Ezel / Tax Rulings / TX
TX 9006L1025D05 Sales and/or Use Tax (State,Local,MTA) 1990-06-06

Did a corporation's sale and leaseback of a telecommunications switch through a limited partnership in which it owned 1% qualify as joint-ownership transfers?

Short answer: Yes, under the stated facts. Both the sale to the limited partnership and the leaseback appeared to qualify as joint-ownership transfers. The corporation therefore paid tax when it originally bought the switch from the manufacturer, while telecommunications services sold to end users remained taxable.

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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 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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The sale and leaseback of the telecommunications switch appeared to qualify as joint-ownership transfers.

The corporation held a 1% interest in the limited partnership that bought the switch, while the other partners were individuals. The corporation was to pay tax when purchasing the switch from the manufacturer.

The letter separately stated that telecommunications services sold to end users were taxable.

Common questions

Did the sale qualify as a joint-ownership transfer? It appeared to.

Did the leaseback qualify? It also appeared to.

Who paid tax on the original equipment purchase? The corporation.

Were end-user telecommunications services taxable? Yes.

Source

Original ruling text

June 6, 1990

Dear ****:

I just want to take a minute to respond to your questions on the
sale and lease back of a telecommunications switch from a corporation
to a limited partnership in which the corporation has a one percent
ownership. As I understand it, all the other partners in the limited
partnership are individuals.

It appears that both the sale and the lease back of the switch
would qualify as joint ownership transfers. That being the case,
the corporation should pay tax on it's purchase of the switch
from the manufacturer.

As we discussed, the sale of telecommunication services to the
end users would also be subject to sales tax.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call our
toll- free number 1- 800- 531- 5441. My direct line number is
463-4680 (FAX (512) 475- 0900]. You may write to me in care of
Taxability Section.

Sincerely,

Al Van Allen
Taxability Section
Legal Services Division

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