| (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.
Cont'd... |
