Could electronic well-logging equipment qualify for a Texas exemption if immediately removed from the state, and was Texas repair labor taxable?

Plain-English summary

The Texas Comptroller agreed that electronic well-logging equipment qualified for exemption under Section 151.324(B) and (C) if the purchaser immediately removed it from Texas.

Bringing the equipment into Texas for repair did not, by itself, void that exemption. The repair labor was taxable, however, unless the work was considered repair of a motor vehicle.

What this means for you

Well-logging businesses

The exemption depended on immediate removal of the purchased equipment from Texas.

Repair providers

The letter separated the equipment's purchase exemption from the tax treatment of later repair labor. A Texas repair did not cancel the exemption, but the labor could still be taxable.

Accountants and tax professionals

Determine whether the repaired property was itself treated as motor-vehicle property under the rule described in the letter, and verify current law.

Common questions

Q: What condition applied to the equipment exemption?
A: The purchaser had to remove the equipment from Texas immediately.

Q: Did a later Texas repair void the purchase exemption?
A: No.

Q: Was the repair labor taxable?
A: Yes, unless it was considered repair to a motor vehicle.

Citations and references

• Section 151.324(B) and (C) (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/8411L0602E02

Original ruling text

November 2, 1984

Dear **:

Thank you for your recent letter regarding electronic well logging
equipment. I have been asked to respond.

I agree that the well logging equipment qualifies for exemption under
Section 151.324 (B) and (C) if it is immediately removed from this state
by the purchaser.

Labor to repair this equipment would be taxable unless it were
considered a repair to a motor vehicle. The fact that the equipment was
simply repaired in Texas would not void the exemption, but the repair
labor would be taxable.

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 me if you have additional questions. You
may write me, call toll free 1-800-252-5555 from anywhere in Texas or
phone 512/475-1931.

Sincerely,

Al Van Allen
Tax Policy Section
Tax Administration Division