A company answers four separate sales-tax questions: is electricity/gas used to repair aircraft (including in leased-out hangar space) exempt, who collects tax on catered aircraft meals, is electricity for a helicopter-repair shop taxable, and is electricity used to repair equipment held for resale taxable?

Plain-English summary

An aircraft service company ("Company A") asked the Comptroller four separate sales-tax questions about its operations:

Question 1 — electricity/gas for aircraft repairs, including leased-out hangar space. Rule 3.297(d)(4) exempts electricity or natural gas used in the OFF-WING processing, overhaul, or repair of a jet turbine engine or its parts, but only for a licensed and certificated carrier. Company A leases out some of its maintenance hangar space to client companies with their own repair staff — but a lessor of real property can never claim this exemption itself, even if it bills the lessee for the electricity/gas cost; the lessee has to establish its own utility account in its own name to claim the exemption. If a single meter measures both exempt and nonexempt use, a predominant use study (Rule 3.295) is required to support any exemption claim.

Question 2 — catering to aircraft passengers. If Company A buys prepared meals for resale to the carrier, it may give the caterer a resale certificate — but it must then collect sales tax on the taxable meals it sells to the common carrier, per Rule 3.293(b)(8).

Question 3 — a helicopter company's repair-shop electricity. Taxable, unless the Rule 3.297(d)(4) exemption applies: the helicopter company must be a licensed and certificated carrier using the aircraft to transport people/property for hire, AND the jet turbine engines must actually be removed from the helicopter for off-wing repair before the exemption applies.

Question 4 — electricity to repair equipment held for resale. Taxable. A business that buys equipment and machinery for resale, then repairs that equipment to make it sellable, is NOT exempt on the electricity used for those repairs — the manufacturing exemption requires electricity used in the fabrication or processing of tangible personal property to be sold, and simply repairing existing equipment doesn't meet that standard.

What this means for you

Aircraft maintenance and repair businesses

The off-wing jet-turbine-engine repair exemption (Rule 3.297(d)(4)) is narrow — it only covers electricity/gas actually used in that specific repair activity by a licensed, certificated carrier, and it doesn't pass through to a lessor just because the lessor pays the utility bill. If you lease out hangar space, make sure your lessee holds its own utility account if it wants to claim the exemption itself.

Businesses with a shared utility meter for exempt and nonexempt uses

You need a predominant use study under Rule 3.295 to support any exemption claim when one meter covers both exempt repair work and other, nonexempt activity.

Businesses reselling catered meals or other purchased goods

You can buy tax-free with a resale certificate, but you're then on the hook to collect sales tax on your own sale of those taxable items to your customer.

Resellers who repair their own inventory to make it sellable

Don't assume repair work on goods held for resale qualifies for the manufacturing exemption on utilities — the exemption is tied to fabricating/processing property to be sold, not to repairing existing equipment.

Common questions

Q: Is electricity used to repair a jet turbine engine exempt from Texas sales tax?
A: Only for OFF-WING repair by a licensed, certificated carrier, per Rule 3.297(d)(4) — and only if the engine is actually removed from the aircraft for that repair.

Q: Can a hangar lessor claim the jet-engine-repair utility exemption on behalf of its lessee?
A: No. The lessee must establish its own utility account in its own name to claim the exemption, even if the lessor bills the lessee for the utility cost.

Q: What if one meter covers both exempt and nonexempt electricity use?
A: A predominant use study under Rule 3.295 is required to support any exemption claim.

Q: Is electricity used to repair equipment a company holds for resale exempt as "manufacturing"?
A: No. The manufacturing exemption requires fabricating or processing property to be sold — repairing existing equipment to make it sellable again doesn't qualify.

Q: Can I rely on this letter for my own aircraft-service or equipment-resale business?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may yield different results; it binds the Comptroller only as to the taxpayer it was issued to.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.297(d)(4) (electricity/gas exemption for off-wing jet turbine engine repair by a licensed, certificated carrier)
• 34 Tex. Admin. Code Rule 3.295 (predominant use studies for electricity and natural gas)
• 34 Tex. Admin. Code Rule 3.293(b)(8) (taxable food sales)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200001002L

Original ruling text

January 25, 2000

To: **

Subject: COMPANY A

Dear **:

Thank you for your e-mail with questions concerning sales tax.

Question 1: COMPANY A has a service staff and provides services and repairs to
corporate and common carrier aircraft. They own the maintenance hangers and
they lease out maintenance facilities to client companies who have their own
service staff. Is the electricity or natural gas used for repairs taxable on
the main facility as well as the facility that is leased?

Response: Rule 3.297(d)(4) exempts electricity or natural gas used in the
off-wing processing, overhaul or repair of a jet turbine engine or its parts
for a licensed and certificated carrier. A lessor of real property may not
claim this exemption even if the lessor bills the lessee for the cost or
expense of the electricity or natural gas. The lessee would have to establish
the account with the utility company in its own name to claim any exemption for
electricity or natural gas used as per Rule 3.297(d)(4).

COMPANY A may only claim an exemption for the electricity or natural gas it
uses in an exempt manner per Rule 3.297(d)(4). If there is a single meter
measuring electricity or natural gas used in both exempt and nonexempt
activities, then a predominant use study must be performed to support any claim
for exemption by the repairman. Rule 3.295 has information on predominant use
studies for electricity and natural gas. The sales tax rules are found on the
Window on State Government web site at by clicking on
"The Sales Tax" under the Quick Links and then on "State Sales Tax" underneath
Current Tax Rules.

Question 2: COMPANY A also provides catering service to clients in their
aircraft and they hire out companies that supply them with the prepared food
and drinks. Should COMPANY A pay sales tax on prepared food to the catering
company or should the carrier company pay sales taxes to COMPANY A?

Response: If COMPANY A is purchasing the meals for resale, it may give a
resale certificate to the caterer. COMPANY A must collect sales tax on the
taxable meals sold to the common carrier in accordance with Rule 3.293(b)(8) on
taxable food sales.

Question 3: There is a helicopter company that flies people out to offshore
oilrigs. The company has a repair shop for the aircraft used to fly people
out. Is the electricity or natural gas used for repairs in the shop taxable?

Response: Yes, unless the exemption in Rule 3.297(d)(4) is applicable. Only
"off-wing" repairs of jet turbine engines for a licensed and certificated
carrier qualify. The helicopter company must be a licensed and certificated
carrier, must use the helicopter as a carrier aircraft in transporting persons
or property for hire, and the jet turbine engines must be removed off the
helicopter for repair before the exemption in (d)(4) applies. Again, see Rule
3.295 for predominant use studies.

Question 4: There is a company that buys equipment and machinery for resale.
They repair their equipment and machinery so it is sellable. Is the
electricity used to repair the equipment and machinery taxable?

Response: Yes. A person using electricity for repairs of machinery and
equipment to be sold is not exempt on the electricity. The electricity must be
used in the fabrication or processing of tangible personal property to be sold
for the person to be a manufacturer.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

I hope this information helps. If you have further questions, please e-mail me
at , or you may reach me by phone at 1-800-531-5441,
ext. 5-0030.

Sincerely,

David Somerville
Tax Policy Division