Temporary storage exclusion certificate. The customer could give the seller an exemption certificate claiming the temporary storage exclusion in Tax Code § 151.011(f), which says that "use" and "storage" don't include keeping property in Texas for the purpose of transporting it outside the state for use solely outside the state.
2. Maquiladora Export Permit/Certificate. The customer could apply for a Maquiladora Export Permit and then give the seller a Maquiladora Exemption Certificate that would cover all of the customer's future purchases (governed by Rule 3.358 on Maquiladoras).
3. Pay tax now, seek a refund later. The customer could pay the Texas tax at the time of purchase, obtain the proper export documentation, and then request a refund of the tax paid.
4. Direct shipment to Mexico. The customer could arrange for the seller to ship the forms directly to the customer's location in Mexico — in that scenario, no Texas tax would be due at all.

The Comptroller noted this opinion was based on the facts submitted, and that other facts, though similar, could yield different results.

What this means for you

Out-of-state or in-state sellers shipping goods that a customer will export

If a customer tells you goods are being purchased for export (here, to Mexico), don't assume any exemption certificate the customer hands you automatically works. This letter shows the Comptroller will sometimes say a certificate isn't sufficient, but it also shows there are legitimate, well-defined alternatives — a temporary storage exclusion certificate under § 151.011(f), a Maquiladora Exemption Certificate, having the customer pay tax and seek a refund, or shipping the goods directly to the foreign location — any of which can result in no Texas tax being owed.

Businesses buying goods in Texas for export (e.g., to Mexico)

If you're the customer, the certificate you provide your Texas supplier needs to actually fit the exemption you're claiming. Simply asserting the goods are for export isn't enough; you may need a properly worded temporary storage exclusion certificate, or you may need to go through the Maquiladora Export Permit process to get a Maquiladora Exemption Certificate that will cover your ongoing purchases.

Accountants and tax professionals

This letter is a good illustration of the range of tools available under Texas law for export transactions: the § 151.011(f) temporary storage exclusion, the Maquiladora program under Rule 3.358, refund claims after paying tax, and direct-to-foreign-destination shipment (which avoids Texas tax entirely because the property never enters Texas commerce for the customer's use here).

Common questions

Q: Does an exemption certificate always exempt purchases of goods bound for export?
A: Not automatically. In this letter, the certificate the customer had sent was not sufficient to exempt the purchases as submitted. The right certificate language and the right facts matter.

Q: What is the "temporary storage exclusion" mentioned in this letter?
A: It refers to Tax Code § 151.011(f), which excludes from "use" and "storage" the keeping of property in Texas solely for the purpose of transporting it outside the state for use entirely outside Texas. A customer can give a certificate claiming this exclusion.

Q: What is a Maquiladora Exemption Certificate?
A: It's a certificate a customer can give after obtaining a Maquiladora Export Permit; once obtained, it can cover all of that customer's subsequent purchases, per Rule 3.358 on Maquiladoras.

Q: If none of the certificates apply, is the sale just taxable with no other options?
A: No. The letter describes two more paths: the customer can pay the Texas tax, get proper export documentation, and request a refund; or the seller can ship the goods directly to the customer's location in Mexico, in which case no Texas tax is due.

Q: Can another business rely on this letter for its own transactions?
A: No. The Comptroller stated this opinion was rendered based on the facts submitted, and that other facts, though similar, may yield different results. STAR letters generally may be relied on only by the taxpayer to whom they were issued.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.011(f) (temporary storage exclusion — property kept in Texas only to be transported outside the state for use solely outside the state)
• 34 Tex. Admin. Code Rule 3.358 (Maquiladoras)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9509L1426A03

Original ruling text

September 19, 1995

Dear **:

Thank you for your recent letter regarding purchases by the MANUFACTURING CO.,
for export to Mexico. The certificate they sent you is not sufficient to
exempt their purchases of forms.

However, there are several ways that such transactions can be handled. For
example, the customer could give you a exemption certificate, (copy to follow
under separate cover), claiming the temporary storage exclusion in Texas Tax
Code Section 151.011(f). That reads as follows:

(f) Neither "use" nor "storage" includes the exercise of a right or power over
or the keeping or retaining of tangible personal property for the purpose of:

(1) transporting the property outside the state for use solely outside the
state;

Another possibility is that the customer could apply for a Maquiladora Export
Permit. It would then be able to give you a Maquiladora Exemption Certificate
covering all subsequent purchases. Under separate cover you will receive a
copy of Rule 3.358 regarding Maquiladoras.

There are other methods available, but, these would require your customer to
pay the tax, obtain proper export documents, and then request a refund of Texas
Tax. They could also arrange for you to ship the forms directly to their
location in Mexico. No Texas tax would be due in this last case.

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

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Al Van Allen
Tax Policy Division