The Third Court of Appeals in Austin recently issued an opinion involving the automatic title transfer provisions in the federal FAR regulations that affect companies that do business with the federal government. The FAR regulations dictate that title to property purchased by a vendor to the federal government immediately passes to the government. Texas courts held in the Raytheon case that the FAR regulations cause a resale to the federal government, thus causing the vendor’s initial purchase to be an exempt purchase for resale.
The Health Care Services Corp. case extends the Raytheon holding to cover situations where the vendor is providing a nontaxable service that uses the tangible personal property being resold, even when the services are not being resold with the tangible personal property. The holding also provides that the initial contract between the parties does not have to require that the vendor purchase the property being resold and that the resale does not have to be subject to tax.
Following is a link to the Third Court’s full opinion: http://www.3rdcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=20044