Could a television repair business buy cable service tax-free for resale when it used the service during repairs?

Plain-English summary

A television and VCR repair business was a taxable-service retailer under Rule 3.292. It could buy circuits, solder, and other property tax-free for resale when those items were affixed to or incorporated into a customer's repaired equipment.

The business had to pay tax on tools, test equipment, and cable-television service used to perform repairs. The cable service was not transferred to the customer, so it was consumed by the repairer rather than resold.

The repairer could recover the cable-service tax cost through its overall customer charge, but could not give the cable provider a resale certificate for the service.

Common questions

Could incorporated repair parts be bought for resale? Yes, with a properly completed resale certificate.

Could the repairer buy cable service for resale? No.

Could the repairer pass its tax cost to the customer? Yes, as part of the overall repair bill.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8905L0934A04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

May 2, 1989

Dear ****:

Thank you for your letter of April 20, 1989, concerning the taxability of
cable television services you purchase for use in tuning, adjusting, and
repairing cable ready televisions and VCRs.

You are considered a repairman under section (a)(11) of Rule 3.292.
Repairmen are retailers who are required to charge sales tax on the sales price
of their services (see section (c)(1) of the rule). Repairmen may purchase
taxable items (tangible personal property and taxable services) transferred to
their customers as part of the taxable repair service. Cable television
service is a taxable service as defined and taxed under taxable items used by
them in providing repair services. See sections (c)(2) and (d) of Rule 3.292.

Under the preceding paragraph, you may purchase tax free taxable items
(circuits, solder, etc.) that are affixed to or incorporated into a customer's
television or VCR as part of the repair service. You must issue a properly
completed resale certificate in order to make these type purchases tax free.
Likewise, you are required to pay sales tax on taxable items (wrenches,
screwdrivers, testing equipment, cable television service, etc.) purchased for
use in repairing a customer's television or VCR. In particular, the cable
television service you purchase is not resold to the customer. That is the
customer does not receive (or buy) the cable television service from you.
Under section (d) of Rule 3.292, you may recoup the tax you pay on the cable
television service from your customer as part of the overall repair bill.

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, 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