The Texas Comptroller of Public Accounts has issued a letter ruling outlining the sales and use tax implications for imported goods stored in bonded warehouses. A bonded area, typically a secured warehouse, allows imported goods to be stored, manipulated, or manufactured without paying duties for up to five years from their importation date into the U.S.
Tax Exemption Within the Bonded Area
According to the ruling:
- Transactions within the bonded area are exempt from Texas sales and use tax.
- Imported goods maintain their status as imports while stored in the bonded area, making sales transactions and any use of the goods within the bonded area tax-exempt.
Tax Obligations Upon Removal from Bonded Area
However, once the transit of imported goods ceases and the items are removed from the bonded area for use in Texas:
- They become subject to Texas use tax.
- The U.S. customer who purchases and removes the goods from the bonded area becomes the importer of record.
- That customer is responsible for paying Texas use tax at that point.
Physical-Presence Nexus and Business Obligations
The ruling also clarifies physical-presence nexus for entities with goods in bonded warehouses:
- Entities that take ownership of goods in a bonded area located in Texas are considered to have a physical presence in the state.
- These entities must register to collect and remit Texas sales and use tax.
- Such entities are engaged in business in Texas because:
- They hold title to tangible personal property.
- They use the bonded warehouse.
- They derive revenue from sales of such property within the state.
Therefore, they are required to obtain a Texas sales and use tax permit.
Summary of Tax Responsibilities
- End customers purchasing goods are liable for Texas use tax upon removing them from the bonded area.
- Sellers are obligated to obtain a sales and use tax permit due to their business activities in Texas.
(Letter No. 202408014L, Texas Comptroller of Public Accounts, August 29, 2024)
Frequently Asked Questions
What is a bonded warehouse, and how does it affect tax liability in Texas?
A bonded warehouse is a secured facility where imported goods can be stored, manipulated, or manufactured without paying duties for up to five years. In Texas, sales and use tax do not apply to transactions or uses of goods within the bonded area.
Are sales of imported goods in a bonded warehouse subject to Texas sales tax?
No. Sales of imported goods while they remain in a bonded warehouse are exempt from Texas sales and use tax because the goods retain their import status during that time.
When does Texas use tax apply to imported goods from a bonded warehouse?
Texas use tax applies once imported goods are removed from the bonded warehouse and used in Texas. At that point, the customer becomes the importer of record and is responsible for the tax.
Do businesses with goods in Texas bonded warehouses need to register for sales tax?
Yes. If a business takes ownership of goods stored in a Texas bonded warehouse, it establishes a physical presence in the state and must register to collect and remit Texas sales and use tax.
What obligations do sellers have when selling goods from a bonded warehouse?
Sellers must obtain a Texas sales and use tax permit if they own goods in a Texas bonded warehouse, conduct sales, or derive revenue from those goods. They are considered to be engaged in business in Texas.