The Texas Comptroller intends to restrict a taxpayer’s ability to accept a resale certificate in good faith, thereby limiting the safe harbor protections. See proposed amendments to 34 Tex. Admin. Code § 3.285.
Currently, a sale is exempt if a seller accepts a resale certificate in good faith and lacks actual knowledge that the sale is not a sale for resale. It is the seller’s responsibility to take notice of the type of business generally engaged in by the purchaser as shown on the resale certificate. Presently, a seller can accept a certificate in good faith if there is nothing on the face of the certificate that would lead the seller to suspect that the resale claim is improper.
The Comptroller’s proposed rule narrows the good faith protections for sellers. Under the proposed rule, sellers must not have reason to know that the sale is not a sale for resale in order to accept a resale certificate in good faith. See proposed amendments to 34 Tex. Admin. Code § 3.285(b)(2) (emphasis added). This standard would require the consideration of a wide array of facts and circumstances beyond the certificate itself, and may impose a duty of inquiry. Thus, the proposed rule may limit a taxpayer’s ability to raise the good faith defense.
The proposed rule amendments could be adopted at any time.