Texas – Tax Free Purchases by Out-of-State Schools

SALT Report 1739 – The Texas Comptroller issued guidance regarding purchases by out-of-state public universities, colleges, junior colleges, community colleges, and school districts.  In Texas, government entities from other states are not exempt from sales and use tax; however, certain schools may qualify for the educational organizations sales and use tax exemption.

Educational Organization Exemption

To qualify for the exemption, the out-of-state educational organization must complete and submit the educational exemption application.  The Comptroller will notify the organization in writing if the exemption is granted.  Once granted, the organization will be assigned a taxpayer identification number that will be included in the Comptroller’s exempt organizations database.

Once the taxpayer identification number has been assigned the out-of-state educational organization may begin to make tax-free purchases of goods and services. The organization must provide the seller with a properly completed exemption certificate to document the exempt sale. The exemption certificate does not require a number to be valid.

Authorized Agents

Authorized agents can make purchases on behalf of an exempt organization as long as the exemption certificate identifies the organization as the purchaser and that the person is acting as an agent for the exempt educational organization.  All authorized agent must be an employee or person authorized by the organization to make purchases on behalf of the organization.  An authorized agent cannot claim a sales tax exemption for purchases that are of a personal nature even if the agent receives an allowance or reimbursement from the organization.

Assignment of Right to Refund

Texas sellers are not required to accept an exemption certificate and may choose to collect the tax instead. If the seller chooses not to honor an exemption certificate, the exempt organization or authorized agent can ask the seller for an Assignment of Right to Refund, so the organization can request a refund of the tax directly from the Comptroller.

For Further Information:

Texas Comptroller – Tax Policy News