Were refrigeration units bought separately and attached to trailers after the vehicle sale subject to motor-vehicle tax or limited sales and use tax?

Plain-English summary

A company bought 16 trailers from one seller and 16 refrigeration units from another. The refrigeration units were shipped to the trailer seller for installation, and the buyer took possession after installation. Even so, the Comptroller found two separate sales and said the trailer purchases occurred before the separately purchased accessories were attached.

The refrigeration units were therefore subject to limited sales and use tax, not motor-vehicle or IMC tax. The buyer could amend its IMC returns and reduce the trailers' purchase price subject to IMC tax by the accessory cost on which limited sales tax had been correctly paid.

The letter also restated the general rule that a motor vehicle's sales price includes the total consideration for the vehicle and all accessories attached at the time of the vehicle sale.

What this means for you

Having separately purchased equipment installed before physical delivery did not make it part of the earlier vehicle sale under these facts. The result depended on separate sellers and a vehicle purchase completed before the accessories were attached.

Common questions

Which tax applied to the refrigeration units? Limited sales and use tax.

Why did motor-vehicle tax not apply to them? They were separately purchased accessories attached after the trailer sale.

Did it matter that the buyer received the trailers only after installation? No. The letter still found two separate sales and treated the vehicle purchase as occurring before attachment.

Could the buyer correct its IMC returns? Yes. It could reduce the vehicle purchase price by the accessory cost on which limited sales tax was correctly paid.

What if accessories are attached at the time of the motor-vehicle sale? The letter said the vehicle's sales price includes accessories attached at that time.

Citations and references

No statute or administrative rule was cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9102L1071E11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller February 8, 1991

Dear ** :

This is in response to your recent letter requesting clarification
of ABC CORP's sales tax obligations, specifically the application
of limited sales tax versus IMC sales and use tax.

Once again, and as you restated in your letter, the sales price is
the total consideration paid or to be paid for a motor vehicle and
all accessories attached at the time of sale (of a motor vehicle).

The documentation which you provided consisted of sixteen invoices
from COMPANY A which billed ABC CORP for the motor vehicles (trail-
ers), and one invoice from COMPANY B which billed ABC CORP for six-
teen refrigeration units.

These are clearly two separate sales from two separate entities; al-
though ABC CORP had the refrigeration units shipped to COMPANY A
for installation and ABC CORP took possession after the installation
was complete. The purchase of the motor vehicles occurred before the
separately purchased accessories were attached.

Again, equipment purchased and attached after the sale of a motor
vehicle is subject to the limited sales and use tax, not motor vehi-
cle or IMC tax.

The ABC CORP may file amended IMC returns and reduce the purchase
price of the motor vehicles subject to IMC tax by the cost of the ac-
cessories on which limited sales tax was correctly paid.

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

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 5-0330. The regular
number is 512/463-4600, or write me at Tax Administration Division.

Sincerely,
Bettie U. Peterson
Tax Administration Division