How did Texas apply its 1984 and 1987 tax-rate increases to a master equipment lease, later schedules, and renewals?

Plain-English summary

The Texas Comptroller explained how two historical tax-rate increases applied to a master equipment lease and later schedules.

For the one-eighth-percent increase effective October 2, 1984, rentals under the original pre-October lease or schedules signed before that date qualified through the original lease term if the price was fixed or based on criteria outside the parties' control. A renewal was a new contract taxed at the renewal-date rate, and equipment added by a schedule on or after October 2, 1984 was subject to the increase.

For the temporary one-and-one-eighth-percent increase effective January 1, 1987, original schedules or renewals entered before January 1 could qualify under the same criteria.

Both exemptions were time-limited. The 1984 protection expired September 30, 1987, and the 1987 protection expired September 30, 1989. Payments due after those dates were subject to the respective increases even if the schedule originally qualified.

What this means for you

The master lease date did not automatically protect later equipment or renewals. Each schedule's execution date, the price-setting method, the original term, renewal timing, payment due date, and statutory expiration mattered.

Common questions

Did pre-October 1984 schedules qualify for the one-eighth-percent exemption? Yes, during the original term and subject to the fixed-price criteria.

Did renewals keep the original rate? No. A renewal was a new contract.

Did equipment added after October 2, 1984 keep the old rate? No.

When did the historical protections expire? September 30, 1987 for the 1984 increase and September 30, 1989 for the 1987 increase.

Citations and references

• The letter cited no numbered statute or Comptroller 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/8702L0799A05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 25, 1987

Dear ***:

Thank you for your recent letter regarding the proper tax rates to
charge on a lease agreement with added equipment schedules. Because
two rate increases are involved, I will discuss them separately for
purposes of clarity.

Since the master lease contract was entered into prior to October 2,
1984, any rentals due on equipment covered under this initial agreement,
or added by schedule signed prior to October 2, would be exempt from
the 1/8% increase through the original term of the lease so long as the
lease price is fixed or is based on criteria not controlled by parties
to the contract. A renewal is considered a new contract and the rentals
are subject to the rate in effect at the time of the renewal. Also,
rentals for equipment added to the master lease through a schedule on or
after October 2, 1984 would be subject to the 1/8% tax increase.
Turning to the temporary 1 1/8% increase effective January 1, 1987,
there would also be a "prior contract" exemption for rentals due under
any original schedule or renewal entered into before January 1, as long
as the documents qualify under the criteria explained in the previous
paragraph.

The exemption for both tax increases lasts for only a specified period.
For 1984 it expires on September 30, 1987; for 1987 it expires on
September 30, 1989. Any rental payments due after these two dates on
contract schedules which originally qualified for a prior contract
exemption would be subject to the respective increase(s).
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 me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Sandi Skaggs
Tax Policy Section
Tax Administration Division