Were labor and parts to clean and repair reusable ISO marine cargo tank containers exempt from Texas sales tax?

Plain-English summary

A Port of Houston business cleaned, repaired, and sometimes temporarily stored reusable ISO tank containers used mainly in international trade. The containers held food or chemicals, moved by truck or carrier, and were later loaded onto ships.

Rule 3.297(b)(2) exempted marine cargo containers that qualified as equipment or machinery and became component parts of commercial vessels exceeding eight tons displacement. The quoted definition required a durable, reusable, fully or partly enclosed container designed to carry goods across transport modes without intermediate reloading and for ready handling between modes.

If the serviced tanks met that definition, labor and parts for cleaning and repair were exempt. The business had to accept an exemption certificate citing Rule 3.297(b)(2) instead of collecting tax.

Although the request also mentioned temporary storage, the response did not separately state whether the storage charge was exempt.

What this means for you

Container cleaning and repair businesses

The exemption depended on the container's legal status as a vessel component, not merely on its use near a port or in international trade. Obtain customer documentation supporting the Rule 3.297 classification.

Shipping and logistics companies

The quoted definition excluded chassis, vehicles, and vehicle accessories or spare parts. Confirm exactly which property is being serviced.

Common questions

Were cleaning labor and repair parts exempt? Yes, for containers that qualified as commercial-vessel components under Rule 3.297(b)(2).

Was an exemption certificate required? Yes.

Did the letter decide the taxability of temporary storage? No. It mentioned storage in the facts but addressed only cleaning and repair in its conclusion.

Citations and references

• 34 Tex. Admin. Code Rule 3.297(b)(2) (marine cargo containers as vessel components)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9202L1156F09

Original ruling text

February 18, 1992

Dear **:

Your letter concerning the taxability of your clients container
cleaning and repair service was assigned to me for review and
response. I appreciate your patience and apologize for the delay
in responding.

Your client is a private business located within the confines of
the Port of Houston. His service is to clean, repair, and
sometimes temporarily store, I.S.O. tank containers. His billing
for these services includes both labor and materials, itemized
separately. The containers hold a variety of products, such as
food or chemicals, and range in capacity from 20,000 liters to
27,000 liters. Outside dimensions are 8' wide, 8 1/2' tall, and
20' long.

A customer will normally bring his container to your client's
place of business in the customer's own truck or by common
carrier. The tanks may be stored temporarily by your client
usually for 20-30 days. After the service is performed the tank
will be picked up by the customer's own truck or by common
carrier. When placed back in the service by the customer, these
tanks are filled with product, placed on a ship, and delivered to
their destination. The majority of these tanks are used in
international trade.

Your question is whether your client's charges for cleaning,
repairing, and temporarily storing these containers is subject to
sales and use tax.

Section (b)(2) of Rule 3.297, Carriers, exempts marine cargo
containers classified as equipment or machinery which become
component parts of vessels having more than 8 tons displacement.
A component part is defined as:

(A) A marine cargo container which is fully or partially enclosed
to constitute a compartment of a permanent character intended for
containing goods. It is strong enough to be suitable for repeated
use, specially designed to facilitate the carriage of goods, by
one or more modes of transport, without intermediate reloading. It
is designed for ready handling, particularly when being transferred
from one mode of transport to another. The term "marine cargo
container" includes the accessories and equipment of the container
provided that such accessories and equipment are carried with the
container. The term "marine cargo container" does not include
chassis, vehicles, accessories or spare parts of vehicles.

If the containers that your client services qualify as component
parts (i.e., marine containers) of a vessel used in a commercial
enterprise then the labor and parts to clean and repair the
containers will qualify for exemption from tax. Your client
would accept an exemption certificate from the customer, citing
the exemption provided under Rule 3.297(b)(2), in lieu of
collecting tax on the cleaning or repair service.

This opinion is based on the facts presented. Other facts though
similar may provide a different result.

If you have other questions or need more information, you may
call 512/463-4600, or 1-800-252-5555 from outside Austin. You
may write to Tax Administration Division.

Sincerely,

Gilbert Zamora
Tax Administration Division