What rate applied to leases signed before October 2, 1984, and how were renewals treated?

Plain-English summary

For a rental or lease contract entered before October 2, 1984 and extending beyond that date, the lessor could apply the tax rate in effect when the contract was executed. The answer covered open-ended contracts as well.

That historical relief expired September 30, 1987. After that date, the lessor had to begin collecting tax at the then-current rate.

Renewals and renegotiated contracts were treated as new contracts and became subject to the tax and rate in effect at renewal.

Common questions

Did an open-ended pre-October 2 lease qualify? Yes. Did the old rate continue indefinitely? No; the letter set a September 30, 1987 expiration. Did a renewal keep the old contract date? No; it was treated as a new contract.

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/8502L0637E02

Original ruling text

February 22, 1985

Dear ***:

Thank you for your letter of February 6, 1985, regarding which sales tax
rate to apply to one of your customer's rentals.

For rental or lease contracts entered into prior to October 2, 1984, and
extending beyond that date, you may apply the tax rate in effect at the
time of execution of the contract, even for open-ended contracts.
However, this exemption expires on September 30, 1987, at which time you are
required to begin collecting tax at the then-current rate.

Also, renewals and renegotiated contracts are regarded as new contracts
and would be subject to the tax and/or tax rate in effect at the time of
renewal.

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