Ezel / Tax Rulings / TX
TX 9903583L Franchise Tax (PRIOR TO 01/01/2008) 1999-03-23

Were computer components delivered through Texas border facilities Texas receipts when the ultimate customers were maquiladora operators in Mexico?

Short answer: It depended on where the buyer took possession or control. Delivery to a Texas freight forwarder hired by the purchaser was not a Texas receipt when the forwarder delivered the goods to the purchaser in Mexico. Delivery to a Texas warehouse or storage facility owned or leased by the maquiladora customer was a Texas receipt, even if the goods were later shipped outside Texas.

Apply this to your situation

This page answers the general question as of 1999. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1999
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. The result depends on actual transfer of possession or control, not merely a Texas customs inspection or intermediate stop. It applies the pre-2008 taxable-capital and earned-surplus delivery rules, replaced by the margin tax effective January 1, 2008; confirm current sourcing law. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The sales were Texas receipts only when the maquiladora customer took possession or control in Texas.

An Arizona corporation shipped computer components and chips by common carrier to a Texas freight forwarder or customs warehouse for U.S. Customs inspection before the goods crossed into Mexico.

The Comptroller distinguished two delivery paths:

  • Freight forwarder hired by purchaser: not a Texas receipt when the forwarder delivered the goods to the purchaser outside Texas. The intermediate Texas handling did not transfer possession to the buyer.
  • Customer-owned or leased Texas warehouse: Texas receipt because delivery to the purchaser was complete in Texas, even when the goods were later shipped to Mexico.

Sections 171.103(1) and 171.1032(a)(2), with Rules 3.549(e)(41) and 3.557(e)(37), focused on transfer of possession or control to the purchaser.

Currency note: Texas replaced the former delivery-based franchise-tax receipts system with the margin tax effective January 1, 2008.

What this means for you

Exporters using Texas border logistics

A Texas customs stop or freight forwarder did not automatically make the sale a Texas receipt. Buyer possession was the key.

Tax professionals

Review who hired the forwarder, who controlled the goods, and whether the Texas facility belonged to the buyer.

Common questions

Q: Did customs inspection make the sale a Texas receipt?
A: Not by itself.

Q: What if the buyer's forwarder sent the goods to Mexico?
A: The sale was not a Texas receipt on those facts.

Q: What if the buyer's Texas warehouse received the goods?
A: The sale was a Texas receipt, even if later exported.

Citations and references

  • Texas Tax Code Secs. 171.103(1) and 171.1032(a)(2)
  • 34 Tex. Admin. Code Secs. 3.549(e)(41) and 3.557(e)(37)

Source

Original ruling text

March 23, 1999

Dear Mr. **:

Thank you for the information contained in your inquiry of March 16, 1999
concerning a corporation's sales of computer components and chips that are
delivered to locations along the Texas border. This response represents the
franchise tax implications of the situation described in the ruling request.

You have indicated that the corporation, located in **, AZ, ships
the products via common carrier to a freight forwarder and/or customs warehouse
in Texas. All products must be inspected by the U.S. Customs Service before
crossing the border.

Most of the corporation's customers hold a Maquiladora permit. The computer
components and chips are used in products assembled in Mexico.

Sections 171.103(1) and 171.1032(a)(2) of the Tax Code address the sales of
tangible personal property (TPP) for purposes of apportioning the taxable
capital and earned surplus components of the tax. These provisions hold that
the sales of TPP result in Texas receipts when the products are delivered or
shipped to a buyer in Texas.

Thus, in the situation described, the determining factor is whether the
customers take delivery of the products in Texas. Delivery is complete upon
transfer of possession or control of the property to the purchaser. To the
extent the purchasers (i.e., the Maquiladora permit holders) take delivery of
the TPP in Texas, the sales would be apportioned as Texas gross receipts.

Delivery to a freight forwarder in Texas (hired by the purchaser) is not a
Texas receipt if the freight forwarder has the items delivered to the
purchaser outside Texas. The sales of products that are handled by a freight
forwarder and then shipped to the permit holders in Mexico would not result in
Texas receipts.

With respect to your question about sales shipped to the customer warehouse
(i.e., the Maquiladora permit holders), sales of TPP that is delivered in Texas
to a warehouse or other storage facility owned or leased by the purchaser would
result in Texas receipts. This treatment would include items subsequently
shipped outside Texas. Those sales with delivery to the Maquiladora permit
holder's warehouse in Texas would be Texas receipts.

For your reference, Franchise Tax Rules 3.549(e)(41) and 3.557(e)(37) discuss
the sales of TPP and provide guidelines concerning delivery in Texas.

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

If you have any questions, please call toll-free 1-800-531-5441, extension
3-4496 or (512) 463-4496.

Sincerely,

Jerry Bobbitt
Tax Policy Division

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