Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017 Page: 6,026
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ble and Fitness International, LLC v. Hegar; 2016 Tex. App.
LEXIS 6337 (Tex. App.--Austin 2016, pet. denied). We there-
fore decline to revise the proposed language.
We agree that some prior comptroller guidance may be incon-
sistent with subsection (b) of this section or with the holding of
Fitness International. We intend to propose conforming amend-
ments to 3.298(f)(1) of this title. In addition, we intend to par-
tially supersede STAR Accession No. 9308L1249G14 (August
10, 1993) (stating a private country club could claim the sale for
resale exemption on the purchase of range golf balls and tennis
balls for a ball machine) as of the effective date of this section.
We have already superseded STAR Accession No. 9411681L
(November 3, 1994), which stated bowling alleys could claim the
sale for resale exemption on the purchase of bowling balls.
Subsection (b)(7) adds new language which incorporates the
limitation set out in Tax Code, 151.058(a), which states that a
taxable service provider is the consumer of the machinery and
equipment used to perform the taxable service. As the consumer
of the machinery and equipment, the service provider cannot
purchase the machinery and equipment tax-free as a sale for re-
sale, unless the service provider transfers primary possession of
the machinery and equipment to a customer. Subsection (b)(7)
further provides that a taxable service provider is not using the
machinery and equipment in performing the service if the person
has transferred primary possession of the machinery or equip-
ment to the purchaser of the service.
Finally, subsection (b)(8) refers taxpayers to 3.280 of this title
(relating to Aircraft) for information relating to the "sale for re-
sale" of aircraft to reflect the changes resulting from new Tax
Code, Chapter 163, relating to sales and use taxation of aircraft,
enacted by Senate Bill 1396, 84th Legislature, 2015.
Subsection (c), formerly subsection (b), is retitled from "Accep-
tance of resale certificate" to "Issuance and acceptance of re-
sale certificates" because the subsection includes information
related to a purchaser's issuance of a resale certificate as well
as a seller's acceptance of a certificate. New paragraph (2) ad-
dresses when a purchaser may issue a resale certificate instead
of paying sales or use tax on the purchase of a taxable item.
Paragraph (2)(A) memorializes currentcomptroller policy that a
purchaser must hold a Texas sales and use tax permit to issue
a resale certificate. Refer to Comptroller's Decision No. 18,660
(1986). This requirement is consistent with the requirement that
a sale for resale be made to a purchaser engaged in the busi-
ness of selling taxable items. Paragraph (2)(A) also restates the
information currently found in subsection (b)(3) and adds lan-
guage to memorialize the comptroller's long-standing policy that
a sale for resale includes the sale of tangible personal property
for the purpose of maintaining the tangible personal property in
a tax-free inventory. This is based on Tax Code, 151.011(e)
("Use" and "Storage") and Comptroller's Decision Nos. 31,088
(1995) and 32,194 (1998).
New paragraph (2)(B) adds language providing that a purchaser
may not issue a resale certificate for items that the purchaser
knows, at the time of purchase, will be used or consumed by the
purchaser. This provision, stated differently, is found in current
subsection (f), relating to the improper use of a resale certificate.
The remainder of the information currently provided in subsec-
tion (b)(1) of the current section is reorganized under new sub-
section (c)(3)(A).
We have amended subsection (c)(3)(A) from the version pro-
posed in the Texas Register to add the word "presumed." Therevised subparagraph follows more closely the language of Tax
Code, 151.054, which provides that all gross receipts of a seller
are presumed to have been subject to the sales tax unless the
seller has accepted a properly completed resale or exemption
certificate.
Current subsection (b)(2) is deleted and new subsection
(c)(3)(B) is proposed to explain the good faith safe harbor in
greater detail. This subparagraph memorializes long-standing
comptroller policy regarding the elements required for such good
faith acceptance. See STAR Accession No. 9105L1110D06
(May 20, 1991) and Comptroller's Decision Nos. 35,834 (1997),
48,258 (2009), and 105,608 (2012). This subparagraph also
revises the statement in the current section that, in order to
accept a resale certificate in good faith, a seller must lack actual
knowledge that the sale is not a sale for resale and must take
responsibility to notice the type business generally engaged
in by the purchaser as shown on the resale certificate. For
clarity and readability, these requirements are now described as
follows: "the seller does not know, and does not have reason to
know, that the sale is not a sale for resale." See Comptroller's
Decision No. 48,258 (2009) ("The Comptroller has construed
her rule to require 'no reason or basis for the seller to suspect
that the certificate is invalid.' It reflects the 'should have known'
concept.")
Current subsection (b)(3) is deleted, as the information con-
tained in that subsection is now provided in subsection (c)(2)(A).
Current subsection (b)(4) is relettered as subsection (c)(3)(C)
and the title to referenced 3.286 is deleted.
New subsection (c)(3)(D) is added to alert sellers of the related
record-keeping requirements by cross-referencing 3.281 of this
title (relating to Records Required; Information Required) and
providing that resale certificates are subject to the record-keep-
ing requirements set out in that section.
Current subsection (c), relating to blanket resale certificates,
is renumbered as subsection (c)(4). The subsection is also
amended to delete the word "only," so that the section now
reads, "a purchaser who purchases items for resale." This
amendment is made to reflect current comptroller practice.
New subsection (c)(5) memorializes prior comptroller guidance,
not reflected in the current section,sthat a broker or dealer who
only buys and sells raw commodities, such as natural gas, raw
cotton bales, or raw aluminum, in bulk is not required to hold a
sales tax permit and is not required to issue a resale certificate
when making such purchases. A broker or dealer may issue a
resale certificate, if requested by the seller, even if the broker or
dealer does not hold a tax permit. See, for example, STAR Ac-
cession Nos. 8909L0957A03 (September 29, 1989), 9608300L
(August 15, 1996), and 200710196L (October 18, 2007).
Subsection (d), which addresses resale certificates issued by re-
tailers outside Texas, is amended to add paragraphs (4) - (6)
and to make minor revisions that are intended to make the sub-
section easier to read, not to change the meaning of the sub-
section. New paragraph (4) is added to advise taxpayers that
retailers not located inside the United States or Mexico may is-
sue resale certificates to purchase items for resale outside Texas
but within the United States or Mexico. This provision is consis-
tent with the definition of sale for resale set out in Tax Code,
151.006 and subsection (b) of this section. New paragraph
(5) provides a cross-reference to 3.286 of this title to assist re-
sellers located outside of Texas in obtaining information about
their obligations under Texas law. New paragraph (6) memorial-42 TexReg 6026 October 27, 2017 Texas Register
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Texas. Secretary of State. Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017, periodical, October 27, 2017; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth897027/m1/114/?rotate=270: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.