Was a truck-driver monitoring program taxable when the provider installed its own device and supplied ongoing calls, reports, and performance materials?

Plain-English summary

A company planned to manufacture and install a device on customer trucks that signaled and recorded excess idling, manifold pressure, speed, and rpm. It also trained drivers, took twice-weekly reports, and prepared weekly through annual reports, recognition letters, performance certificates, and bonus reports.

The Comptroller said the company was providing a nontaxable service rather than renting the monitoring device. It did not need to charge tax on the service, but it had to pay tax on all materials used to perform it, including the device components, because it neither resold nor rented the device.

What this means for you

The installed equipment did not control the transaction when the provider retained it as part of a broader monitoring and reporting service. The provider remained the taxable consumer of that equipment.

Common questions

Was the monitoring charge taxable? No.

Was the installed device treated as rented property? No.

Could the provider buy device components tax-free? No.

Citations and references

The letter did not cite a statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1094F12

Original ruling text

March 25, 1991

Dear ***:

Thank you for your recent letter. As I understand it, you will provide a
truck-driver monitoring service. You will manufacture and install a device on
your customers' trucks. The device will signal the driver whenever the truck
exceeds the limits the company selects for engine idling, manifold pressure,
speed and rpm. The device records and displays the amount of time the driver
exceeds these limits.

In addition to providing this device, your company will orient the drivers on
how to interpret the signals from the device; take two telephone reports from
each driver each week; prepare weekly summary reports for the truck owners; and
prepare monthly, quarterly and annual reports for the truck owners, along with
Recognition Letters, Performance Certificates, bonus reports, etc.

It appears that you are not renting tangible personal property (the truck
driver monitoring device), but instead you are providing a nontaxable service.

Therefore, you are not required to charge tax on your service. You must pay tax
on all the materials that you use to provide the service. This includes the
components of the device itself (since you do not resell or rent the device,
you are not entitled to purchase the component parts tax free).

This opinion is based on the facts presented. Different facts, though similar,
might lead to different answers. If you have further questions, feel free to
write or call 1-800-252-5555. My direct extension is 3-3889.

Sincerely,

John Christian
Tax Administration