Which mobile-phone installation, removal, reprogramming, repair, cleaning, and inspection charges were taxable in Texas?
Apply this to your situation
This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.
Plain-English summary
Texas gave a cellular-service company an itemized tax answer for mobile-phone work.
Taxable charges included:
- Installation labor connected with selling or leasing a mobile phone, whether separately stated or not.
- Reinstallation after repair, installing a replacement unit for a malfunctioning phone, changing a number by reprogramming the phone system, and changing billing information to add or remove enhanced services.
- Refurbishing a phone for resale or rental, repairing a customer's phone, repair parts, and cleaning a returned rental unit.
Nontaxable charges included deinstalling a phone for nonpayment or at the customer's request, and removing and reinstalling a phone in another vehicle owned by the same customer, when that work was not connected with a taxable repair or other taxable service. Separately stated inspection charges were also nontaxable, whether performed at installation or later at the customer's request.
An independent repairer could accept a resale certificate for refurbishing work, and the cellular company could buy parts for its own refurbishing under a resale certificate.
What this means for you
Mobile-phone sellers and service providers
Separate stand-alone deinstallation or inspection from taxable installation, repair, reprogramming, and enhanced-service work. The letter makes the connection to another taxable service decisive in several scenarios.
Rental operators and repair shops
Cleaning and refurbishing returned rental phones were taxable. Resale certificates could apply when the work or parts were acquired for resale as described in the letter.
Common questions
Q: Is installation labor taxable when separately stated?
A: Yes. The letter says installation connected with a sale or lease was taxable after October 1, 1987, whether separately stated or not.
Q: Is removing a phone taxable?
A: Not in the stand-alone nonpayment or customer-request scenarios described.
Q: Is moving the same phone to another vehicle taxable?
A: No, if the vehicles belong to the same customer and the work is not tied to repair or another taxable service.
Q: Are inspections taxable?
A: The separately stated inspection charges described in the letter were nontaxable.
Citations and references
- Rule 3.292, Repair, Remodeling, Maintenance and Restoration of Tangible Personal Property
- Rule 3.294, Rental and Lease of Taxable Items
- Rule 3.344, Telecommunications Services
Source
- STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
- Opinion: https://star.comptroller.texas.gov/view/8806L0906F12
Original ruling text
COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774
June 14, 1988
Dear ****:
Thank you for your recent letter concerning the taxability of various
services billed to your customers.
The situations are listed below with the taxability response following:
Situation 1: Installation of a mobile phone.
Answer: Installation labor in connection with the sale or lease of a
mobile telephone is taxable. Effective October 1, 1987, the installation labor
is taxable whether separately stated or not.
Situation 2: Deinstallation of a mobile phone.A. At **'s request due
to nonpayment by customer B. At customer's request due to transfer to another
cellular provider or moving from city.
Answer:In either situation, the labor is not taxable.
Situation 3: Reinstallation of a mobile phone.
A. Phone was repaired prior to reinstallation. Answer:The labor to
reinstall the phone that was repaired is taxable.
B. Old phone was removed due to malfunction and another unit was
installed.
Answer: The total charge is taxable.
C. Changing a phone number associated with a unit.
Answer: You indicated in our telephone conversation on June 7, 1988,
that in order to change a phone number, a unit inside the phone system (called
a "name") is actually reprogrammed to recognize a new phone number. The total
charge for this service is taxable.
D. Changing a customer's billing information.
Answer: You stated that a customer's billing information is changed as a
result of adding additional services, such as call waiting, call forwarding,
etc. or deleting services. The total charge for reprogramming the system is
taxable as are the related charges for enhanced services, installation, etc.
E. Deinstalling a customer's phone and reinstalling phone into a
different vehicle belonging to the same customer.
Answer:The deinstallation and reinstallation charges are not taxable if
not performed in connection with a taxable repair or other taxable service.
Situation 4: Refurbishing a mobile phone.
A. Bringing a unit back to its original condition in order to resell or
rent book value of phone does not change, rental amount charged does not
change.
Answer: The labor charge to refurbish the phone is taxable. If an
independent repairman is doing the refurbishing, CORP ABC could issue a resale
certificate to the independent repairman in lieu of the tax.
B. Adding piece parts to unit to accomplish refurbishing.
Answer: Again, the labor charge to refurbish the phone is taxable. If
an independent repairman does the refurbishing, ABC could issue a resale
certificate to the repairman in lieu of tax. If ABC does the refurbishing, ABC
can issue a resale certificate to its vendor for its parts used in the
refurbishing instead of paying sales tax on the parts.
Situation 5: Repair of customer's mobile phone.
A. Bringing a unit back to its original condition.
The total charge for repairing a customer's mobile phone is taxable and
ABC must collect the tax from its customer.
B. Adding piece parts to unit to accomplish repair.
Answer: The repair parts are taxable to ABC's customer and ABC must
collect the tax.
Situation 6: "Wipe and clean" (cleaning a mobile phone after a rental
unit has been returned prior to renting unit again).
Answer: The charge for cleaning the unit is taxable.
Situation 7: Inspecting or checking out a mobile phone.
A. At time of installation.
Answer: The inspection charge by an independent agent to ABC would not
be taxable if separately stated.
B. After installation, at customer's request.
Answer: In this situation, the customer is billed by ABC who was billed
by the independent agent. The inspection charge would not be taxable, if
separately stated.
I am enclosing Rule 3.292, Repair, Remodeling, Maintenance and
Restoration of Tangible Personal Property; Rule 3.294, Rental and Lease of
Taxable Items and Rule 3.344, Telecommunications Services for your reference.
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 our
toll-free number 1-800-531-5441. The regular number is 512/463-4600. You may
write me at Tax Correspondence, Comptroller of Public Accounts.
Sincerely,
Julie Pesl
Tax Correspondence
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