When a company with multiple Texas offices rents and erects scaffolding at a customer site in a different city, which city/district's local sales tax applies -- the office that took the order, or the site where the scaffolding is used?

Plain-English summary

A scaffolding rental and erection company with four active Texas business locations asked how city sales tax and a crime control district sales tax applied to scaffolds it rented and erected at a refinery in a different city than any of its own offices. One of its locations sits inside both a city's limits and that city's crime control district.

The Comptroller's answer: local tax sourcing follows the seller's order-taking place of business, not the job site. Under Tex. Tax Code § 321.203, a sale is "consummated" -- for local sales tax purposes -- at the place of business from which the taxable item is delivered (or, if delivered from somewhere that isn't itself a place of business, at the seller's actual place of business). "Place of business" under § 321.002(3) means a location where three or more orders are taken. Crime control district tax, imposed as a form of county sales and use tax under Chapter 323, is sourced the exact same way per § 323.203(c)-(d).

So here: if the scaffold rental order was received at the location that's inside both a city and a crime control district, the full local rate (city + crime control district, on top of state tax) applies -- no matter where the scaffolding is actually erected and used. The refinery city's own local taxes don't apply at all, because the order wasn't taken there. The letter also flags that a direct payment permit holder can pre-elect an exemption certificate at time of purchase to shift collection responsibility, but can't retroactively claim a local-tax-only exemption after having already paid the tax to the seller. And once tax is added to a sale, § 151.052(a) makes it a legal debt the purchaser owes the seller, recoverable like the underlying sales price.

What this means for you

Companies with multiple Texas business locations renting or selling equipment

Local sales tax (city and any special district tax) is based on which of your offices took the order -- not where the customer job site is located. Track order-taking location carefully across multi-office operations; it determines your local tax rate, independent of delivery/use location.

Customers in special-purpose districts (crime control, industrial development, hospital, etc.)

Don't assume your own city/district's local rate applies just because equipment is used or delivered there -- if the seller's order was taken elsewhere, that seller's location's local taxes apply instead.

Direct payment permit holders

You can elect a direct payment exemption certificate up front to handle your own tax remittance, but you can't retroactively claim a local-tax-only exemption after already paying tax to the seller.

Common questions

Q: Which city's sales tax applies when I rent equipment from a company with offices in one city but use it in another?
A: The tax sources to wherever the seller's order-taking place of business is located, not where you use the equipment -- per Tex. Tax Code § 321.203.

Q: Does a special district (like a crime control district) tax follow the same rule?
A: Yes -- Chapter 323's county sales and use tax (which includes crime control districts) is consummated the same way as city sales tax, per § 323.203(c)-(d).

Q: Can I get a refund of local tax I already paid by claiming a direct payment exemption afterward?
A: No, per this letter -- a direct payment permit holder who already paid tax to a retailer can't retroactively issue a direct payment exemption certificate to claim a local-tax-only exemption.

Citations and references

Statutes:

• Tex. Tax Code § 321.203(a), (c), (d) (city sales tax consummation/sourcing)
• Tex. Tax Code § 321.002(3) (definition of "place of business")
• Tex. Tax Code § 323.203(c), (d) (crime control/county district sales tax, same sourcing rule)
• Tex. Tax Code § 151.052(a) (sales tax added to price becomes a debt of the purchaser)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9911899L

Original ruling text

November 16, 1999

Dear **:

Thank you for your recent letter concerning the proper collection of city and
crime control district sales taxes on scaffolds rented and erected for use at
the REFINERY located at **, CITY, Texas **.

Our records show BUILDER has the following four active places of business:

LOCATION A, Texas **

LOCATION B, Texas **

LOCATION C, Texas **

LOCATION D, Texas **

Our records show that the LOCATION A location is inside the city limits of
LOCATION A, Texas and inside the LOCATION A Crime Control District.

Texas Tax Code Section 321.203(c) addresses the responsibilities of a seller
having multiple places of business in Texas. This provision makes the location
of the place of business from which a taxable item is delivered the place where
the sale is consummated. Texas Tax Code Section 321.002(3) defines a place of
business as a location where three or more orders are taken for taxable items.

Texas Tax Code Section 321.203(d) states that if a taxable item is delivered in
this state from a location that is not the seller's place of business, the sale
is consummated at the seller's place of business.

Texas Tax Code Section 321.203(a) requires city sales tax to be collected at
the place of business where the sale is consummated. Crime control district
sales tax is imposed under Chapter 323 as a county sales and use tax. Texas Tax
Code Section 323.203 makes the consummation of a sale of taxable items at the
seller's place of business in the same manner as city sales tax. See Tax Code
Section 323.203(c) and (d).

This means, that if an order for scaffold rental is received at your place of
business in LOCATION A are subject to 8.25% (6.25% state sales, 1.5% LOCATION A
city sales and .5% LOCATION A crime control district sales) tax no matter where
they are erected and used. Scaffolds that you rent and erect at the REFINERY at
CITY are subject to tax based on your place of business in LOCATION A, not on
CITY location where they are used.

A direct payment permit issued by a purchaser relieves the seller from the
responsibility for collecting taxes. A direct payment permit holder may elect
to issue a direct payment exemption certificate at the time of purchase or pay
the sales tax. A direct payment permit holder who pays tax to a retailer may
not issue a direct payment exemption certificate after-the-fact to claim
exemption from local sales taxes only.

The contractor owes the LOCATION A city sales tax and LOCATION A Crime Control
District sales tax on the scaffold rentals. Texas Tax Code Section 151.052(a)
states that when a seller of a taxable item adds the sales tax to the sales
price, the sales tax becomes part of the sales price of the item sold and is a
debt of the purchaser to the seller and is recoverable at law in the same
manner as the original sales price.

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

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. My direct line is 512/463-4683. You may
also write to the Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division