Were a copy-machine lease, maintenance fee, per-copy click charge, and the business's charge to customers taxable in Texas?

Plain-English summary

A business leased a copy machine, paid separate lease, maintenance, and usage-based "click" charges, and then charged its customers for copies.

The Comptroller said the lessor had to collect tax on all three charges. Separately stating the maintenance and click amounts did not remove them from the taxable lease price.

The business also had to collect tax on the total amount charged to customers for copies, including any click charge passed through to them. It could not give the lessor a resale certificate for the click charge because it was selling copies, not reselling clicks; the click fee was an expense of producing the copies.

Common questions

Were the machine's maintenance and click charges taxable? Yes, along with the lease charge.

Did separate billing change the result? No.

Was the passed-through click charge taxable to the customer? Yes. It was part of the total charge for taxable copies.

Could the business issue a resale certificate for the click charge? No, because it was not reselling clicks.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0951D01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

August 24, 1989

Dear ****:

Thank you for your letter concerning copy machine lease charges.
According to your letter, your company leases a copy machine which is used to
provide your customers copies for a fee. The lessor of the copy machine
charges your company a lease charge, maintenance charge, and a charge based on
the number of clics incurred by the usage of the machine. Your company then
passes this clic charge along to your customers.

The total charge for the lease of tangible personal property in this
state is taxable. Therefore, the lessor should charge your company tax on the
lease charge, maintenance charge, and the clic charge. It doesn't matter that
these charges are stated separately on the bill.

You in turn are charging your customers for copies and your company is
passing this clic charge on to your customers. The total charge your company
charges its customers for the copies is taxable. This includes the clic
charge.

A resale certificate cannot be issued to the lessor for this clic charge
because your company is not reselling the clics. Your company is selling the
copies and the clic charge is part of your company's expense for providing the
copies just like the copy machine.

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

If you have any questions, please contact Tax Correspondence. You may
call toll free
1-800-252-5555, or our regular number is 512/463-4600. My extension is
3-4668.

Sincerely,
Sherry Buckley
Tax Correspondence