When did Texas require tax collection on a financing lease, and what collection right did the lessor have against the lessee?

Plain-English summary

The Texas Comptroller said Section 151.055 required tax collection on a financing lease when the lessee took possession of the property or when the first payment became due, whichever occurred earlier.

Section 151.052(a), as described in the letter, required the seller to add tax to the selling price and gave the seller a remedy for collecting it from the lessee.

The Comptroller said there was no reason to pursue action against the recipient if the tax had been properly paid as required by Section 151.055.

What this means for you

Financing lessors

The historical tax-collection point was the earlier of possession and the first payment due date.

Lessees

The letter described the seller's right to add the tax to the price and pursue collection from the lessee.

Accountants and tax professionals

The source says the rule was effective October 2 but does not state the year in that sentence. Verify the current statutes and lease-tax rules.

Common questions

Q: When was financing-lease tax collected?
A: When the lessee took possession or the first payment was due, whichever came first.

Q: Could the seller add the tax to the selling price?
A: Yes, according to the letter's description of Section 151.052(a).

Q: What did the Comptroller say about enforcement?
A: The letter saw no reason to pursue the recipient if the tax had been properly paid under Section 151.055.

Citations and references

• Section 151.055 (as cited in the letter)
• Section 151.052(a) (as cited in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8410L0621D14

Original ruling text

October 31, 1984

Dear ***:

Thank you for your recent letter to *** regarding treatment
of financing leases. She has asked me to respond.

Effective October 2, Section 151.055 requires that tax be collected when
the lessee takes possession of the property or when the first payment is
due, whichever is earlier.

Section 151.052(a) requires you to add the tax to the selling price and
gives you remedy for collecting from the lessee.

I see no reason why we would pursue action against you provided that we
have been properly paid the tax as set out in 151.055. I am enclosing a
copy of the law and pamphlet supplement of Legislative changes.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You
may call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division