Ezel / Tax Rulings / TX
TX 8705L0818G13 Sales and/or Use Tax (State,Local,MTA) 1987-05-22

Were film libraries leased by subscription taxable in Texas, including when used by a federal contractor?

Short answer: Yes. Based on the limited facts, the Comptroller treated the subscription as a lease of taxable tangible personal property; a federal contractor was not exempt for items it used.

Apply this to your situation

This page answers the general question as of 1987. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1987
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 1987 Texas Comptroller letter reached a tentative result from limited information; the author says she could not obtain additional product details and that the film libraries appeared to be leased tangible personal property. The letter concerns physical film libraries, not modern digital subscriptions. Verify current rental, digital-product, government-contract, and local-tax rules. STAR documents may no longer represent current policy even when not marked superseded. Identities are redacted. This summary is informational only and is not legal or tax advice.
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

Based on the information supplied, the Texas Comptroller treated film libraries leased to customers by subscription as tangible personal property rather than a nontaxable service. Sales or use tax was therefore due on the lease or rental.

The letter also distinguished the federal government from its contractors. The federal government was exempt, and items actually sold or leased to it qualified for exemption. A federal contractor, however, was not exempt for items the contractor used or consumed to perform its federal contract.

The author could not reach the requester for more information, so the conclusion was expressly based on the limited facts in the letter.

What this means for you

A subscription label did not turn a rental of physical property into a service. The identity of the actual purchaser or lessee also mattered: direct federal-government transactions received different treatment from a contractor's own purchases or rentals.

Common questions

Were subscription-based film-library rentals taxable? Yes, on the facts provided. They appeared to be leases of tangible personal property.

Was the federal government exempt? Yes.

Was a federal contractor automatically exempt? No. Items used or consumed by the contractor to perform a federal contract were taxable to the contractor.

What if the property was actually sold or leased to the federal government? The letter says those items qualified for exemption.

Citations and references

  • Comptroller Rule 3.294 — Rental and Lease of Taxable Items.
  • Comptroller Rule 3.322 — Exempt Entities.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 22, 1987

Dear ***:

Thank you for your letter of April 15, 1987, concerning the taxability of
film
libraries which you lease to customers on a subscription basis.

I was unable to contact you by telephone in order to obtain additional
information about your product. Based on the information given in your
letter, it appears that you are leasing tangible personal property rather
than
providing a nontaxable service. Sales or use tax is due on the lease or
rental of tangible property.

The federal government is exempt from payment of the sales tax. Federal
government contractors, however, are not exempt from the tax. Only those
items actually sold or leased to the federal government qualify for
exemption.
Items used or consumed by the contractor to perform a federal contract
are
taxable to the contractor.

Rule 3.294 - Rental and Lease of Taxable Items and Rule 3.322 - Exempt
Entities are enclosed for your reference.

This opinion is based upon the facts you presented. If there are
additional
or different facts, this opinion may change.

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
512/463-4600.

Sincerely,
Julie Pesl
Tax Policy Section
Tax Administration Division

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