Texas Comptroller of Public Accounts    STAR System


200602373L


STAR SUPERSEDED INFORMATION
Accession No.(s) -   200602373L
Supersede type - Complete         
Document superseded on -  October 6, 2011
Issue(s) that caused the document to be superseded - definition of "place of
business" for local sales tax purposes
Reason(s) -   Statutory change -  HB 590 amended Section 321.002(3), regarding 
the definition of "place of business of the retailer" for local sales and use tax 
purposes; 82nd Regular Legislative Session. Effective 9/01/01.  See STAR 201108160L 
for current policy.



February 22, 2006

**************
**************
**************

RE: Follow up to Letter 05279806

Dear **************:

Thank you for your email providing additional information concerning the 
Letter issued by this office regarding whether a business 
location qualifies as a “Place of Business” for the purpose of sourcing Texas 
local sales and use tax under the provisions outlined in House Bill 3534 and 
House Bill 2912 from the 78th Regular Legislative Session, and Texas Attorney 
General Opinion No. GA-0137.

For the purposes of administering the provisions of House Bill 3534, the 
Comptroller's office looks for the following indicia that the business is a 
bona fide place of business:

- Employees
- Separate books and records
- An operating office (phone lines, office area, signage)
- All products are sold for an amount equal to or greater than cost
- The office orders the products, pays for the products, tracks the orders and 
deals directly with vendors when shipments are late, lost or substandard
- The office is not relocating from one city to another in order to obtain a 
local tax rebate.

Of course, the place of business must also take three or more orders in a year.

According to the facts provided, Company A, a statewide contractor, has a 
subsidiary, Client. Client is a retailer of building materials and purchases 
tangible personal property from suppliers for resale. Client's new business 
location takes substantially more than three orders a year for building 
materials that will be sold at or above cost, has an employee or employees, 
maintains separate books and records, and has an operating office with phone 
and fax services.

In addition, your Client will receive a sales tax incentive from the CITY A, 
under Texas Local Government Code Section 380. Client will not receive an 
incentive from a 4A or 4B corporation.

In the original ruling issued by this office, we determined that the Client’s 
new business location would qualify as a bona fide place of business for local 
sales tax purposes.

The CITY A has requested that some of the factual representations in the letter be 
clarified. In your follow up email, you provided the following additional 
information:

Client’s employees order the products, pay for the products, track the orders 
and deal directly with vendors.

Company A previously had a sales tax incentive agreement with another Texas 
city, City A. Company A’s sales tax incentive agreement with City A became 
effective on January 1, 2003 (i.e.: prior to May 27, 2003) and terminated on 
August 31, 2005. Company A was building homes in City A in 2003 and maintained 
a minimal physical presence, including two employees, in that city. City A had 
a 1 percent general city tax and a 0.5 percent 4B Corporation tax (with a 
stated purpose for economic development). Company A does not currently build 
homes in City A and desired to consolidate its Texas purchasing operations 
(effective September 1, 2005) in a Texas location where it had its most 
significant physical presence, including employees.

COMPANY represents that Client does not exist or function to avoid the tax 
imposed by this chapter or to rebate a portion of the tax imposed.

Lastly, the incentive agreement that Client negotiated with the CITY A provides 
that the amount of rebate incentive that Client will receive from the CITY A is 
substantially less than the amount of rebate received under the previous 
agreement.

Based on the information you provided, it appears that Client had business 
reasons other than the rebate agreement to locate in the CITY A. Therefore, we 
agree that Client's location in the CITY A is a bona fide place of business for 
Texas state and local sales and use tax purposes.

This opinion is based on the facts you submitted. Other facts, though similar, 
may yield different results.

I hope this information helps. If you have further questions, please e-mail me 
at robin.corrigan@cpa.state.tx.us., or you may reach me by phone at 
1-800-531-5441, ext. 3-1810.

Our goal is to provide you with prompt, professional service. Please take a 
moment to complete our on-line survey at: 
http://aixtcp.cpa.state.tx.us/surveys/tpsurv/

Sincerely,


Robin Corrigan
Tax Policy Division




October 11, 2005

**************
**************
**************

RE: 05279806

Dear **************,

Thank you for your recent letter requesting guidance concerning the effects of 
House Bill 3534, House Bill 2912, and Texas Attorney General Opinion No. 
GA-0137 regarding sourcing of local sales and use taxes for Texas.

You provided the following information: Company A, a statewide contractor, has 
a subsidiary, Client. Client is a retailer of building materials and purchases 
tangible personal property from suppliers for resale. 

Client will maintain a single place of business in CITY A, Texas, where they 
will receive substantially more than three orders for building materials per 
year. The place of business will be subject to a formal lease agreement and 
will be open during regular business days/hours. Client will maintain separate 
books and records and will employ approximately 11 personnel associated with 
the statewide purchasing function within the CITY A. The place of business will 
have local phone/fax service, and personal computers/ printers to print 
purchase orders received by the 11 employees. Client’s sales tax permit will be 
displayed at the place of business. In addition, Company A may have other 
business operations housed in the same location.

Client will collect and remit state and local sales and use taxes on its sales 
of tangible personal property to Company A. Client will sell items at or above 
cost and does not anticipate selling any services. Client will collect local 
city, county and special purpose district sales tax for the location where it 
receives orders for building materials. Since the CITY A currently has a two 
percent combined city tax rate, no other local taxes will be collected where 
the items are shipped due to the State’s two percent cap on local taxes. 

Client may negotiate and receive a sales tax incentive from the CITY A, under 
Texas Local Government Code Section 380. Client will not receive an incentive 
from a city 4A or 4B corporation.

You believe that the location in CITY A will be a "place of business" that is 
not affected by House Bill 3534 and orders received in CITY A will continue to 
be sourced to that city on or after September 1, 2005. You also believe House 
Bill 2912 will not apply to the facts above since an incentive is not 
negotiated with a 4A or 4B corporation.

For the purposes of administering the provisions of House Bill 3534, the 
Comptroller's office will look for the following indicia that the business is a 
bona fide place of business:

- Employees
- Separate books and records
- An operating office (phone lines, office area, signage)
- All products are sold for an amount equal to or greater than cost
- The office orders the products, pays for the products, tracks the orders and 
deals directly with vendors when shipments are late, lost or substandard
- The office is not relocating from one city to another in order to obtain a 
local tax rebate.

Of course, the place of business must also take three or more orders in a year.

According to your facts, Client's place of business takes substantially more 
than three or more orders a year for building materials that will be sold at or 
above cost, will have an employee, separate books and records, and an operating 
office with phone and fax services. Therefore, we agree that Client's location 
would be a bona fide place of business. 

The entire text of the Texas Tax Code, a complete set of rules, and a wealth of 
other Information is available on the Window on State Government web site at 
www.window.state.tx.us. You may find the sales tax rules by first clicking on 
"Sales Tax" under the Quick Links and then by clicking on "Rules" at the top of 
the web page.

This opinion is based on the facts you submitted. Other facts, though similar, 
may yield different results.

I hope this information helps. If you have further questions, please e-mail me 
at robin.corrigan@cpa.state.tx.us., or you may reach me by phone at 
1-800-531-5441, ext. 3-1810.

Our goal is to provide you with prompt, professional service. Please take a 
moment to complete our on-line survey at: 
http://aixtcp.cpa.state.tx.us/surveys/tpsurv/

Sincerely,


Robin Corrigan
Tax Policy Division




ACCESSION NUMBER: 200602373L
SUPERSEDED: S
DOCUMENT TYPE: L
DATE: 02/22/2006
TAX TYPE: SALES