How were pager rentals, repairs, damage waivers, and lost-equipment charges taxed when connected with paging service?

Plain-English summary

The Comptroller said pager equipment rented as part of telecommunications service, along with later repair charges, would be taxed at the same rate as the service. The letter noted that state tax applied uniformly to intrastate pager service while city, county, and transit taxes depended on local adoption.

An outright pager purchase was different: the full prevailing tangible-personal-property tax rate applied to both the equipment and later repair charges, even where local jurisdictions had not elected to tax telecommunications service.

The letter also distinguished damage and loss charges. A damage-waiver charge on rented equipment was taxable, but a charge to replace lost equipment was not. A single combined charge covering both would be taxable.

Common questions

What rate applied to a pager rented with paging service? The same rate as the telecommunications service.

What rate applied to an outright pager purchase? The full prevailing rate for tangible personal property, including later repair charges.

Was a damage waiver taxable? Yes.

Was a lost-equipment replacement charge taxable? No under the letter, unless combined with a taxable damage-waiver charge in one amount.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8902L0922C06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 13, 1989

Dear ***:

I just want to take a minute to confirm our conversation on the
taxability of pager service, pager sales and rental, and pager repair.

State sales tax is uniformly assessed on intrastate pager service while
city, county and mass transit authority taxes are assessed on a local option
basis. on the other hand, tangible property is subject to both state and local
tax. It's no wonder you find the situation confusing.

For the sake of simplicity, we decided that when equipment is rented to a
customer as part of a telecommunications service, the equipment and future
repair charges would be taxable at the same rate as the service. When a person
purchases equipment outright he is charged the full prevailing tax rate for
both equipment and future repair charges even if the local taxing jurisdictions
have not elected to impose tax on telecommunications services.

As we discussed, charges for damage waiver on rented equipment are
taxable while charges to replace lost equipment are not subject to tax. If a
single charge were made for both it would be taxable and local taxes would be
imposed based on the above criteria.

I hope this information proves helpful. Please feel free to call or
write if you have additional questions. You can reach me by calling toll free
800-531-5441 or FAX (512) 475-0900.

Sincerely,
Al Van Allen