Hearing No.102,623 (2010)
The taxpayer operates a jewelry store where it also sells collectible coins. The taxpayer purchased coin cases and holders to package its coins for sale and shipment to its customers. The cases and holders were purchased free of tax.
The taxpayer was audited for the period April 1, 2005, through July 31, 2008. The auditor scheduled the purchases of the cases and holders as taxable packaging supplies. The taxpayer requested a redetermination of the sales and use tax assessment made by the auditor on the purchases of the cases and holders.
In the hearing, the taxpayer claimed the coin cases and holders become an integral part of the coins and that the cases and holders are necessary to preserve the value of the coins.
Comptroller staff argued the taxpayer was a retailer and its purchases of coin holders and cases were taxable packaging supplies under Texas Tax Code Section 151.302(c). This section does not allow a resale exemption for packing and wrapping supplies purchased in the furtherance of a sale of tangible personal property. Additionally, Tax Code Section 151.302(c) provides that packaging supplies used in wrapping or packing tangible personal property for the purpose of furthering the sale of tangible personal property may not be purchased for resale.
The Administrative Law Judge determined that the taxpayer was a retailer, not a manufacturer, and that as such, the taxpayer was not eligible to claim an exemption for packaging and wrapping supplies.
Taken from "Tax Policy News" at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2011/tpn1101.html#issue5
