Overview
An export packer who failed to provide the required documentation was denied a Texas Sales Exemption.
Texas Comptroller’s Ruling
The Texas Comptroller of Public Accounts ruled that purchases of packing supplies by a taxpayer who exported products outside the United States on behalf of its customers, and shipped other products intrastate via rail cars, were not exempt. This was due to the taxpayer’s failure to provide the required documentation showing which materials were used specifically for the exempt purpose of exporting tangible personal property.
When purchased by an export packer to export personal property, crating and packaging supplies are exempt under Tex. Tax Code Ann. § 151.307, whether used to package:
- The export packer’s property
- Property of vendors shipping to their foreign customers
- Property of purchasers who contract and pay for such services
Documentation Requirements
Export packers must maintain records clearly showing which materials were used for the exempt purpose of exporting tangible personal property. Proof of export may be shown only through specific documentation, including:
- A bill of lading identifying the seller as consignor, the buyer as consignee, and a delivery point outside the territorial limits of the United States
- A bill of lading and a forwarder’s receipt if a freight forwarder takes possession of the property
Failure to Meet Requirements
In this case, the taxpayer’s bills of lading were incomplete. They failed to identify:
- The buyer
- The seller
- The consignor
- The consignee
- The delivery location
Furthermore, there was nothing in the record identifying which packaging supplies were used for:
- Exporting products
- Warehousing
- Intrastate shipping services via rail cars
As a result, the taxpayer failed to demonstrate that the packaging supplies were used solely for exporting property outside the United States.
Texas Comptroller’s Decision No. 115,436, 07/07/2022
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Frequently Asked Questions
What is a Texas Sales Tax Exemption for export packers?
Texas Sales Tax Exemption allows export packers to purchase packaging and crating materials tax-free if the materials are used exclusively to export tangible personal property outside the United States. This exemption is authorized under Tex. Tax Code Ann. § 151.307.
What documentation is required to claim the export exemption?
To qualify for the exemption, export packers must provide specific documents proving export use. This includes a bill of lading naming the seller, buyer, consignor, consignee, and the delivery point outside the U.S., or a bill of lading along with a forwarder’s receipt if a freight forwarder is used.
Why was the taxpayer in this case denied the exemption?
The taxpayer was denied because their bills of lading lacked critical details such as the identities of the buyer and seller, as well as the delivery location. Additionally, they did not demonstrate which packaging supplies were used solely for export purposes.
Are packaging materials always tax-exempt for export packers?
No. Packaging materials are only exempt when they are clearly and exclusively used for exporting tangible personal property. If they are also used for intrastate shipping or warehousing, and proper documentation is lacking, the exemption does not apply.
What happens if an export packer fails to meet documentation requirements?
Failure to provide proper records or incomplete export documentation results in denial of the sales tax exemption. The taxpayer becomes liable for sales tax on all packaging materials unless they can prove exempt use.