Private Letter Ruling Denies R&D Sales Tax Exemption for Texas Subsidiary

• The Comptroller’s Office in Texas issued a Private Letter Ruling regarding the sales and use tax exemption for research and development (R&D) purchases.
• The ruling involved a taxpayer who is a subsidiary of a parent entity and was established to purchase land and construct facilities in Texas for the parent entity.
• The taxpayer does not have any employees and does not generate revenue, as all activities are funded by the parent entity.
• The taxpayer purchased items used by the parent entity in its research and development activities.
• The parent entity received a Texas Qualifying Research Registration Number, allowing it to claim an exemption from sales and use tax for qualified tangible personal property used in qualified research.
• However, the taxpayer did not apply for a Texas Qualified Research Registration Number.
• The Comptroller ruled that the taxpayer cannot use the parent entity’s registration number and the parent entity’s research activities do not qualify for the R&D sales tax exemption for the taxpayer’s purchases to be tax-free.

Source: jdsupra.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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