In 7-Eleven, Inc. v. Combs (Third Court of Appeals, No. 03-08-00212-CV, Aug. 31, 2009), the Court held that the taxpayer was entitled to a resale exemption on software that it purchased and transferred to its franchisees as a an integral part of its provision of taxable data processing services to the franchisees. The software was used to perform bookkeeping, payroll, and accounts payable functions for the franchisees and to report certain financial information to the taxpayer. The Comptroller argued that the exemption was not proper because (1) the taxpayer was obtaining as much or more of a benefit from the use of the software as the franchisees, (2) the essence of the transaction disproved a purchase for resale, and (3) the taxpayer did not collect sales tax from out-of-state franchisees on the taxable data processing services that it provided. The Court rejected these arguments and concluded that neither the taxpayer’s obtaining a benefit from the software, the essence of the transaction test, nor the non-collection of sales tax on the data processing services invalidated the exemption. The Court held that the taxpayer satisfied the requirements of a purchase for resale.
You can review the revised opinion on the Third Court’s website. http://www.3rdcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=18477