34 Tex. Admin. Code § 3.314 - Wrapping, Packing, Packaging Supplies, Containers, Labels, Tags, Export Packers, and Stevedoring Materials and Supplies
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Containers--Glass, plastic, or metal bottles, cans, barrels, and cylinders. The
term does not include any item of a type that is enumerated in paragraph (4) of
this subsection.
(2)
Manufacturers--Those persons covered by the provisions of §
3.300 of this title (relating to
Manufacturing; Custom Manufacturing; Fabricating; Processing).
(3) Nonreturnable container--A container
other than a returnable container.
(4) Packaging supplies--All internal and
external wrapping, packing, and packaging supplies including wrapping paper,
wrapping twine, bags, boxes, cartons, crates, crating material, pallets, tape,
rope, rubber bands, metal bands, labels, staples, glue, mailing tubes,
excelsior, straw, cardboard fillers, separators, shredded paper, ice, dry ice,
cotton batting, shirt boards, and hay lath.
(5) Returnable container--A container of a
kind customarily returned for reuse by the buyer of the contents.
(b) Manufacturers.
(1) Sales or use tax is not due on containers
or packaging supplies purchased by manufacturers for use as a part of the
completion of the manufacturing process. For the purposes of this section, the
manufacturing process is complete when the tangible personal property being
produced has been packaged by the manufacturer as it will be sold. For example,
toothpaste may be sold at retail in a tube enclosed in a box. Multiple units of
the boxed toothpaste are placed in cardboard boxes by the manufacturer. A label
is placed on the cardboard boxes identifying the product. The manufacturer then
places these labelled boxes on a pallet and covers them with shrink-wrap for
shipment, either to the manufacturer's distribution center, the manufacturer's
warehouse, or to the manufacturer's customer. The toothpaste manufacturer may
purchase the tubes, boxes, labels, pallets, and shrink-wrap tax free. Any
additional packaging necessary to transfer the product from the manufacturer's
distribution center, or from the manufacturer's warehouse to the manufacturer's
customer would also be exempt from tax.
(2) Sales tax is not due on internal or
external wrapping, packing and packaging supplies sold to a person for the
person's own use, stored for use, or used in wrapping, packing, or packaging
newspapers as defined in §
3.299(a) of this
title (relating to Newspapers, Magazines, Publishers, Exempt Writings),
including those distributed free of charge to the general public.
(3) Sales tax is not due on nonreturnable
containers, if the purchaser fills the container and sells the container with
its contents. See subsection (g)(3) of this section regarding returnable
containers.
(4) Sales or use tax is
not due on ice used by manufacturers and processors inside or outside a package
in order to shape, form, preserve, stabilize, or protect the contents of the
manufactured product.
(c) Sale of packaging supplies to persons
other than manufacturers. Sales or use tax is due on the sale of packaging
supplies, including gift wrapping supplies, to persons who repack tangible
personal property prior to sale, produce shippers who are not original
producers, wholesalers, retailers, and service providers other than laundry and
dry cleaners for use in delivering, expediting, or furthering in any way:
(1) the performance of a taxable or
nontaxable service;
(2) the rental
of tangible personal property; or
(3) the sale of tangible personal
property.
(d) Gift
wrapping supplies. Sales tax is due on the purchase price of gift wrapping
supplies used by persons providing gift wrapping services.
(1) Tax must be paid on the purchase price of
gift wrapping by the person who provides the service whether or not the item
being gift wrapped was sold by the person providing the service.
(2) Tax must be collected on a charge for
gift wrapping if the person who provides the gift wrapping service sold the
item that is being wrapped and does not provide the service on a stand-alone
basis.
(e) Combination
businesses. A business that primarily manufactures tangible personal property
for sale may also purchase tangible personal property for resale that was
manufactured by another entity. If the business is primarily a manufacturer,
all packaging supplies may be purchased tax free even though a portion of the
packaging supplies are used in repackaging a product. For example:
(1) fast-food restaurants are considered to
be primarily processors of tangible personal property for sale. The restaurant
may also sell tangible personal property without further processing, such as
soft drinks, doughnuts, or candy. The fast-food restaurant may purchase all
packaging supplies tax free even though a portion of the packaging supplies are
used in packaging or serving a nonprocessed product;
(2) a grocery store purchases tangible
personal property for resale, but also processes food and food products. A
grocery store's meat department or snack bar may be processing as well as
re-packaging food and food products. If the packaging supplies used by the
departments that process are clearly distinguishable from those packaging
supplies used in the nonprocessing department, the processing department's
packaging supplies may be purchased tax free.
(f) Purchases for resale. A person who
purchases packaging supplies for resale "as is," not as part of a packaged
product, may purchase the packaging supplies tax free by issuing a resale
certificate in lieu of paying tax.
(g) Containers. Sales or use tax is not due
on:
(1) containers when sold with the
contents, if sales or use tax is not due on the sales price of the
contents;
(2) nonreturnable
containers when sold without the contents to persons who place the contents in
the container and sell the contents together with the container. Throwaway
glass bottles are examples of nonreturnable containers;
(3) returnable containers when sold with the
contents in connection with the retail sale of the contents or when resold for
refilling. An example is a person who sells oxygen with an oxygen cylinder. The
oxygen seller must pay sales or use tax on the oxygen cylinder at the time of
purchase. If the oxygen purchaser returns the cylinder to be refilled, then no
tax is due on the cylinder in that transaction.
(h) Labels and tags. Sales or use tax is due
on labels and tags unless they are used as discussed in subsection (b) or are
purchased by the type of persons who are described in subsection (k) of this
section.
(i) Export packers.
(1) An export packer is a person who packages
property to be exported outside the territorial limits of the United
States.
(2) Crating and packaging
supplies as listed in subsection (a)(4) of this section, when purchased by an
export packer to export personal property, are exempt under Tax Code, §
151.307, whether used to
package the export packer's property, that of vendors shipping such property to
their foreign customers, or that of purchasers who contract and pay for such
services.
(3) An export packer may
give exemption certificates to suppliers on material purchases but must
maintain records showing which materials were used for the exempt purpose of
exporting tangible personal property.
(4) The export packer need not obtain a sales
or use tax permit if all crating and packing supplies are purchased for
exporting tangible personal property.
(j) Stevedoring services. Materials and
supplies are exempt when purchased by a person providing stevedoring services
for a ship or vessel operating exclusively in foreign or interstate coastal
commerce if the materials and supplies are loaded aboard the ship or vessel and
are not removed before the departure of the ship or vessel.
(k) Laundry and dry cleaners. Sales tax is
not due on hangers, safety pins, pins, inventory tags, staples, boxes, paper
wrappers, and plastic bags that are purchased by a person who performs laundry
or dry cleaning services, if the items are used to wrap, pack, or package an
item that the person has pressed and dry cleaned or laundered in the regular
course of business. See §
3.310 of this title (Relating to
Laundry, Cleaning, and Garment Services).
Notes
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