Ezel / Tax Rulings / TX
TX 8604L0719A12 Sales and/or Use Tax (State,Local,MTA) 1986-04-16

How should a repair shop handle third-party vehicle-storage fees paid for a customer?

Short answer: The shop should pay tax on the storage fee, not issue a resale certificate, and bill it as a storage reimbursement without adding tax again.

Apply this to your situation

This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A repair business sometimes picked up a customer's vehicle from another storage yard before repairing it. The Comptroller instructed the repairer to pay tax on the storage fee instead of giving the storage yard a resale certificate.

When passing that cost to the customer, the repairer should label it “storage reimbursement” and should not charge the customer additional tax on that amount. The repairer should also attach the storage yard's receipt, showing the storage cost and tax paid, to its copy of the customer's invoice.

Common questions

Can the repair shop buy the storage service for resale? No. The letter says the shop should not give a resale certificate and should pay the tax on the storage fee.

Should the shop charge its customer tax again? No. It should show the amount as a storage reimbursement without additional tax.

What record should the shop keep? The receipt from the other storage yard showing the storage cost and tax paid, attached to the shop's copy of the customer invoice.

Citations and references

The reproduced letter does not cite a statute or rule.

Source

Original ruling text

April 16, 1986

Dear ***:

Thank you for your letter concerning Motor Vehicle storage.

I apologize for the delay in getting back with you. *** and I
discussed this situation during a policy meeting. During the meeting it
was decided that you should not give a resale certificate but pay the
tax on storage fees when you, acting on your customer's behalf, pick
up a vehicle stored elsewhere and repair it.

When you bill your customer, you should note "storage reimbursement" on
your invoice and not charge your customer additional tax on the storage.
Phase attach to your copy of the customer's invoice the receipt from
the other storage yard showing the cost of the storage and the amount of
tax paid.

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

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