How did Texas reclassify motor-vehicle undercoating after an administrative hearing had treated it as processing for earlier audit years?

Plain-English summary

The Texas Comptroller said the administrative law judge correctly treated the taxpayer's undercoating as processing for the January 1979 through June 1983 audit period.

The classification changed effective February 12, 1986. From that date, undercoating was considered protection or maintenance under Rules 3.292 and 3.312 rather than processing under Rule 3.300.

What this means for you

The letter preserves the old classification for the closed audit period while applying the newer rule prospectively. It does not itself calculate the tax due under the protection-or-maintenance classification.

Common questions

Was the earlier processing classification wrong? No, not for the audit period ending June 1983.

When did the classification change? February 12, 1986.

What was the new classification? Protection or maintenance.

Citations and references

• Comptroller Rule 3.300 — the earlier processing rule.
• Comptroller Rule 3.292 — repair and maintenance rule applied after the change.
• Comptroller Rule 3.312(c) — protection and maintenance provision effective February 12, 1986.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8611L0772A14

Original ruling text

November 24, 1986

Gentlemen:

You recently received the final decision in Hearing No. 16,000. That hearing
covered the periods from January 1, 1979 through June 30, 1983. In the hearing
decision the Administrative Law Judge ruled that your undercoating activities
were processing activities. That was correct for the period of time covered by
the audit.

This letter is being written to let you know that as of February 12, 1986
undercoating activities are considered to be protection or maintenance. Rather
than being covered by Rule 3.300, these activities are now covered by, Rules
3.292 and 3.312. Please refer to section (c) of Rule 3.312 which became
effective February 12, 1986.

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 512/463-4633.

Sincerely,

(Mrs.) Wanda Hutcheson
Tax Administration Division