Were customer damage repairs, equipment inspections, and freight charges connected with sold or rented equipment taxable in Texas?

Plain-English summary

The requester asked four questions about equipment it rented or sold. The Comptroller answered as follows:

• Repair services and parts billed to a customer for rental equipment returned damaged were taxable.
• A separate charge by an inspection company for inspection only was not taxable.
• Freight was taxable when equipment was sold or rented to the customer, even when an outside carrier billed the requester and the requester separately rebilled the customer.
• Freight was also taxable when the requester delivered the equipment in its own vehicle and separately stated the delivery charge.

What this means for you

The letter distinguished a stand-alone inspection from repair work: inspection alone was not taxed, while customer damage repairs and parts were. For delivery, separately stating freight did not remove it from tax when it accompanied a sale or rental of equipment.

This 1991 letter did not cite the governing sections, so current rules on repair services, rentals, and transportation charges should be checked independently.

Common questions

Were repair charges for customer-damaged rental equipment taxable? Yes, including both service and parts.

Was an inspection-only charge taxable? No.

Was freight taxable when an outside carrier performed the delivery? Yes, when the equipment was sold or rented to the customer and the freight was rebilled.

Was delivery in the seller's own vehicle treated differently? No. That separately stated freight charge was also taxable.

Citations and references

The letter did not cite a numbered statute or administrative 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/9107L1127E10

Original ruling text

July 30, 1991

Dear ***:

Thank you for your recent letter asking for responses to the
following questions.

Taxability of the service and parts required to repair
rental equipment owned by Your company but returned damaged
by the customer. Should the service and parts be taxable
when billed the customer for the repairs?

Response: The service and parts billed to Your customers for the
cost of repairing damaged equipment are taxable.

The service provided by an inspection company to inspect
your equipment. Should the inspection company charge your
company sales tax?

Response: A charge for inspection only 1s not taxable. The
inspection company should not charge your company sales tax on a
charge for inspection only.

Taxability of freight that is not provided by your company
but rather by a freight carrier. The freight is billed
direct to your company but rebilled to your customer as a
separate item on their invoice. Should you charge your
customer sales tax for the freight?

Response: If you are shipping equipment to your customers that
you have sold or rented to them, the freight charge is taxable.
You should collect sales tax from your customer on this freight
charge.

Taxability of freight that is provided by your company
vehicle and listed as at separate item on the invoice.
Should you charge your customer sales tax on the freight?

Response: If you are shipping equipment to your customers that
you have sold or rented to them; the freight charge is taxable.

You should collect sales tax from your customer on this freight
charge.

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

If you have any questions or need more information, you may call
me toll free at 1-800-252-5555, extension 3-4633.The regular
number is 512/463-4633.

Sincerely,

Wanda Hutcheson
Tax Administration Division