Was an aircraft-engine maintenance agreement subject to Texas sales tax?

Plain-English summary

The Texas Comptroller said a maintenance agreement for aircraft repair was not taxable. The answer applied whether the agreement covered the entire aircraft or only the engine.

The attached request concerned an hourly aircraft-engine service agreement. The requester stated that sales tax was paid on installed parts and asked for relief from tax on the agreement's hourly charge, as well as a refund of tax already paid. The Comptroller's response gives the nontaxable answer but does not discuss the requested refund.

What this means for you

Aircraft owners

This 1984 letter treated the described maintenance agreement as nontaxable.

Engine-service providers

The response applied the same answer to an agreement for the whole aircraft or just the engine.

Accountants and tax professionals

The ruling gives no statute, rule, or detailed agreement terms. Verify current Texas aircraft-maintenance and service-contract law before relying on the historical result.

Common questions

Q: Was the aircraft maintenance agreement taxable?
A: No.

Q: Did the answer change if the agreement covered only the engine?
A: No. The letter said the result applied to the entire aircraft or just the engine, as appropriate.

Q: Did the Comptroller order a refund of tax already paid?
A: The response does not address the refund request.

Citations and references

• The letter cites no statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8411L0606E12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller

Dear **:

Thank you for your recent letter regarding service agreements on aircraft
engines.

A maintenance agreement for repair of an aircraft would not be taxable.
This would
apply to the entire aircraft or just the engine as appropriate.

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

November 1, 1984

Ms. Wanda Hutcheson
State of Texas Comptroller's Office
Capitol Station
Austin, Texas 78774

Dear Ms. Hutcheson:

In reference to our telephone conversation, I am requesting a
letter relieving COMPANY A, the owner of Hawker Siddeley
N70ORG Serial No. **, from paying a Texas five per cent sales
tax on the hourly rate that we pay COMPANY X of New York City
for our Aircraft Engine Service Agreement.

A sales tax is paid on all parts installed on the aircraft when
maintenance is performed, therefore a double taxation is taking
place.

A copy of the Engine Service Agreement will be available upon
your request. Again I am requesting a letter that I might forward
to COMPANY X so they will not continue to request this tax, and
will refund the tax already paid.

Thank you,