Ezel / Tax Rulings / TX
TX 8410L0625C01 Sales and/or Use Tax (State,Local,MTA) 1984-10-24

Was providing and maintaining power generators at customer locations for a flat daily charge a taxable Texas rental?

Short answer: Yes. The Comptroller treated the arrangement as a taxable generator rental even though the provider maintained the units. Tax applied to the daily or standby rate, and engine oil and filters could be bought with a resale certificate.

Apply this to your situation

This page answers the general question as of 1984. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1984
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Texas Comptroller treated a company's customer-site power-generator arrangement as a taxable rental.

The provider placed generators at customer locations, maintained them, and charged a flat daily rate while the customer used the electricity produced. A recent Tax Division policy statement, as described in the letter, classified the arrangement as a rental. Tax applied to the daily fee or standby rate.

The provider could purchase engine oil and oil filters tax-free with a resale certificate.

What this means for you

Generator providers

Maintaining the equipment and selling access to its output did not make the described transaction a nontaxable service.

Customers renting standby power

The taxable amount was the daily fee or standby rate stated in the letter.

Accountants and tax professionals

The source does not reproduce the policy statement. Verify current rental, generator-consumable, and resale-certificate rules.

Common questions

Q: Was the generator arrangement a taxable rental?
A: Yes.

Q: What amount was taxable?
A: The daily fee or standby rate.

Q: Could the provider buy engine oil and filters with a resale certificate?
A: Yes.

Citations and references

  • The letter refers to a recent Tax Division policy statement but does not identify it.

Source

Original ruling text

October 24, 1984

Dear ***:

Thank you for your letter of October 11, 1984, regarding the taxation of
rentals made by your company.

It is my understanding that you provide power generators to produce
electricity to your customers. Your company maintains these generators
while they are at your customer's location. Your customer uses the
electricity produced. You charge a flat rate per day to customers.

A recent policy statement by our tax division identifies this service as
a taxable rental of a power generator. The daily fee, or stand-by rate,
is the amount upon which tax is due.

You may purchase tax-free engine oil and oil filters with a resale
certificate.

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 Administration Division

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