34 Tex. Admin. Code § 3.285 - Resale Certificate; Sales for Resale
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Equipment--Any apparatus, device, or simple machine used to perform a
service.
(2) Federal
government--The government of the United States of America and its
unincorporated agencies and instrumentalities, including all parts of the
executive, legislative, and judicial branches and all independent boards,
commissions, and agencies of the United States government unless otherwise
designated in this section.
(3)
Integral part--An essential element without which the whole would not be
complete. One taxable item is an integral part of a second item if the taxable
item is necessary, as opposed to desirable, for the completion of the second
item, and if the second item could not be provided as a whole without the
taxable item.
(4) Internet hosting
service--The provision to an unrelated user of access over the Internet to
computer services using property that is owned or leased and managed by the
service provider and on which the unrelated user may store or process the
user's own data or use software that is owned, licensed, or leased by the
unrelated user or service provider. The term does not include
telecommunications services as defined in §
3.344 of this title (relating to
Telecommunications Services).
(5)
Machinery--All power-operated machines.
(6) Mexico--Within the geographical limits of
the United Mexican States.
(7)
Purchaser--A person who is in the business of selling, leasing, or renting
taxable items.
(8) Seller--Every
retailer, wholesaler, distributor, manufacturer, marketplace provider, or any
other person who sells, leases, rents, or transfers ownership of tangible
personal property or performs taxable services for consideration. Specific
types of sellers, such as direct sales organizations, pawnbrokers, marketplace
providers, and auctioneers, are further defined in §
3.286 of this title (relating to
Seller's and Purchaser's Responsibilities).
(9) Taxable item--Tangible personal property
and taxable services. Except as otherwise provided by Tax Code, Chapter 151,
the sale or use of a taxable item in an electronic form instead of on physical
media does not alter the item's tax status.
(10) Tax-free inventory--A stock of tangible
personal property purchased tax-free for resale, whether from out-of-state or
by issuing a properly completed resale certificate, by a purchaser who, at the
time of purchase:
(A) holds a valid Texas
sales and use tax permit;
(B) makes
sales of taxable items in the regular course of business; and
(C) does not know whether the tangible
personal property will be resold in the normal course of business or used in
the performance of a service.
(11) United States--Within the geographical
limits of the United States of America or within the territories and
possessions of the United States of America.
(b) Sale for resale.
(1) Except as provided in paragraphs (3) -
(6) of this subsection, each of the following is a sale for resale:
(A) the sale of a taxable item to a purchaser
who acquires the taxable item for the purpose of reselling it as a taxable item
in the United States or Mexico in the normal course of business:
(i) in the form or condition in which it is
acquired; or
(ii) as an attachment
to or as an integral part of another taxable item;
(B) the sale of tangible personal property to
a purchaser who acquires the property for the sole purpose of leasing or
renting it in the United States or Mexico in the normal course of business to
another person, but not if incidental to the leasing or renting of real estate,
as described in §
3.294(k) of this
title (relating to Rental and Lease of Tangible Personal Property);
(C) the sale of tangible personal property to
a purchaser who acquires the property for the purpose of transferring the
property to a customer in the United States or Mexico as an integral part of a
taxable service;
(D) the sale of a
taxable service performed on tangible personal property that the purchaser of
the service holds for sale, lease, or rental;
(E) the sale of tangible personal property or
a taxable service to a purchaser who acquires the tangible personal property or
service for the purpose of transferring it as an integral part of performing a
contract, or a subcontract of a contract, for the sale, other than the lease or
rental, of tangible personal property with an entity or organization exempted
from the taxes imposed by this chapter under Tax Code, §
151.309 (Governmental
Entities) or Tax Code, §
151.310 (Religious,
Educational, and Public Service Organizations) only if the purchaser:
(i) allocates and bills to the contract the
cost of the tangible personal property or service as a direct or indirect cost;
and
(ii) transfers title to the
tangible personal property to the exempt entity or organization under the
contract or subcontract and any applicable acquisition regulations;
(F) the sale of a wireless voice
communication device, such as a cellular telephone, to a purchaser who acquires
the device for the purpose of transferring the device as an integral part of a
taxable telecommunication service when the purchase of the service is a
condition for receiving the device, regardless of whether there is a separate
charge for the device or whether the purchaser is the provider of the taxable
service. See §
3.344 of this title for
information about telecommunication services; and
(G) the sale of a computer program to a
provider of Internet hosting services who acquires the computer program from an
unrelated vendor for the purpose of selling the right to use the computer
program to an unrelated user of the provider's Internet hosting services in the
normal course of business and in the form or condition in which the provider
acquired the computer program, without regard to whether the provider transfers
care, custody, and control of the computer program to the unrelated user. The
performance by the provider of routine maintenance of the computer program that
is recommended or required by the unrelated vendor of the computer program does
not affect the application of this subsection. For purposes of this subsection,
the purchase of the computer program by the provider qualifies as a sale for
resale only if:
(i) the provider offers the
unrelated user a selection of computer programs that are available to the
public for purchase directly from an unrelated vendor;
(ii) the provider executes a written contract
with the unrelated user that specifies the name of the computer program sold to
the unrelated user and includes a charge to the unrelated user for computing
hardware;
(iii) the unrelated user
purchases the right to use the computer program from the provider through the
acquisition of a license; and
(iv)
the provider does not retain the right to use the computer program under that
license.
(2)
To qualify as a sale for resale, the taxable item must be acquired for the
purpose of selling, leasing, or renting it in the regular course of business or
for the purpose of transferring it as an integral part of a taxable service
performed in the regular course of business.
(3) A sale for resale does not include the
sale of internal or external wrapping, packing, or packaging supplies to a
purchaser who acquires the supplies for use in wrapping, packing, or packaging
tangible personal property, or in the performance of a service, for the purpose
of furthering the sale of the tangible personal property or the service. See
§
3.314 of this title (relating to
Wrapping, Packing, Packaging Supplies, Containers, Labels, Tags, Export
Packers, and Stevedoring Materials and Supplies).
(4) A sale for resale does not include the
sale of tangible personal property or a taxable service to a purchaser who
acquires the property or service for the purpose of performing a service not
listed as a taxable service under Tax Code, §
151.0101 ("Taxable
Services"), regardless of whether title transfers to the service provider's
customer, unless the tangible personal property or taxable service is purchased
for the purpose of performing a contract, or a subcontract of a contract, for a
service, including a taxable service under Tax Code, §
151.0101, with any branch of
the Department of Defense, Department of Homeland Security, Department of
Energy, National Aeronautics and Space Administration, Central Intelligence
Agency, National Security Agency, National Oceanic and Atmospheric
Administration, or National Reconnaissance Office to the extent allocated and
billed to the contract with the federal government.
(5) A sale for resale does not include the
sale of a taxable item to a purchaser who acquires the taxable item for the
purpose of reselling or transferring the taxable item outside the territorial
limits of the United States or Mexico. Refer to §
3.323 of this title (relating to
Imports and Exports).
(6) Tangible
personal property used to perform a taxable service is not considered resold
unless the care, custody, and control of the tangible personal property is
transferred to the purchaser of the service. The care, custody, and control of
tangible personal property is transferred to the purchaser of the service when
the purchaser has primary possession of the tangible personal property.
(A) Except as provided in subparagraphs (B)
and (C) of this paragraph, to have primary possession, the purchaser or the
purchaser's designee must have:
(i) physical
possession of the tangible personal property off of the premises of the service
provider;
(ii) a contractual duty
to care for the tangible personal property. At a minimum, the contract must
prohibit the purchaser from damaging the tangible personal property or impose
liability if the purchaser damages the tangible personal property;
and
(iii) a superior right to use
the tangible personal property for a contractually specified period of
time.
(B) The purchaser
may have primary possession of tangible personal property if the purchaser or
the purchaser's designee has physical possession of the tangible personal
property and directly consumes the tangible personal property during the
provision of the taxable service. Property is considered consumed if it can no
longer be used for its intended purpose in the normal course of business or is
not retained or reusable by the service provider.
(C) A purchaser may have primary possession
of a computer program if the purchaser acquires a license to use the computer
program from the service provider and the service provider does not retain the
right to use the computer program under that license.
(7) A person performing services taxable
under Tax Code, Chapter 151 is the consumer of machinery and equipment used by
the person in performing the services. A person performing a taxable service is
not using the machinery or equipment in performing the service if the person
has transferred primary possession, as that term is described in paragraph (6)
of this subsection, of the machinery or equipment to the purchaser of the
service.
(8) Aircraft. See §
3.280 of this title (relating to
Aircraft) for the definition of "sale for resale" as it applies to
aircraft.
(9) A sale for resale
does not include the sale of tangible personal property to a purchaser who
acquires the property for the purpose of using, consuming, or expending it in,
or incorporating it into, an oil or gas well in the performance of an oil well
service taxable under Tax Code, Chapter 191 (Miscellaneous Occupation
Taxes).
(c) Issuance and
acceptance of resale certificates.
(1) A sale
for resale as defined in subsection (b) of this section is not
taxable.
(2) Who may issue a resale
certificate.
(A) In general, a purchaser who
holds a Texas sales and use tax permit may issue a resale certificate instead
of paying tax at the time of purchase of a taxable item that the purchaser
intends to resell, lease, rent, or transfer as an integral part of a taxable
service in the normal course of business. A purchaser may also issue a resale
certificate instead of paying tax at the time of purchase of a taxable item
that the purchaser intends to maintain in a valid tax-free inventory, if the
purchaser does not know at the time of purchase whether the item will be resold
or used in the performance of a service. The purchaser must collect, report,
and remit tax to the comptroller as required by §
3.286 of this title when the
purchaser sells, leases, or rents taxable items.
(B) A purchaser may not issue a resale
certificate in lieu of paying tax on the purchase of a taxable item, including
tangible personal property to maintain in a valid tax-free inventory, that the
purchaser knows, at the time of purchase, will be used or consumed by the
purchaser.
(3) Accepting
a resale certificate.
(A) All gross receipts
of a seller are presumed subject to sales or use tax unless a properly
completed resale or exemption certificate is accepted by the seller. A properly
completed resale certificate contains the information required by subsection
(g) of this section. See also §
3.287 of this title (relating to
Exemption Certificates).
(B) A
seller does not owe tax on a sale, lease, or rental of a taxable item if the
seller accepts a properly completed resale certificate in good faith. A resale
certificate is deemed to be accepted in good faith if:
(i) the resale certificate is accepted at or
before the time of the transaction;
(ii) the resale certificate is properly
completed, meaning that all of the information required by subsection (g) of
this section is legible; and
(iii)
the seller does not know, and does not have reason to know, that the sale is
not a sale for resale. It is the seller's responsibility to be familiar with
Texas sales tax law as it applies to the seller's business and to take notice
of the information provided by the purchaser on the resale certificate. For
example, a jewelry seller should know that a resale certificate from a
landscaping service is invalid because a landscaping service is not in the
business of reselling jewelry.
(C) The seller should obtain a properly
executed resale certificate at the time the taxable transaction occurs. All
certificates obtained on or after the date the comptroller's auditor actually
begins work on the audit at the seller's place of business or on the seller's
records after the entrance conference are subject to verification. All
incomplete certificates will be disallowed regardless of when they were
obtained.
(i) The seller has 90 days, or
until a later date agreed to in writing by the comptroller and the seller,
referred to in this section as "the period," from the date written notice is
received by the seller from the comptroller in which to deliver the
certificates to the comptroller. Written notice shall be given by the
comptroller no earlier than the filing of a petition for redetermination or
claim for refund.
(ii) For the
purposes of this section, written notice given by mail is presumed to have been
received by the seller within three business days from the date of deposit in
the custody of the United States Postal Service. The seller may overcome the
presumption by submitting proof from the United States Postal Service or by
other competent evidence showing a later delivery date.
(iii) Any certificates delivered to the
comptroller during the period will be subject to independent verification by
the comptroller before any deductions will be allowed. Certificates delivered
after the period will not be accepted and the deduction will not be granted.
See §
3.282 of this title (relating to
Auditing Taxpayer Records) and §
3.286 of this title.
(D) Resale certificates are
subject to the provisions of §
3.281 of this title (relating to
Records Required; Information Required). A seller is required to keep resale
certificates for a minimum of four years from the date on which the sale is
made and throughout any period in which any tax, penalty, or interest may be
assessed, collected, or refunded by the comptroller or in which an
administrative hearing or judicial proceeding is pending.
(4) Blanket resale certificate. A purchaser
may issue to a seller a blanket resale certificate describing the general
nature of the taxable items purchased for resale. The seller may rely on the
blanket certificate until it is revoked in writing.
(5) Bulk commodities. A resale certificate is
not required to be issued by a broker or dealer that buys and sells only raw
commodities in bulk, such as natural gas, raw cotton bales, or raw aluminum,
from producers or other commodity brokers or dealers solely for resale in the
normal course of business. However, if requested by the seller, a properly
completed resale certificate, absent a sales tax permit number, may be issued
by the purchaser of such raw commodities even if the purchaser does not hold a
sales and use tax permit.
(6)
Electricity sales and purchases by independent organization certified under
Texas Utilities Code, §
39.151. A resale
certificate is not required to be issued by a person who purchases electricity
solely for the purpose of resale from the independent organization certified
under Texas Utilities Code, §
39.151. The
independent organization certified under Texas Utilities Code, §
39.151 is not required
to issue a resale certificate to a person from whom it purchases electricity
solely for the purpose of resale.
(d) Retailers outside Texas.
(1) A seller in Texas may accept a resale
certificate in lieu of tax from a retailer located outside Texas who purchases
taxable items for resale in the United States or Mexico in a transaction that
is a sale for resale, as defined in subsection (b) of this section.
(2) The resale certificate must show the
signature and address of the purchaser, the date of the sale, the state in
which the purchaser intends to resell the item, the sales tax permit number or
the registration number assigned to the purchaser by the state in which the
purchaser is authorized to do business or a statement that the purchaser is not
required to be permitted in the state in which the purchaser is authorized to
do business. Mexican retailers who purchase taxable items for resale must show
their Federal Taxpayers Registry (RFC) identification number for Mexico on the
resale certificate and give a copy of their Mexican Registration Form to the
Texas seller. An invoice describing the taxable item purchased and showing the
exact street address or office address from which the taxable item will be
resold must be attached to the resale certificate. The resale certificate must
also state the type business engaged in by the purchaser and the type items
sold in the regular course of business. A resale certificate may be accepted
from the out-of-state retailer even if the Texas retailer ships or delivers the
taxable item directly to a recipient located inside Texas.
(3) The Texas retailer is not responsible for
determining whether the out-of-state retailer is required to hold a Texas sales
and use tax permit or to enter a Texas permit number on the resale
certificate.
(4) Foreign
purchasers, other than purchasers from Mexico, who are not engaged in business
in Texas and do not hold a Texas sales and use tax permit, may issue a properly
completed resale certificate, as described in paragraph (2) of this subsection,
in lieu of paying tax on the purchase of taxable items for sale in the normal
course of business when the items are delivered or shipped to a location
outside of Texas but within the United States or Mexico.
(5) An out-of-state or foreign purchaser who
acquires goods or services from a Texas seller for resale in Texas should refer
to §
3.286 of this title for
information on their responsibilities.
(6) A purchaser, whether from Texas, Mexico,
or another foreign country, may not issue a resale certificate for taxable
items purchased for resale outside the United States or Mexico. See subsection
(b)(5) of this section. Purchasers who purchase taxable items in Texas for sale
outside the United States or Mexico must comply with the requirements of §
3.323 of this title to claim
exemption from the Texas sales tax.
(e) Taxable use of items purchased for
resale; items removed from tax-free inventory.
(1) Divergent use; paying tax on fair market
rental value. When a taxable item is removed from a valid tax-free inventory
for use in Texas, Texas sales tax is due. When a taxable item purchased under a
resale certificate is used for any purpose other than retention, demonstration,
or display while holding it for sale, lease, or rental, or for transfer as an
integral part of a taxable service, the purchaser is liable for sales tax based
on the value of the taxable item for the period of time used.
(A) The value of tangible personal property
is the fair market rental value of the tangible personal property. The fair
market rental value is the amount that a purchaser would pay on the open market
to rent or lease the tangible personal property for use. If tangible personal
property has no fair market rental value, sales tax is due based upon the
original purchase price.
(B) The
value of a taxable service is the fair market value of the taxable service. The
fair market value is the amount that a purchaser would pay on the open market
to obtain that taxable service. If a taxable service has no fair market value,
sales tax is due based upon the original purchase price.
(C) At any time the person using a taxable
item may stop paying tax on the value of the taxable item and instead pay sales
tax on the original purchase price. When the person elects to pay sales tax on
the original purchase price, credit will not be allowed for taxes previously
paid based on value.
(2)
Donation of taxable item. A purchaser who gives a valid resale certificate
instead of paying tax on the purchase of a taxable item is not liable for sales
tax on the taxable item when donated to an organization exempt under Tax Code,
§
151.309 (Governmental
Entities), or §151.310(a)(1) and (2) (Religious, Educational, And Public
Service Organizations), provided the purchaser did not make a taxable use of
the donated taxable item prior to its donation.
(3) Use of taxable item as a trade-in. A
purchaser who gives a valid resale certificate instead of paying tax on the
purchase of a taxable item is liable for sales tax if the purchaser uses the
taxable item as a trade-in on the purchase of another taxable item. Tax must be
paid on the original purchase price of the taxable item used as a
trade-in.
(4) Use of taxable item
outside Texas. Texas sales or use tax is not due on a taxable item removed from
a valid tax-free inventory for use by the purchaser outside the
state.
(5) Lost or destroyed
inventory. Texas sales or use tax is not due on tangible personal property
purchased under a valid resale certificate that is totally destroyed or
permanently disposed of by the purchaser in a manner other than for use or sale
in the normal course of business. For example, documented theft, casualty
damage or loss, or disposal in a landfill. This does not apply to consumable
items that are completely used up or destroyed by the purchaser in the course
of performing a service in Texas.
(f) Improper use of a resale certificate;
criminal offenses.
(1) A person may not issue
a resale certificate at the time of purchase for a taxable item if the person
knows the item is being purchased for a specific taxable use.
(2) Any person who intentionally or knowingly
makes, presents, uses, or alters a resale certificate for the purpose of
evading Texas sales or use tax is guilty of a criminal offense. For more
information, see §
3.305 of this title (relating to
Criminal Offenses and Penalties).
(g) Content of a resale certificate. A resale
certificate must show:
(1) the name and
address of the purchaser;
(2) the
number from the sales tax permit held by the purchaser or a statement that an
application for a permit is pending before the comptroller with the date the
application for a permit was made. If the application is pending, the resale
certificate is valid for only 60 days, after which time the resale certificate
must be renewed to show the permanent permit number. If the purchaser holds a
Texas sales and use tax permit, the number must consist of 11 digits that begin
with a 1 or 3. Federal employer's identification (FEI) numbers or social
security numbers are not acceptable evidence of resale. See also subsection
(d)(2) of this section regarding registration numbers for retailers outside
Texas;
(3) a description of the
taxable items generally sold, leased, or rented by the purchaser in the regular
course of business and a description of the taxable items to be purchased tax
free by use of the certificate. The item to be purchased may be generally
described on the certificate or itemized in an order or invoice attached to the
certificate;
(4) the signature of
the purchaser or an electronic form of the purchaser's signature authorized by
the comptroller and the date; and
(5) the name and address of the
seller.
(h) Form of a
resale certificate. A resale certificate must be substantially either in the
form of a Texas Sales and Use Tax Resale Certificate or a Border States Uniform
Sale for Resale Certificate. Copies of both certificates are available at
comptroller.texas.gov or may be obtained by calling our toll-free number
1-800-252-5555. A seller may also accept as a resale certificate the Uniform
Sales and Use Tax Certificate-Multijurisdiction promulgated by the Multistate
Tax Commission and available online at http://www.mtc.gov. The Streamlined Sales and
Use Tax Agreement Certificate of Exemption may not be accepted as a resale
certificate.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.