Texas Tax Code 151.155 – Exemption Certificate
(a) Except as provided by § 151.3181 for property used in manufacturing, if a purchaser certifies in writing to a seller that a taxable item sold, leased, or rented to the purchaser will be used in a manner or for a purpose that qualifies the sale of the item for an exemption from the taxes imposed by this chapter, and if the purchaser then uses the item in some other manner or for some other purpose, the purchaser is liable for the payment of the sales tax on the value of the taxable item for any period during which the item is used in the divergent manner or for the divergent purpose.
(b) The value of an item of tangible personal property is the fair market rental value of tangible personal property, which is the amount that a purchaser would pay on the open market to rent or lease the property for his use. The value of a taxable service is the fair market value of the taxable service, which is the amount that a purchaser would pay on the open market to obtain the service for the use of the purchaser.
Terms Used In Texas Tax Code 151.155
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- in writing: includes any representation of words, letters, or figures, whether by writing, printing, or other means. See Texas Government Code 312.011
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Market value: means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:
(A) exposed for sale in the open market with a reasonable time for the seller to find a purchaser;
(B) both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and
(C) both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other. See Texas Tax Code 1.04 - Person: includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. See Texas Government Code 311.005
- Personal property: All property that is not real property.
- Personal property: means property that is not real property. See Texas Tax Code 1.04
- Property: means real and personal property. See Texas Government Code 311.005
- Tangible personal property: means personal property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has negligible or no intrinsic value. See Texas Tax Code 1.04
(c) If an item of tangible personal property has no fair market rental value or if a taxable service has no fair market value, the original purchase price shall be the measure of tax.
(d) At any time, the person making the divergent use may cease paying tax on the fair market rental value or fair market value and may pay sales tax on the original purchase price without credit for taxes previously paid.
(e) A purchaser of a taxable item who gives an exemption certificate is not liable for the tax imposed by this chapter if he donates the taxable item to an organization exempted under § 151.309 or 151.310(a)(1) or (2) of this code; except that any use by the purchaser of the taxable item other than retention, demonstration, or display shall be subject to taxes imposed by this section.