Ezel / Tax Rulings / TX
TX 9002L0980F04 Motor Vehicle Tax 1990-02-09

How did Texas tax an automobile extended warranty and repairs performed under it?

Short answer: The extended warranty and motor vehicle repair labor were not taxable, but parts, supplies, and materials were. Under a separated contract the repairer collected parts tax from the customer, usually the contract provider; under a lump-sum contract the repairer paid tax when buying the parts.

Apply this to your situation

This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
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 Tax Correspondence letter dated February 9, 1990; STAR metadata lists February 1, but the printed date controls here. It addressed automobile extended warranties and repairs under separated or lump-sum contracts. It predates modern Private Letter Ruling reliance terms and cannot bind the Comptroller for unrelated taxpayers. Rule 3.292, service-contract taxability, repair labor, parts, supplies, materials, billing, and purchaser responsibilities may have changed. The enclosed rule is not reproduced in STAR. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
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

The Texas Tax Correspondence Division said sale of an extended motor vehicle warranty was not subject to sales or use tax. Labor to repair the vehicle was also not taxable, but repair parts, supplies, and materials were.

Under a separated contract, the repairer collected tax on parts from the customer, usually the contract provider. Under a lump-sum contract, the repairer paid tax when purchasing the parts.

What this means for you

Billing structure changed who bore the historical parts tax. Verify current Rule 3.292 and service-contract rules.

Common questions

Q: Was repair labor taxable?

A: No. Parts, supplies, and materials were taxable.

Citations and references

  • 34 Tex. Admin. Code Rule 3.292 — referenced for historical repair rules; the enclosed text is not in STAR.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 9, 1990

Dear *****:

Thank you for your recent letter regarding the taxability of
repairs relating to service contracts on automobiles.

The sale of an extended warranty for a motor vehicle is not-
subject to the sales and/or use tax. However, all parts,
supplies and materials used or consumed in the repair are
taxable. The labor to repair a motor vehicle is not taxable.

The repairman will collect tax on the parts from the customer
(usually the contract provider) under a separated contract. The
repairman will pay the tax at the time of purchase on parts used
in a lump sum contract. Please refer to the enclosed Rule 3.292
on repairs.

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 additional information, you may
call me toll free at 1-800-252-5555, extension 5-0330. The
regular number is 512/463-4600, or write me at Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,
Bettie U. Peterson
Tax Correspondence Division

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