Ezel / Tax Rulings / TX
TX 8708L0829F03 Sales and/or Use Tax (State,Local,MTA) 1987-08-14

How much Texas sales tax did a cash-basis lessor report when a Chapter 11 lessee paid only 35% of scheduled equipment rent?

Short answer: Tax was due only on rental payments actually received under the lessor's cash-basis reporting method. If the remaining rent was later received, tax would then be due on the full amount received.

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 is a taxpayer-specific August 1987 Texas Comptroller letter about two equipment financing leases and a Chapter 11 lessee. It says the opinion may change if the facts differ. The answer depended on CORP A's cash-basis sales-tax reporting and is historical; verify current lease and bad-debt 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 STAR documents may no longer represent current policy even when not marked superseded.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

CORP A had two equipment financing leases with a firm in Chapter 11 bankruptcy. The leases began in December 1981 and were scheduled to run through 1992, but CORP A was receiving only 35% of the originally scheduled rent.

Because CORP A reported sales tax on a cash basis, the Comptroller approved remitting tax only on the rental payments actually received. If CORP A later received the full rent, tax would be due on the full amount received.

What this means for you

The historical answer followed the lessor's cash-basis reporting method. It did not require tax on scheduled rent that had not actually been collected, while preserving tax liability for later receipts.

Common questions

How much scheduled rent was being paid? 35%.

What amount was subject to tax at the time? Rental payments actually received.

What if the remaining rent was later collected? Tax would be due on that additional amount.

Citations and references

  • No statute or rule number is cited in the ruling text.

Source

Original ruling text

August 14, 1987

Dear ***:

Thank you for your letter of July 14, 1987 concerning equipment leases
between CORP A and a firm in Chapter 11 bankruptcy.

You indicated in our telephone conversation yesterday that the two
financing
leases were executed in December of 1981 and were scheduled to end in
1992.
Since CORP A is on a cash basis of accounting for sales tax reporting
purposes, sales tax is being remitted only on the actual money received
(35% of rental payments originally scheduled).

This is correct procedure based on the facts you presented. Sales tax is
due
on the amount received as rental payments. If the full amount if rent is
ever received then sales tax will be due on the total amount.

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 Policy Division.

Sincerely,

Julie Pesl
Tax Policy Division

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