Is equipment rented or leased for making a motion picture, video, or audio recording exempt from Texas sales tax?

Subject

Equipment Rented Or Leased For Motion Picture, Video, Or Audio Production — Sales Tax Exemption

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9309L1258G05

Plain-English Summary

This 1993 Comptroller letter answers a question about the sales tax treatment of equipment rented or leased for making motion pictures, video recordings, or audio recordings. The letter states that, effective October 1, 1993, a producer may claim an exemption from tax on qualifying machinery or equipment rented or leased for the production of a motion picture or a video or audio recording, a copy of which will be sold, licensed, distributed, broadcasted, or exhibited.

The exemption is limited to equipment used directly in the production of the film. The letter lists examples of qualifying equipment: cameras and accessories, lights and accessories, costumes, microphones and accessories, fog machines, and wind machines. It expressly carves out certain categories from the exemption: office equipment, transportation equipment, motor vehicles, hand tools, and equipment that is only incidental to the production.

The letter also addresses related charges: if the underlying rental is exempt, no tax is due on associated transportation and damage waiver charges billed with that rental. Finally, it describes the mechanics for claiming the exemption — the producer must give the rental company a completed exemption certificate stating that the equipment will be used directly in the production of a motion picture, video, or audio recording, a copy of which will be sold, licensed, distributed, broadcasted, or exhibited.

What This Means For You

If you produce films, video, or audio recordings in Texas: Equipment you rent or lease that is used directly in production — such as cameras, lights, microphones, costumes, fog machines, and wind machines — can be rented or leased tax-free starting October 1, 1993, as long as the resulting copy will be sold, licensed, distributed, broadcasted, or exhibited.

If you rent equipment to production companies: Watch for a completed exemption certificate from the producer stating the equipment will be used directly in production of a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcasted, or exhibited. Without that certificate, do not treat the rental as exempt.

Know what's excluded: Office equipment, transportation equipment, motor vehicles, hand tools, and equipment that is merely incidental to the production remain outside the exemption — do not assume every rental made by a production company qualifies.

Related charges follow the equipment's tax status: If the rental itself is exempt, transportation and damage waiver charges billed alongside it are also exempt, per this letter.

Q&A

Q: When did this equipment rental/lease exemption take effect?
A: The letter states it is effective October 1, 1993.

Q: What kind of equipment qualifies for the exemption?
A: Machinery or equipment used directly in the production of a motion picture or a video or audio recording. The letter gives examples: cameras and accessories, lights and accessories, costumes, microphones and accessories, fog machines, and wind machines.

Q: What equipment is excluded from the exemption?
A: Per the letter, the exemption does not include office equipment, transportation equipment, motor vehicles, hand tools, and equipment incidental to the production.

Q: Are transportation and damage waiver charges taxable if the equipment rental is exempt?
A: No. The letter states that if the rental is exempt, no tax is due on associated transportation and damage waiver charges.

Q: How does a producer claim this exemption?
A: The letter states the producer must give the rental company a completed exemption certificate stating the equipment will be used directly in the production of a motion picture, video, or audio recording, a copy of which will be sold, licensed, distributed, broadcasted, or exhibited.

Original ruling text

September 29,1993

Dear ****

Effective October 1, 1993, a producer may claim an exemption from tax
on qualifying machinery or equipment rented or leased for the
production of a motion picture or a video or audio recording, a copy
of which will be sold, licensed, distributed, broadcasted or
exhibited.

The machinery and equipment must be used directly in the production of
the film. Examples include cameras and accessories, lights and
accessories, costumes, microphones and accessories, fog machines and
wind machines. This exemption does not include office equipment,
transportation equipment, motor vehicles, hand tools and equipment
incidental to the production.

If the rental is exempt, no tax is due on associated transportation
and damage waiver charges.

To claim the exemption, the producer must give the rental company a
completed exemption certificate stating the equipment will be used
directly in the production of a (one of the following) motion picture,
video or audio recording a copy of which will be (one or more of the
following) sold, licensed, distributed, broadcasted or exhibited.

My number is 512/463-4614, if you have any questions.

Sircerely,

Adina Whittemore
Tax Administration Division

NOTE: Previous Accession Number 93070179L.1 and/or 9307179L