Was Texas tax due when a Texas watch-repair seller subcontracted the actual repair work to a business in New York?

Plain-English summary

A customer brought a watch to a Texas repair shop, which sent the watch to a New York subcontractor for the actual repair. The Comptroller said Texas sales tax still applied because repair of tangible personal property was a taxable service, the Texas shop remained the seller to the consumer, and the customer received the repaired watch from the Texas location.

The Texas shop could purchase the subcontracted repair for resale whether the subcontractor performed it in Texas or out of state. The letter also said the customer would owe Texas use tax even if the customer sent the watch directly to New York and received it back directly.

What this means for you

Sending repair work to an out-of-state subcontractor did not change the Texas shop's role as the seller of a taxable repair service to its customer.

Common questions

Did it matter that the physical repair occurred in New York? No, under the described seller-and-delivery facts.

Could the Texas shop buy the subcontracted repair for resale? Yes, whether the subcontractor was in Texas or out of state.

What if the customer dealt directly with the New York repairer? The letter said the customer would owe Texas use tax when the repaired watch returned from New York.

Citations and references

• Texas Tax Code §§ 151.005, 151.010, 151.0101, and 151.051, concerning taxable sales, items, services, and sales tax.
• Texas Tax Code §§ 151.011, 151.101, and 151.102, cited for the use-tax conclusion.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1043B01

Original ruling text

August 28, 1990

Dear ***:

I am responding to your letter regarding watch repair. I apologize
to you for the delay in providing this response.

You are correct. Texas tax is due on this transaction even though
the repair was actually performed in New York.

Texas sales tax is imposed on each sale of a taxable item in this
state. A "sale" includes, but is not limited to, the performance
of a taxable service for consideration. "Taxable items" include tan-
gible personal property and taxable services. The repair of tangible
personal property is included as a "taxable service." This informa-
tion is found in sections 151.005, 151.010, 151.0101, and 151.051 of
the sales and use tax statute. A copy of the statute is enclosed for
your assistance in verifying this to your customer.

Your customer brought the watch to you for repair. You subbed the
repair out to another party.(You may purchase this repair for resale
whether the repair is performed in Texas or out-of-state.) You
remain the seller of the "taxable item" to the end consumer. You are
located in Texas. The customer receives the repair from your loca-
tion in Texas. This transaction is subject to Texas sales tax.

I feel I should point out that the customer owes Texas use tax on
this transaction even if he sends the watch directly to New York for
repair and receives the repaired watch back from New York himself.
This is based upon sections 151.101, 151.102, 151.010, and 151.011
of the statute.

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

You may also write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence