TX 9107L1119F04 Sales and/or Use Tax (State,Local,MTA) 1991-07-09

Was a lessor's reimbursement charge for personal property tax on leased equipment subject to Texas sales tax?

Short answer: Not when the property-tax reimbursement was separately stated from the equipment lease price. If it was included in the lease price, sales tax applied to the entire charge. The Comptroller pointed to Rule 3.325(b) because a refund might be due.

Apply this to your situation

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

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

An equipment lessee was being charged sales tax on amounts billed as reimbursement for personal property taxes.

The Comptroller said a property-tax reimbursement was not taxable when separately stated from the equipment lease price. If the lessor included the property tax in the lease price, sales tax applied to the total charge.

Because the lessee might be entitled to a refund, the letter enclosed Rule 3.325 and directed the reader to subsection (b).

What this means for you

How the lessor stated the property-tax reimbursement controlled the result described in this letter. A separate line avoided inclusion in the taxable lease price; bundling it made the full amount taxable.

Common questions

Was a separately stated reimbursement taxable? No.

What if it was included in the lease price? Tax applied to the total charge.

Did the letter suggest a refund might be available? Yes, under the procedure referenced in Rule 3.325(b).

Citations and references

34 Tex. Admin. Code Rule 3.325(b) — refund procedure referenced by the Comptroller

Source

STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
Opinion: https://star.comptroller.texas.gov/view/9107L1119F04

Original ruling text

July 9, 1991

Dear *:

Thank you for your recent letter which is restated in part with
response below.

FACTS: *** leases equipment from a company. The company
is billing your business sales tax on personal property taxes. You
have specifically asked if the personal property taxes are subject
to the limited sales tax.

RESPONSE: Property tax reimbursements are not taxable when
separately stated from the lease price of the equipment. If the
property tax was included in the lease price, tax would be due on
the total charge. Because a refund may be in order, I am
enclosing a copy of Rule 3.325 for your reference. Please refer
to subsection (b).

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

If you have questions or need additional information, you may
call toll-free 1-800-252-5441, extension 5-0330. The regular
number is 512/463-4600, or write to Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division

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