JUDGMENT ENTERED IN FAVOR OF TAXPAYER ON TAXABILITY OF FULFILLMENT SERVICES

On January 10, 2018, a Travis County District Court judge entered a final judgment in Pointsmith Point-of-Purchase Management Services, LP v. Hegar, ruling that the taxpayer’s fulfillment services (handling, packing, and freight) were not taxable under the sales price rule as part of the taxpayer’s sales of custom-printed point-of-purchase advertising materials.

The court also denied the Comptroller’s Partial Plea to the Jurisdiction which sought to limit the evidence presented in the taxpayer’s protest suit to only the specific errors scheduled in the audit assessment. Instead, the court ruled that the taxpayer was entitled to contest the Comptroller’s failure to consistently apply his taxing position, which would have generated credits offsetting the sales tax assessment. Specifically, the taxpayer was allowed to introduce evidence that, if fulfillment services were taxable as part of the sale of custom-printed materials, then the Comptroller should have looked to the ultimate destination of the printed materials to determine whether the sale was subject to Texas sales and use tax. Since the majority of the printed materials were shipped outside of Texas, the Comptroller should have identified Texas sales tax collected in error on print sales, under his taxing position, and calculated a credit to offset the tax imposed on the fulfillment services.

For more information about this case, please contact Jimmy Martens or Danielle Ahlrich, the lawyers who tried the case.