Ezel / Tax Rulings / TX
TX 9106L1133G13 Sales and/or Use Tax (State,Local,MTA) 1991-06-06

Was a demurrage charge imposed when a customer returned a gas seller's tank late subject to Texas sales tax?

Short answer: No. The Comptroller treated the charge as a nontaxable penalty for returning the seller's reusable container after the specified deadline.

Apply this to your situation

This page answers the general question as of 1991. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1991
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A company sold gas in returnable tanks. If a customer kept a tank beyond a stated period, usually 30 days, the company assessed a demurrage charge until the tank was returned.

The Comptroller said that demurrage charge was not taxable. The letter characterized it as a charge or penalty for returning a reusable container after the specified date.

What this means for you

The 1991 holding applied to a late-return penalty tied to a returnable container, not a general statement about every charge labeled demurrage. The facts showed the charge arose only after the customer failed to return the seller's tank on time.

Common questions

Was the gas sale itself addressed? No. The letter answered only the demurrage question.

How long did customers usually have to return the tank? The letter said usually 30 days.

Was the late-return charge taxable? No.

Citations and references

  • No statute or administrative rule was cited in the letter.

Source

Original ruling text

June 6, 1991

Dear ****:

Thank you for your letter regarding the taxability of a demurrage
charge.

You indicate that your company sells gas to its customer which is
delivered in returnable tanks. If your customer does not return
the tank within a particular period of time (usually 30 days), a
demurrage charge is assessed until the tank is returned. A demurrage
charge or penalty for returning your returnable containers after
a specified date is not taxable.

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

If you have any questions, please don't hesitate to call toll free
at 1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division

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