Did the carrier exemption cover consumable aircraft-repair supplies, and could a shop servicing both private and licensed-carrier aircraft claim exemption for qualifying tools and equipment?

Plain-English summary

The commenter asked Texas to expand the § 151.328(d) terms "machinery, tools, and equipment" to include supplies consumed while repairing, remodeling, or maintaining licensed and certificated carriers. The Comptroller declined. Because subsection (d) used narrower terms than subsection (e)'s "tangible personal property," consumable repair supplies were not covered.

The letter also rejected the claim that "exclusive use" limited the exemption to airline-owned repair facilities or shops serving only licensed carriers. A business working on both private aircraft and licensed-carrier aircraft could still claim qualifying exemption, but it had to keep records separating exempt and taxable uses.

Sections 151.154 and 151.155 allowed a business to claim exemption and later pay tax on the fair market value of property put to taxable use. The Comptroller rejected a partial exemption based on carrier-related revenue as a percentage of total revenue because the Tax Code did not authorize that method.

What this means for you

Mixed clientele did not itself destroy the exemption, but recordkeeping had to follow actual use. Revenue allocation was not an accepted substitute, and consumable supplies remained outside the specifically worded equipment exemption.

Common questions

Were consumable repair supplies exempt? No. Could a shop also repair private aircraft? Yes, with records supporting exempt and taxable uses. Could it allocate exemption by revenue percentage? No. How was later taxable use handled? By paying tax on fair market value under §§ 151.154 and 151.155.

Citations and references

• Texas Tax Code § 151.328(d) (machinery, tools, and equipment used for licensed and certificated carriers)
• Texas Tax Code § 151.328(e) (the broader wording contrasted by the letter)
• Texas Tax Code §§ 151.154 and 151.155 (taxable use after claiming exemption)
• Rule 3.297 (carriers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110557L

Original ruling text

October 7. 1991

Dear **:

Thank you for your comments on Rule 3.297 concerning carriers. I apologize for
the delay in responding.

You requested the terms "machinery, tools, and equipment" be expanded to cover
supplies consumed in the repair, remodeling or maintenance of licensed and
certificated carriers.

The terms machinery, tools, and equipment are specifically enumerated in
151.328(d) of the Tax Code. If the legislature had wanted the exemption to be
more expansive, they could have used the broader terms "tangible personal
property" as they did in 151.328(e). It is our position that by using the more
restrictive terms, the legislature did not intend to exempt consumable supplies
used in the repair. We respectively decline to accept your suggestion in this
area.

It was your opinion that by requiring "exclusive" use of the tools, machinery,
and equipment in the repair, maintenance, and remodeling of aircraft, aircraft
engines or component parts for licensed and certificated carriers, the rule
limits the exemption to either large airlines operating their own repair
facilities or to independent repair facilities which service only licensed and
certificated carriers.

The "exclusive use" language is found in 151.328(d). Since the Tax Code
contains the exclusive language, the rule can hardly do less. But we do not
agree that the language denies the exemption to businesses repairing aircraft
other than those used by licensed and certificated carriers. Persons who work
on both private aircraft and aircraft operated by licensed and certificated
carriers will have to keep more records showing exempt and taxable uses in
order to claim an exemption. That is the same burden put on any person using
items in both a taxable and exempt manner.

The law provides a way to claim an exemption and then pay tax on the fair
market value of property put to a taxable use. These provisions are found in
151.154 and 151.155 of the Tax Code. Claiming the exemption won't be easy, but
its not impossible either.

We cannot take your suggestion for a provision of the rule to base a partial
exemption on the revenue earned for services provided to licensed and
certificated carriers to the total revenues. There is no basis in the Tax Code
for partial exemptions taken in the manner you requested.

You requested that the rule list the parts of the Federal Aviation Regulations
under which we recognize licensed and certificated carriers. We respectfully
decline to adopt this suggestion. Subsection (a)(l) of the rule covers
carriers generally. If we adopted your suggestion, we would also have to list
the federal regulations governing vessels, trains, motor vehicles and
pipelines. Any time the federal regulations changed, the rule would have to be
revised.

Again, thank you for your comments.

Sincerely,

Wanda Hutcheson
Tax Administration Division