Ezel / Tax Rulings / TX
TX 8904L0933B11 Sales and/or Use Tax (State,Local,MTA) 1989-04-10

Was a separately stated insurance premium covering replacement of lost, stolen, or destroyed leased cellular phones taxable?

Short answer: No. The premium was forwarded to an insurer, covered replacement rather than repair, and was optional for lessees with other coverage.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
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 an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
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

A cellular-telephone lessor separately charged an insurance premium and forwarded it to an insurance carrier to cover replacement of leased units that were lost, stolen, or destroyed.

The charge was not reimbursement for the lessor's own inventory insurance, lessees with their own coverage did not have to pay it, and the policy did not cover repairs. On those facts, the separately stated premium was nontaxable.

Common questions

Was the replacement premium taxable? No.

Did the policy cover repairs? No.

Was the premium mandatory for lessees with other insurance? No.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller April 10, 1989

Dear ***:

Thank you for your letter of March 29, 1989, and our recent tele-
phone conversation concerning the taxability of a charge for in-
surance to replace lost, stolen, or destroyed cellular telephone
(units) that you lease.

The following is a summary of the information you provided by
telephone:

  1. The charge is for an insurance premium that is forwarded
    to an insurance carrier to cover the replacement cost of the
    unit.

  2. The charge is not a reimbursement for the cost of insur-
    ance you pay on the inventory because your insurance only
    covers the units while they are in inventory.

  3. Lessees who provide a copy of a rider issued by their in-
    surance carrier showing coverage for the unit are not required
    to pay the insurance premium.

  4. The insurance does not cover repairs to damaged units.

A separately stated premium charge for insurance for replacement
of lost, stolen, or destroyed units is not taxable.

This opinion is based on the facts presented. If there are addi-
tional or different facts, the opinion may change.

If you have any questions or need more information, you may call
toll-free -1-800-252-5555, ext. 3-4683. The regular number is
512/463-4600. You may write me at Tax Correspondence, Comptroller
of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence

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