Was providing sign trailers a taxable rental, and how did Texas tax the provider's trailers, signs, and materials?

Plain-English summary

Providing sign trailers was an advertising service, not a motor vehicle rental, because customers did not receive exclusive use.

The provider therefore did not collect historical gross rental receipts tax or limited sales and use tax from customers for the service.

As the consumer, the provider paid motor vehicle sales tax when buying a trailer or a complete trailer-and-sign unit and registered it with the county collector. A sign or component bought separately from the trailer was subject to limited sales and use tax. If the provider made its own sign, it paid that tax on the materials.

What this means for you

The letter separated the customer-facing advertising service from the provider's acquisition of the equipment and materials used to perform it.

Common questions

Q: Was the customer renting the trailer?
A: No, because the customer lacked exclusive use.

Q: What tax applied to a complete trailer-and-sign unit?
A: Historical motor vehicle sales tax.

Q: What tax applied to a separate sign or sign materials?
A: Historical limited sales and use tax.

Citations and references

• No statute or rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/7803L2024C01

Original ruling text

ALERT: The tax rates cited in this article are no longer the current motor vehicle sales tax
or motor vehicle rental tax rates.

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, 78774

BOB BULLOCK

Comptroller March 17, 1978

Attention: ***

Dear Taxpayer:

As you know, there has been general confusion throughout the state on the tax treatment of sign trailers. The answer often depends on whom you asked and how often. After consulting members of the industry across Texas, we have developed a simple procedure to follow in properly reporting tax for sign trailers.

Providing sign trailers is an advertising service not a rental, since your customers do not have exclusive use of the trailers. Because the transactions are not rentals, you, as the provider of the service, should not collect motor vehicle gross rental receipts tax or limited sales and use tax.

You, as the purchaser and provider of the service, are the consumer of the trailer and signs. Therefore, whenever you purchase a trailer or a complete unit (trailer and sign), you are purchasing a motor vehicle and you must register the retailer or unit and at that time pay the 4% motor vehicle sales tax to the county tax assessor-collector.

Whenever you purchase a sign or component parts not attached to a trailer at the time of purchase of the trailer, you must pay limited sales and use tax (4% state, 1% city where applicable and 1/2% M.T.A. where applicable) on the sign or component parts. If you make the sign which you will use in providing the advertising service, you must pay limited sales and use tax on the materials at the time of purchasing the materials.

If you have any questions, please feel free to contact Sales Tax Division or Motor vehicle Sales Tax Division at our toll-free number: 1-800-252-5555.

Sincerely,

BOB BULLOCK

Comptroller of Public Accounts