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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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Texas taxes applicable to an out-of-state consignor

Resolved Question:

If another Company in another state consigns and ships consumer goods inventory to another company in Texas located in a tax-free zone for selling purposes and the company owning the inventory pays no storage fees for the inventory to the Texas Company, is the inventory owner outside the state of Texas subject to any Texas taxes on the inventory?
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

Let's clarify,

there is no tax on inventory, however there are sales tax on goods sold.

As the Company A holds inventory in Texas and if any goods are sold and shipped to the customer in Texas - that transaction is a subject for the sale taxes in Texas because the Company A is actually doing business in Texas.

If the Company A uses facilities of the Company B to store an inventory - that will not provide any difference in sales tax allocation.

Lev and 5 other Tax Specialists are ready to help you
Customer: replied 8 years ago.
Reply to LEV's Post: I would like to clarify and will give you another example:

Company A is a retailer located outside the state of Texas and primarily sales to consumers through internet channels. Company A currently has no agents, facilities or inventory located in the state of Texas and does not currently collect sales tax when it sells products to consumers located in the state of Texas.

Company A has excess inventory that it needs to dispose of and has asked Company B to help them dispose of this inventory.

Company B, a Carrollton, Texas company operating in a free trade zone, has agreed to store the inventory on a consignment basis at its Carrollton, Texas facility. At such time as Company B finds a buyer for the inventory, it will purchase the consigned inventory from Company A and sell the purchased product to its customer.


Under this scenario, will Company A's normal retail sales (ie.. inventory from its non-Texas facilities) to consumers located in the state of Texas be subject to Texas sales tax?
Expert:  Lev replied 8 years ago.

Based of your clarification that is the Company B that actually sells goods are required to collect sales tax if selling to customers in Texas.

The Company A would sell goods to the Company B and as long as the Company A doesn't have any business presence in Texas - it is not required to collect any Texas sales tax.

For qualified businesses investing in Enterprise Zones, Texas offers a one-time state sales tax refund, a one-time franchise tax refund and preference for all programs administered by the State of Texas - that may be an opportunity for the Company B if it qualified.