Texas – Envelopes Used to Mail Statements Not Exempt

SALT Report 1969 – The Texas Comptroller issued a ruling regarding a sales and use tax refund request from a Taxpayer who provides investment and banking services.  The refund request was for taxes paid on envelopes that the Taxpayer purchased outside the state and had shipped to its mail facility in Texas. At the mailing facility, the Taxpayer inserted account statements into the envelopes and then mailed them to its customers in several states.

Texas classifies envelopes as wrapping and packaging materials and if these materials are brought into the state, they are presumed to have been purchased for use in the state, and the person using, storing, or consuming the taxable item is liable for use tax under Tax Code Sections 151.101(a), 151.102(a), and 151.105(a).  In other words, to receive a sales tax refund the Taxpayer must prove that it did not use or store the envelopes in Texas or that an exemption applies.

Upon review of the case the Comptroller determined that the import-export exemption, the export packer exemption, and the temporary storage exemption did not apply to the Taxpayer.  The import-export clause was not applicable because the Taxpayer did not use the envelopes to package property to be exported outside the United States.  Further, the Taxpayer’s use of the property in Texas prior to export caused the loss of the export exemption.

Similarly, the export packer exemption for crating and packaging supplies that are purchased and used by an export packer to package items that will be exported did not apply because the Taxpayer did not use the envelopes to package property to be exported outside the United States.

Finally, the exemption for items that are purchased outside the state and temporarily stored in the state, for later use outside the state  did not apply because the envelopes were stored and used by the Taxpayer in Texas first.

Because the Taxpayer did not qualify for the exemptions the Comptroller denied the sales tax refund and further determined that use tax was due since the Taxpayer exercised a right or power incidental to the ownership of the envelopes to further its services.

For Further Information:

Texas Comptroller of Public Accounts – Decision, Hearing No. 104,096