How did Texas tax rental of a semitrailer with a permanently attached CAT scanner and related services?

Plain-English summary

The CAT scanner was permanently affixed to a semitrailer, and tax had been paid when the trailer and equipment were purchased together as a motor vehicle.

A contract over 180 days was a lease, with no tax on monthly charges if purchase tax covered the trailer and all attached equipment. A shorter contract was a rental requiring a permit and tax on each billing. The letter also described reimbursement of purchase tax before additional rental tax became due and excluded separately stated training and management charges.

What this means for you

Contract duration, the originally taxed unit, and separate statement of services drove the historical result. Verify current classification and billing rules.

Common questions

Q: Were separately stated training and management charges taxable?

A: No, according to the letter.

Q: What happened under a contract shorter than 180 days?

A: It was a taxable rental requiring a permit.

Citations and references

• The letter cited no statute or administrative rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9101L1066G03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller January 11, 1991

Dear ** ,

We have received your letter inquiring as to the taxability of charges
for a mobile cat scan rental and associated services.

Your letter stated that a cat scanner has been permanently affixed to
a semi trailer. This trailer is then rented to another taxable entity
that provides the cat scans on a fee per scan basis to eight tax ex-
empt hospitals. Your charges also include charges for management and
training.

Kevin Koller, of our office contacted ** and yourself for
clarification of the issues involved. He found that the company you
rent to will provide the driver, a ctual technicians and medical per-
sonnel to operate the vehicle and associated equipment. He also found
that the equipment and trailer were purchased as one unit as a motor
vehicle and motor vehicle taxes were paid at the time of purchase.
Your billings are going to be one lump sum amount for the motor vehi-
cle, equipment, training and management services. Billings will be on
a monthly basis.

If a contract for this motor vehicle rental extends beyond 180 days it
is considered a lease rather then a rental. If it is considered a
lease, any motor vehicle taxes were due on the initial purchase and tax
is not due on subsequent monthly charges. In this case motor vehicle
taxes have already been paid and additional taxes would not be due if
motor vehicle tax was paid on the trailer and all equipment attached
to it at the time of purchase.

If the contract is actually a rental (less than 180 days) your company
would need to apply for a Motor Vehicle Tax permit. Taxes would be
collected on each billing. The law does provide for a reimbursement of
Motor Vehicle Taxes paid at time of purchase prior to additional rental
taxes being due. Any separately stated charges for training or manage-
ment services would not be taxable.

I have enclosed the Motor Vehicle Tax Law for your review.

This opinion is based upon the facts presented. If there are addition-
al or different facts, the opinion may change.

Please feel free to contact me if you have any additional questions.
You may write me, call toll free 1-800-252-5555 (ext. 3-4685) from any-
where in the United States or phone 512/463-4685.

Sincerely,
Julie Pesl
Tax Administration