Could an elevator maintenance company use one historical taxable-repair percentage for all of its Texas maintenance contracts?

Plain-English summary

Elevator maintenance contracts included both maintenance and repair labor. The company asked whether it had to calculate a taxable repair percentage contract by contract or could use historical data across contracts.

For simpler recordkeeping, the Comptroller allowed the company to establish one taxable percentage for its Texas maintenance contracts. The preserved earlier correspondence says the method had to be verifiable in an audit.

Common questions

Was a separate percentage required for every contract? No.

Could one percentage cover all Texas maintenance contracts? Yes.

Did the calculation need support? Yes. The earlier letter required a verifiable recordkeeping method.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8902L0923E01

Original ruling text

February 21, 1989

Dear **:

Thank your for your recent letter to Mr. Swenson. I have been asked to respond.

I have reviewed the letters written by Mrs. Hutcheson and myself and agree with
her opinion. For simplicity of record keeping, your client may establish a
single taxable percentage to apply to their Texas maintenance contracts.

Please feel free to call or write if you have questions. You can reach me by
calling 800-531-5441 or FAX (512) 475-0900.

Sincerely,

Al Van Allen
Taxability Section
Legal Services Division

cc: Curt Swenson

February 15, 1989

To: Martin

From: Al

Subject: Elevator Repair and Maintenance

History:

Maintenance contracts on elevators include an element of repair labor - more on
old elevators -- less on new.

To avoid making them tax their annual contracts we have allowed them to compute
a percentage of repair to the total and tax only that percentage.

• I told them to do it on a contract by contract basis

• Wanda let them do one calculation using all their contracts. These were
  different taxpayers.

**, with ** has both letters and wants to do it
Wanda's way. Wanda said she thought that is the way Dan wanted it.

I think it discriminates against people with newer elevators at a time when we
are trying to encourage growth.

Question:

Would you get me a reading on this?

January 31, 1989

TO: Martin Cherry

FROM: Curt Swenson

SUBJECT: Acceptable computation method which elevator repair/ maintenance firms
may use to determine sales tax liability. Rule 3.357

Attached is a letter from **, **, questioning whether
elevator service firms may use mixed contract, mixed customer and mixed
property historical data to determine the taxable ratio of future
repair/maintenance contracts or must they use a contract by contract basis.

Letters from Wanda and Al are attached. It is my understanding that this issue
was before the original policy committee.

Please advise.

February 11, 1988

Dear **:

On behalf of Mr. Bullock, please accept my apology, for the delay in responding
to your letter. This is not the way we normally do business.

We have been swamped with a deluge of inquiries concerning the new sales tax
law.

Your letter concerned **, who is a corporation selling elevators
and related contracts for maintenance repairs of those elevators.

You ask that we review the information provided to determine the manner in
which ** determines how much of their contracts are for repair
labor as opposed to maintenance labor.

We have reviewed ** ' proposed record-keeping activities and have
decided that this is an acceptable way to compute the repair percentage of a
repair/maintenance contract. Of course, this method must be verifiable in case
of audit.

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
the Tax Policy Division.

Sincerely,

Wanda Hutcheson
Tax Policy Division