Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017 Page: 6,028
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(b) Sale for resale.
(1) Except as provided in paragraphs (3) - (6) of this sub-
section, each of the following is a sale for resale:
(A) the sale of a taxable item to a purchaser who ac-
quires the taxable item for the purpose of reselling it with or as a taxable
item in the United States or Mexico in the normal course of business:
(i) in the form or condition in which it is acquired;
or
(ii) as an attachment to or as an integral part of an-
other taxable item;
(B) the sale of tangible personal property to a purchaser
who acquires the property for the sole purpose of leasing or renting
it in the United States or Mexico in the normal course of business to
another person, but not if incidental to the leasing or renting of real
estate, as described in 3.294(k) of this title (relating to Rental and
Lease of Tangible Personal Property);
(C) the sale of tangible personal property to a purchaser
who acquires the property for the purpose of transferring the property
to a customer in the United States or Mexico as an integral part of a
taxable service;
(D) the sale of a taxable service performed on tangible
personal property that the purchaser of the service holds for sale, lease,
or rental;
(E) the sale of tangible personal property to a purchaser
who acquires the tangible personal property for the purpose of trans-
ferring it as an integral part of performing a contract, or a subcontract
of a contract, with the federal government only if the purchaser:
(i) allocates and bills to the contract the cost of the
tangible personal property as a direct or indirect cost; and
(ii) transfers title to the tangible personal property to
the federal government under the contract or subcontract and applicable
federal acquisition regulations;
(F) the sale of a wireless voice communication device,
such as a cellular telephone, to a purchaser who acquires the device
for the purpose of transferring the device as an integral part of a tax-
able telecommunication service when the purchase of the service is a
condition for receiving the device, regardless of whether there is a sep-
arate charge for the device or whether the purchaser is the provider of
the taxable service. See 3.344 of this title (relating to Telecommuni-
cations Services) for information about telecommunication services);
and
(G) the sale of a computer program to a provider of In-
ternet hosting services who acquires the computer program from an
unrelated vendor for the purpose of selling the right to use the com-
puter program to an unrelated user of the provider's Internet hosting
services in the normal course of business and in the form or condition
in which the provider acquired the computer program, without regard
to whether the provider transfers care, custody, and control of the com-
puter program to the unrelated user. The performance by the provider
of routine maintenance of the computer program that is recommended
or required by the unrelated vendor of the computer program does not
affect the application of this subsection. For purposes of this subsec-
tion, the purchase of the computer program by the provider qualifies as
a sale for resale only if:
(i) the provider offers the unrelated user a selection
of computer programs that are available to the public for purchase di-
rectly from an unrelated vendor;(ii) the provider executes a written contract with the
unrelated user that specifies the name of the computer program sold
to the unrelated user and includes a charge to the unrelated user for
computing hardware;
(iii) the unrelated user purchases the right to use the
computer program from the provider through the acquisition of a li-
cense; and
(iv) the provider does not retain the right to use the
computer program under that license.
(2) To qualify as a sale for resale, the taxable item must be
acquired for the purpose of selling, leasing, or renting it in the regular
course of business or for the purpose of transferring it as an integral
part of a taxable service performed in the regular course of business.
(3) A sale for resale does not include the sale of internal
or external wrapping, packing, or packaging supplies to a purchaser
who acquires the supplies for use in wrapping, packing, or packaging
tangible personal property, or in the performance of a service, for the
purpose of furthering the sale of the tangible personal property or the
service. See 3.314 of this title (relating to Wrapping, Packing, Pack-
aging Supplies, Containers, Labels, Tags, Export Packers, and Steve-
doring Materials and Supplies).
(4) A sale for resale does not include the sale of tangible
personal property or a taxable service to a purchaser who acquires the
property or service for the purpose of performing a service that is not
taxed under this chapter, regardless of whether title transfers to the ser-
vice provider's customer, unless the tangible personal property or tax-
able service is purchased for the purpose of reselling it to the United
States in a contract, or a subcontract of a contract, with any branch of
the Department of Defense, Department of Homeland Security, Depart-
ment of Energy, National Aeronautics and Space Administration, Cen-
tral Intelligence Agency, National Security Agency, National Oceanic
and Atmospheric Administration, or National Reconnaissance Office
to the extent allocated and billed to the contract with the federal gov-
ernment.
(5) A sale for resale does not include the sale of a taxable
item to a purchaser who acquires the taxable item for the purpose of
reselling or transferring the taxable item outside the territorial limits of
the United States or Mexico. Refer to 3.323 of this title (relating to
Imports and Exports).
(6) Tangible personal property used to perform a taxable
service is not considered resold unless the care, custody, and control
of the tangible personal property is transferred to the purchaser of the
service. The care, custody, and control of tangible personal property
is transferred to the purchaser of the service when the purchaser has
primary possession of the tangible personal property.
(A) Except as provided in subparagraphs (B) and (C)
of this paragraph, to have primary possession, the purchaser or the pur-
chaser's designee must have:
(i) physical possession of the tangible personal
property off of the premises of the service provider;
(ii) a contractual duty to care for the tangible per-
sonal property. At a minimum, the contract must prohibit the purchaser
from damaging the tangible personal property or impose liability if the
purchaser damages the tangible personal property; and
(iii) a superior right to use the tangible personal
property for a contractually specified period of time.
(B) The purchaser may have primary possession of tan-
gible personal property if the purchaser or the purchaser's designee has42 TexReg 6028 October 27, 2017 Texas Register
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Texas. Secretary of State. Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017, periodical, October 27, 2017; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth897027/m1/116/?q=%22%22~1: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.