Ezel / Tax Rulings / TX
TX 9303367L Sales and/or Use Tax (State,Local,MTA) 1993-03-24

If a stereo or radio installed in a vehicle exported to Mexico gets a sales-tax refund, is the tax on the installation charge refundable too?

Short answer: Yes. Because installation charges are only taxable when the underlying item is taxable, once you have proof the stereo or radio was exported and its sales tax refunded, you may refund the sales tax collected on the installation charge at the same time.

Apply this to your situation

This page answers the general question as of 1993. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1993
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 Texas retailer that sells and installs stereos and radios in vehicles bound for Mexican nationals asked the Comptroller's office whether the sales tax collected on the installation charge could be refunded along with the tax on the stereo or radio itself, once the item is proven exported.

The Comptroller's answer: yes. The letter explains the underlying logic in one sentence — installation charges are only taxable if the tangible property being installed is taxable. So when the retailer has proof the stereo or radio was exported and refunds (or has the sales tax refunded on) the item itself, the sales tax collected on the installation charge can be refunded at the same time.

In other words, the installation charge's tax treatment simply follows the treatment of the item being installed. There is no separate export test for the labor charge.

What this means for you

Retailers who sell and install accessories in vehicles for export

If you sell and install a taxable item (like a stereo or radio) that later qualifies for an export-sale tax refund, don't forget the installation charge. Because installation-charge taxability is tied to the taxability of the item installed, once you have the export proof needed to refund the sales tax on the item, you can refund the tax on the installation labor at the same time, using the same proof.

Accountants and tax professionals

This letter is a short, narrow confirmation of a general principle (installation charges take on the taxability of the underlying property) rather than a new rule. It doesn't cite a specific statute or rule number, so when applying it, look to the general Texas provisions governing taxable services performed on tangible personal property and the export-sale refund procedures for the underlying authority.

Common questions

Q: Do I need separate proof of export for the installation charge?
A: No. The letter says the tax on the installation charge may be refunded "at the same time" the tax on the stereo or radio is refunded, using the same proof of export.

Q: What if the stereo or radio itself doesn't qualify for a refund?
A: Then the installation charge wouldn't qualify either — the letter's logic is that installation charges are only taxable (and thus only refundable) to the extent the underlying property is.

Q: Does this letter apply to items other than car stereos and radios?
A: This particular letter answers a narrow question about stereos and radios sold to Mexican nationals, but the principle it states — that installation charges follow the taxability of the property installed — is stated generally, not limited to audio equipment.

Q: Can I rely on this letter for my own business?
A: This is a 1993 letter addressed to a specific taxpayer whose identifying details are redacted. Under Texas's STAR system rules, a letter like this supports a detrimental-reliance claim only for the taxpayer it was issued to, and it may no longer reflect current Comptroller policy. Consult a licensed Texas tax professional about your own facts.

Citations and references

No statutes or rules are cited in this letter.

Source

Original ruling text

March 24, 1993

Dear ***:

It was nice meeting with you again. You raised a question concerning the
refundability of tax on installation charges on stereos and radios sold to
Mexican nationals. Because installation charges are only taxable if the
tangible property is taxable, upon proof of export of the stereo or radio, you
may refund the sales tax collected on the installation charges at the same time
the sales tax on the stereo or radio is refunded.

I hope this satisfactorily answers your question. Should you need to discuss
this further, please feel free to call me at 1-800-531-5441, extension 3-4004.

Sincerely,

Wade Anderson
Assistant Director of Tax Administration

cc: Mike Doyle, Director Tax Administration
Chuck Johnstone, Manager Tax Administration

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