Were separately billed spool removal, wire-line repair, replacement, and installation charges taxable?

Plain-English summary

All described spool-removal, wire-line repair or replacement, and reinstallation charges were taxable whether billed together or separately. A separate installation charge did not create an exemption. If the unit was serviced out of state and returned to Texas by the customer's personnel, use tax applied to the total charges.

Common questions

Did separate billing change the result? No. Was installation exempt? No. What about out-of-state work returned to Texas? Use tax applied.

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/8507L0651A09

Original ruling text

July 3, 1985

Dear ***:

Thank you for your recent letter which is restated with response below.

We requested a taxability response on the above mentioned charge.
Specifically, our primary operations revolve around oil well
servicing and the charge in question is assessed in many different
ways on our workover mobile rigs. Briefly, spooling charges can be
broken down as follows:

1. A charge by a third party vendor to remove the spool from the
   mobile rig, remove frayed or parted wire line, replace the
   wire line, and then place the spool back on the mobile rig,

2. An assessment by a third party vendor to perform any
   combination of the above mentioned charges referred to in 1.
   such as:

a. removing the spool and replacing it after the wire line
is replaced, or
b. replacing the wire line only, or
c. splicing a frayed wire line after removal of the spool
from the mobile rig and the wire from the spool.

I am aware of the taxability of repair, remodeling, restoration,
and maintenance of tangible personal property; however, I cannot
seem to determine whether or not use tax accruals should be made on
installation charges. Quite frequently we will utilize different
vendors to perform wire-line replacements, such as one vendor to
remove and place back the wire line spool on the mobile rig, and
another vendor to actually remove the wire from the spool and
either repair or replace the line altogether.

We would appreciate your making a judgement call on the above
mentioned charge(s). In summarization, we would like to know how
we can differentiate between a repair of heavy equipment, and what
constitutes the replacement and installation of parts on heavy
equipment.

Response: In the above situations, the total charges individually or
severally billed are taxable. If there is any doubt on the part of
otherwise uninvoiced service people, you should inform them to charge
you the tax. If the unit is delivered out of state and the unit is
subsequently picked up and returned to Texas by your personnel, you
should accrue use tax on the total charges for removal, repair and
replacement.

The charges mentioned constitute a repair. The separate charge for
installation in this case would not exempt the transaction.

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 Administration Division