Ezel / Tax Rulings / TX
TX 9008L1038B11 Sales and/or Use Tax (State,Local,MTA) 1990-08-16

Did leases requiring customers to pay taxes imposed during the term qualify for Texas's 1990 prior-contract rate protection?

Short answer: No. The tax clause allowed the increase to be passed through, so the leases failed the statutory no-change-or-modification condition.

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 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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 lease made the customer pay or reimburse taxes imposed during its term. The Comptroller denied protection from the July 1, 1990 rate increase because House Bill 6 required a protected contract not to be subject to change or modification because of the increase.

What this means for you

A preexisting signature date was not enough; the contract's tax-adjustment language controlled the historical relief.

Common questions

Did the leases qualify? No. Why? Their tax clause passed later-imposed taxes to the customer.

Citations and references

  • House Bill 6, quoted for the prior-contract condition.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 16, 1990

Dear ** :

Thank you for your letter concerning the applicability of the
state tax increase to your lease contracts.

You stated that the lease contracts have a beginning date (date
contract is signed) and an end date, which is determined by the
term of the lease. Your concern is whether or not the prior con-
tract exemption applies based on the provisions of the "Taxes"
section of the contracts.

The contract states in part that the customer (lessee) "shall
pay or reimburse Lessor for all taxes...now or hereafter levied,
assessed, or imposed during the term of this Lease under the
authority of a federal, state, or local taxing jurisdiction, re-
gardless of when and by whom payable."

The lease contracts do not qualify for the prior exemption for
the state tax rate increase effective July 1, 1990. House Bill 6,
which provided for the state tax rate increase, provided for a
prior contract exemption if the contract is not "...subject to
change or modification because of the tax rate increase made by
this Act."

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

If you have any questions or need additional information, you may
call toll free 1-800-252-5555 or the regular number 512/463-4600.
My extension is 3-4666. You may write to Tax Correspondence, Comp-
troller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence

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