Was recurring cleaning of rubber-finishing machines nontaxable maintenance when scheduled by usage rather than the calendar?

Plain-English summary

The plant hired a contractor to clean rubber-finishing machines when rubber types changed or equipment condition required it. The schedule depended on throughput and use rather than fixed calendar intervals.

The Comptroller treated this recurring work as nontaxable routine maintenance. If the contractor put taxable janitorial work and nontaxable maintenance on the same invoice, the invoice needed to identify each category and its charge clearly; otherwise the entire charge could be treated as taxable.

The broader STAR label mentions refineries, chemical plants, and waterblasting, but the preserved ruling decides the described rubber-finishing-machine cleaning.

Common questions

Did maintenance need a fixed calendar schedule? No.

Could taxable and nontaxable work appear on one invoice? Yes, if clearly identified with separate charges.

What if the nontaxable portion was not identifiable? The entire charge could be considered taxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L1029B12

Original ruling text

June 29, 1989

Dear *****:

We have researched the questions in your letter to ***** pertaining to

the cleaning of rubber finishing machines and taxability for sales taxes.

As stated in your letter, the cleaning of these machines is based on pounds of

throughput and the condition of the rubber. This kind of schedule is not

tied to a calendar but rather the amount of usage. This appears to us to be

routine maintenance, which would be exempt from the sales tax.

If the contractor bills you for taxable and non- taxable maintenance on the

same invoice, the invoice needs to clearly identify each and the charges for

each. If the non-taxable charges cannot be clearly identified on the invoice,

the entire charge may be considered taxable.

I hope this answers your questions, but if you have more, please don't

hesitate to contact me.

Sincerely,

Dan Pearson

Deputy Comptroller

June 22, 1989

Dear **:

We have a situation that we feel is maintenance and exempt from State sales

tax, but we would like you to check it out with the State Comptroller's Office

and get a ruling for us.

It is the cleaning of ** Finishing Machines (Drum Dryers, Sealers,

Horizontal Conveyors and Spiral Conveyors) by contracted service labor. This

is similar to water blasting in principle because it is done on a routine,

recurring basis to operational and functional equipment to keep it in good

working order by preventing the decline, failure or deterioration of said

equipment. This cleaning is done every time we change rubber types and

sometimes more frequently if the equipment gets dirty in the middle of a long

production run. Our schedule is based on pounds of throughput and the

condition of the rubber, more than it is based on a time schedule.

We would like to know if it makes any difference if the labor contractor bills

use for taxable services and non-taxable maintenance on the same invoice. They

do the above mentioned equipment cleaning which we treat as non-taxable

maintenance, and they also do janitor work which we treat as taxable. They do

provide time sheets as back-up to their invoices which separates the time spent

on these two services. We use these time sheets to classify their charges.

We would appreciate a prompt response as we are undergoing a sales tax audit at

the present time. The auditor seems to be questioning the fact that there is

not a precise time schedule for our maintenance work, and that the outside

contractor bills us on the same invoice for all work performed that week, some

of which we consider non-taxable and some is considered taxable as mentioned

above.

Sincerely yours,

Plant Controller