Border States Caucus
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Sales for Resale
You may make tax‑free sales to retailers who will resell the property in the regular course of their business operations either "as‑is" or as a physical part of another product they sell. This tax exclusion is not limited to sales to local retailers. You may make tax‑free sales for resale to merchants from Mexico even though they do not have Arizona, California, Oklahoma, New Mexico or Texas seller's permits but will resell the property in Mexico. As with all sales for resale, you must have proper documentation to support the transaction as a sale for resale or you will be liable for the tax.
The vast majority of the sales to Mexican merchants will be to businesses that participate in the Mexican Merchants Program. A participating Mexican merchant can make tax‑exempt purchases for resale from Arizona, California, Oklahoma, New Mexico or Texas provided they will resell the merchandise in Mexico. You can obtain information about the Mexican Merchants Program through the following Mexican business associations or chambers:
CANACO, the Chamber of Commerce
CANACINTRA, the Chamber of Industries
CANACOPE, the Chamber of Commerce of Small Merchants
CANAGRAF, the Chamber of Graphic Arts
These chambers assign resale registration numbers to qualified merchants along with a business code number that indicates the merchants' type of business. Both numbers are noted on each merchant's official identification card, also issued by the chamber. When you make sales to merchants from Mexico, obtain the following documentation:
· A copy of the Mexican merchant's official identification card or an imprint of the card on each sales invoice, and
· A timely resale certificate or Border States Uniform Sale for Resale Certificate.
Your responsibilities in accepting an ID card
When you make a sale for resale to a Mexican merchant, you must:
· Ensure that the merchant provides you with a current, official identification card; and
· You must make a copy of the card and keep it with your records.
A merchant identification card that has expired or is not signed is not acceptable as support for a nontaxable sale for resale. It is important for you to remember that the card is not a "buyer's license" for tax‑free purchases of property for personal or business use. A merchant may purchase for resale only those items that would reasonably be sold by the type of business they operate. For example, you should not allow a drug store owner to make an exempt purchase of car or truck tires. If you allow a merchant to purchase for resale any items that they will not re-sell in their normal business operations, you will be liable for the tax even though you have met the documentation requirements.
Your responsibilities in accepting a resale certificate
You should not accept a certificate that is incomplete or inaccurate. It may be invalid and you may become liable for tax due on the sale. In particular, you should not accept a resale certificate if the business codes given by the merchant:
Do not match those on the merchant's identification card, or
Identify a type of business that normally would not re-sell the merchandise being purchased.
Once your customer provides you with a valid Mexican merchant or Border States resale certificate, they may use that same certificate to make subsequent purchases for resale, if they buy the same kind of merchandise described on the certificate. If you make a sale to a merchant who has previously given you a resale certificate, you must imprint or photocopy the merchant's identification card on the invoice or other sales document that you retain for your records.
Sales to merchants who are not participating in the Mexican Merchants Program
While the vast majority of your business customers from Mexico will likely have a Mexican merchant identification card, some business owners are not required to register with one of the participating chambers or may not be able to register because they do not operate in Baja California or the northern part of the state of Sonora. You may make sales for resale to such businesses if you obtain adequate documentation that demonstrates that the transaction is a valid sale for resale and you accept the documentation in good faith.
You must obtain additional documentation
In addition to a signed and completed resale certificate, you will need to obtain from the purchaser a signed statement, preferably on their business letterhead, stating the reason they are not required to hold a seller's permit. A typical statement might say, "I am engaged in business in Mexico and re-sell (indicate type of tangible personal property) in Mexico." In California, the purchaser must state that they are not engaged in business in California and that they do not make sales of tangible personal property in California. If you are not sure whether the reason cited by your customer is valid, please contact the particular state.
You must also obtain and keep copies of documentation that proves that the purchaser is a legitimate business. The acceptable record to document that a person is in business in Mexico is the Federal Identification Number (Cedula de Indentificacion Fiscal).
Please remember that you, as the seller, will not be relieved of your liability for the sales tax for a sale for resale unless your records support your claimed deduction. You must accept all documentation in a timely manner and in good faith.
Sales for Export
If your sale to a purchaser from Mexico may not qualify as a nontaxable sale for resale, it may still qualify as a tax‑exempt export to a foreign country. In general, tax does not apply to your sale when:
Your customer intends to ship the property to a foreign destination;
The property is irrevocably committed to export at the time of sale; and
The property is actually shipped or delivered to that foreign destination prior to its use by the customer.
Property is irrevocably committed to export when you ship it to the foreign destination with your own vehicle or by common or contract carrier. Any shipment or delivery that starts the property on a continuous trip to its final foreign destination, including your shipment or delivery to also indicates direct commitment:
Any person engaged in the business of preparing property for export or arranging for its export. This includes carriers, forwarding agents, export packers, and customs brokers.
A ship, airplane, or other mode of transportation (not including cars and pickup trucks) furnished by the purchaser. The means of transport and type of property must provide certainty that the property will not be diverted for use in this country prior to its arrival at the foreign destination.
Example: If you sell equipment and deliver it to a foreign purchaser's aircraft, no tax applies if the equipment is specially designed for use at the foreign destination and the foreign purchaser has filed a flight plan showing that the aircraft will transport the property on a continuous journey to that foreign destination.
Examples of sales and deliveries that do not qualify for the export exemption include:
Sale of a television delivered into the trunk of the purchaser's car.
Sale and delivery of jewelry to the purchaser at an airport before the purchaser boards an airplane on a scheduled flight to a foreign destination.
For more information about export sales, contact the particular states.
Proof of export
As with any sales tax exemption you claim, you must keep and maintain proper records of your exempt export sales to Mexican purchasers. The required records are described in this section.
If you have property delivered by common carrier to an export agent (e.g., forwarding agent, customs broker, or other person engaged in the business of preparing goods for export or arranging their exportation), you must retain the following documentation as proof of export:
¨ A copy of the purchase order or other documentation received from the purchaser that specifies that the property is to be delivered to the export agent for shipment to a foreign destination. It must also indicate to whom the property will be shipped and the specific destination point.
¨ A copy of the bill of lading that identifies the export agent to whom delivery was made and the invoice, contract number, or other identification of the transaction involved.
If you deliver the property to the purchaser in Mexico using your own vehicle or other mode of transport, you must retain a Certificate of Delivery in Mexico. It must be completed and signed by the vehicle driver who made the delivery. The seller also needs to retain copies of the import documents.
Vehicles delivered into Mexico
Sales of vehicles that you deliver into Mexico qualify as exempt sales for export if the purchaser does not first use the car in the State of purchase. To support this exemption you must obtain a Certificate of Delivery in Mexico from the deliverer. You should also keep documentation showing that the property was committed for delivery to Mexico and not to an in-state destination. In addition, it is recommended that you retain a copy of the import documents to show that the property was in fact delivered to Mexico.
Please note: If you sell a vehicle that the purchaser picks up in a particular state and drives into Mexico, your sale does not qualify as an exempt sale for export.
For more information on general tax questions or to get tax forms contact:
Arizona: Arizona Department of Revenue
Taxpayer Information and Assistance
1600 W. Monroe
Phoenix, AZ 85007-2650
Phone: (602) 255-2060
California: State Board of Equalization
1350 Front Street, Room 54
San Diego, CA 92101-3698
Oklahoma: Oklahoma Tax Commission
Tax Policy and Research Division
2501 Lincoln Blvd.
Oklahoma City, OK 73194
Phone: (405) 521-3133
New Mexico: New Mexico Taxation and Revenue Department
Audit and Compliance Division
1100 S. St Francis Dr., Suite 3079
Santa Fe, NM 87502
Contact: Jerry Montoya @ Phone: (505) 827-0929
Texas: Texas Comptroller of Public Accounts
Austin, TX 78774
Phone: 1-800-252-5555 (toll free) or (512) 463-4600
United States Customs Service: www.customs.gov
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