Is the rental of a mobile office/office trailer subject to Texas sales tax, and is a separately stated property tax charge taxable?

Plain-English summary

A taxpayer called and faxed the Comptroller's office asking about sales tax on rentals of mobile offices, and this letter confirms what was discussed. The Comptroller explained that mobile offices are no longer classified as motor vehicles — as of October 1, 1993, they are treated as tangible personal property, which means their sale, lease, or rental became subject to state and local sales or use tax on that date.

The letter also addresses two billing details the taxpayer had raised. First, the taxpayer's supplier was charging sales tax on a "property tax" line item. The Comptroller confirmed that a property tax reimbursement charge is not taxable if it is separately stated and clearly identified on the invoice, but if it isn't broken out that way, it gets folded into the taxable rental price. Second, the supplier had been billing 8.25% tax on a rental used in the city of Austin, but the Comptroller determined the correct combined rate was 8% — made up of 6.25% state tax, 1% city tax, and 0.75% Austin MTA (metropolitan transit authority) tax — based on the supplier's Austin place of business.

What this means for you

Businesses that rent or lease mobile offices/office trailers

If you rent out mobile offices or office trailers to customers, this letter confirms that since October 1, 1993, those rentals are subject to Texas state and local sales/use tax because mobile offices are treated as tangible personal property, not motor vehicles. Make sure you are charging the correct combined state and local rate for the jurisdiction where your business (or the taxable rental) is sourced, and don't over-collect.

Businesses that rent mobile offices as customers

If your invoice includes a separate "property tax" line item, check whether it is clearly and separately stated. Per this letter, a separately stated property tax reimbursement charge is not itself subject to sales tax. If it's lumped into the rental charge instead of broken out, expect it to be taxed along with the rest of the rental price.

Accountants and tax professionals

This letter is a useful, if narrow, confirmation of two points: (1) the effective date (October 1, 1993) on which mobile offices/office trailers shifted from motor-vehicle classification to tangible personal property for sales tax purposes, making their rental taxable, and (2) the general invoicing principle that separately stated, clearly identified property tax reimbursement charges are excluded from the taxable rental price, while bundled charges are not. It also illustrates how the applicable local tax rate is tied to the supplier's place of business (here, Austin, yielding 8% total) rather than simply the rate the supplier assumed.

Common questions

Q: Are mobile office/office trailer rentals subject to Texas sales tax?
A: Yes, according to this letter, effective October 1, 1993, mobile offices are classified as tangible personal property rather than motor vehicles, and their sale, lease, or rental is subject to state and local sales or use tax.

Q: Is a property tax charge on a mobile office rental invoice taxable?
A: Not if it is separately stated and clearly identified on the invoice. If it isn't separately stated, it is included in the sales price of the taxable rental and taxed along with everything else.

Q: What was the correct tax rate in this letter's example?
A: The Comptroller determined the correct rate was 8% (6.25% state, 1% city, and 0.75% Austin MTA tax), based on the supplier's place of business being in Austin, Texas — not the 8.25% the supplier had been billing.

Q: Does this letter cite a specific statute?
A: No. The letter states the Comptroller's conclusions directly without citing a statute or rule number.

Citations and references

The original letter does not cite any specific statute or rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9404L1297G13

Original ruling text

April 15, 1994

Dear ***:

I am writing to confirm our telephone conversation and your
fax transmittal of March 29, 1994. You were questioning the
application of sales tax on rentals of mobile offices.

In this telephone conversation, I confirmed that mobile
offices are no longer motor vehicles and are now classified
as tangible personal property. The sale, lease, or rental
of mobile offices became subject to state and local sales or
use tax effective October 1, 1993.

You stated that your supplier is billing sales tax on
property tax when the amount charged for property tax is
listed as a separate line item on the invoice. Property tax
is not taxable if separately stated and clearly identified
on the invoice; however, property taxes are included in the
sales price of the taxable rental if not separately stated
on the invoice.

You also stated that your supplier is billing 8.25% on the
invoice rather than 8%. The rental is for use in the city
of Austin. You explained that the supplier is located in
Pflugerville, Texas. Our records indicate that your
supplier's place of business is located in Austin. The tax
rate due is broken down into 6.25% state tax, 1% city tax,
and .75% Austin MTA tax.

In summary, the correct tax rate is 8%. Sales tax is not
due on separately stated property tax reimbursement charges.

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

You may also write to Tax Administration Division, Post Office
Box 13528, Austin, Texas 78711-3528.

Sincerely,

Tax Administration Division

NOTE: Previous Accession Number 9404280L