Could an equipment lessor accept a resale certificate from a customer using rented equipment to remodel nonresidential real property?

Plain-English summary

An equipment-rental business received a resale certificate from a customer involved in converting a department store. The certificate described purchases of materials or labor, but the lessor had not performed the remodeling or repair work.

The Comptroller said equipment bought, rented, or leased by someone using it to perform nonresidential real-property repair or remodeling was taxable. The lessor could not accept a resale certificate from a customer that would use the equipment for that remodeling.

What this means for you

The contractor consumed the rented equipment in performing the real-property service; it did not resell the equipment merely because the project involved taxable remodeling work.

Common questions

Was the customer's resale certificate valid for the equipment rental? No.

Who bore tax on equipment used to perform the remodeling? The person purchasing, renting, or leasing it for use.

Citations and references

• Comptroller Rule 3.357(b)(4) — real-property repair and remodeling equipment

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1044B09

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller September 5, 1990

Dear ****:

Thank you for your letter of August 15, 1990, concerning the
request for refund of sales tax submitted by ***.

Our records indicate that you are engaged in the business of
renting equipment. The resale certificate issued by *
states that it is purchasing materials and/or labor. The re-
sale certificate is not valid if you did not perform any of
the remodeling or repair work to convert the department store.

Equipment purchased, rented, or leased by a person who uses
it to perform nonresidential real property repair or remodel-
ing services is taxable. You may not accept a resale certi-
ficate from a customer who will use the equipment to perform
real property remodeling. See section (b)(4) of the enclosed
Rule 3.357 - Real Property Repair and Remodeling.

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

You may call toll free 1-800- 252- 5555 if you have any ques-
tions or need more information. You may write to Tax Corres-
pondence, Comptroller of Public Accounts.

Sincerely
Eddie C. Washington
Tax Correspondence