Ezel / Tax Rulings / TX
TX 8908L0948B03 Sales and/or Use Tax (State,Local,MTA) 1989-08-04

Was equipment installed by a private aviation company in a city-owned leased building exempt from Texas sales tax?

Short answer: No. The equipment purchase and installation were taxable; if the equipment became part of the existing nonresidential building, the full charge was taxable remodeling.

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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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 private aviation company bought equipment for installation in a building it leased from a city. The Comptroller said both the equipment purchase and its installation were taxable.

If the equipment became a structural component of the existing nonresidential building, the entire charge, including installation, was a taxable real-property remodeling service. Rule 3.291(c)(2) also prevented the private party's prime contract from becoming exempt merely because the improved property belonged to an exempt entity.

Common questions

Was the equipment purchase exempt? No.

Was installation taxable? Yes.

Did city ownership of the building make the private tenant's contract exempt? No. The letter treated the contract as serving the private party's primary use and benefit.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

August 4, 1989

Dear *:

Thank you for your letter dated July 31, 1989 concerning equipment
purchased by a private aviation company for installation in a
building leased from the city.

The purchase and installation of the equipment is taxable. If the
equipment does become a structural component of an existing nonres-
idential building, the total charge (including installation)is a
taxable real property remodeling service. As stated in section (c)
(2) of Rule 3.291, a prime contract with a private party to improve
real property belonging to an exempt entity for the primary use and
benefit of the private party is not an exempt contract.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have any additional questions.
You may write me, call toll-free 1-800-5531-5441 from anywhere in the
United States or phone 512/463-4685.

Sincerely,
Julie Pesl
Tax Correspondence

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