Did a pre-October 2, 1984 software lease qualify for prior-contract relief, and was there an occasional-lease exemption afterward?

Plain-English summary

A computer-software lease entered and effective before October 2, 1984 qualified for the historical prior-contract exemption. It remained untaxed until the lease was modified, extended, or September 30, 1987 arrived, whichever occurred first.

Effective October 2, 1984, the letter said there was no longer any provision for an occasional lease or rental. A client leasing taxable goods had to obtain a sales-tax permit even if it was not generally in the leasing, retail, or wholesale business and made only a few leases each year.

Common questions

What ended the old lease's relief before 1987? A modification or extension. Did making only a few leases create an exception? No after October 2, 1984. What compliance step did the letter require? A sales-tax permit to lease taxable goods.

Citations and references

The reproduced letter cites no numbered statute or 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/8502L0627E09

Original ruling text

February 22, 1985

Dear ***:

Thank you for your recent letter to ***. I have been asked to
respond.

Your facts are restated as follows:

Where a lease for computer software was entered into and effective prior
to October of 1984, are the payments made under the lease subject to the state
sales tax? The lessor is not in the business of leasing or retail or wholesale
selling and leases only a few items each year. Is there any "occasional sales"
exemption available for an entity which has in the past or may in the future
lease equipment and/or computer software on a very limited basis?

Response: Leases of software entered into prior to October 2, are subject to
the prior contract exemption. Therefore, they will not be taxable until they are
modified, extended or September 30, 1987, whichever comes first. Effective October 2,
there is no longer any provision for an occasional lease or rental. Your client
would be required to obtain a sales tax permit to lease taxable goods.

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

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the Tax
Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division