What did the 1994 internal Comptroller memo say about which machinery, tools, and equipment used to repair or maintain a certificated/licensed carrier's aircraft qualify for the Section 151.328(d) sales tax exemption?

Plain-English summary

This document is not a taxpayer-specific letter ruling in the usual sense — it's an internal September 22, 1994 memo from Lindey Osborne, Tax Administration, to an audit team (recipient redacted), resolving a specific audited airline taxpayer's question about which machinery, tools, and equipment qualify for a sales/use tax exemption.

The taxpayer, an airline company, operated a maintenance facility in Texas used to repair and maintain aircraft owned both by the taxpayer and by other licensed and certificated carriers. The taxpayer asked whether various specific items qualified for exemption under Tex. Tax Code § 151.328(d), which exempts "[m]achinery, tools, and equipment used or consumed exclusively in the repair, remodeling, or maintenance of aircraft, aircraft engines, or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property."

The memo explains that the Comptroller had interpreted this statute in Section (d) of Rule 3.297 (Carriers), under which items used directly and exclusively in aircraft repair, remodeling, or maintenance are exempt if purchased by the aircraft owner/operator, the aircraft manufacturer, or a licensed/certified repair facility — including equipment that sustains or supports safe, continuous operation or otherwise keeps the aircraft in good working order (e.g., battery chargers or diagnostic equipment). Consumable supplies not part of or used in the aircraft (e.g., cleaning solvents) are not included. Machinery, tools, and equipment that support overall carrier operations generally — rather than the aircraft repair/maintenance itself — do not qualify, such as baggage loading/handling equipment, waste disposal equipment, or reservation/booking machinery.

Applying that framework, the memo lists specific items that DO qualify for exemption (because they are used directly and exclusively in repairing, remodeling, or maintaining the aircraft): cranes, racks, scaffolding, towbars and pushout tractors, air conditioning trucks, paint booths, machining booths, tape heaters, ladders, forklifts, air chillers, air start units, de-icing fluid, and engine stands.

It also lists specific items that do NOT qualify: computers, storage bins, computerized storage bins, pallets, latex gloves, masking tape, sweepers and vacuums, and plastic sheeting masks.

Finally, the memo notes that no exemption exists for the taxpayer's separate ground transportation maintenance facility, and that repair parts used to repair ground transportation equipment are taxable. A note at the end references a prior accession number, 9409698L.

What this means for you

If you operate or service aircraft for a certificated/licensed carrier

This memo illustrates how the Comptroller applied Tex. Tax Code § 151.328(d) and Rule 3.297(d) to concrete categories of maintenance-facility machinery and tools for one audited airline. Items used directly and exclusively to repair, remodel, or maintain the aircraft itself (cranes, tow equipment, paint/machining booths, engine stands, de-icing fluid, and similar) were treated as exempt, while items supporting general facility or carrier operations (computers, storage bins, pallets, cleaning/consumable supplies, disposable protective items) were treated as taxable. It does not itself grant reliance protection to any taxpayer other than the one it was issued to.

If you are researching the Section 151.328(d) aircraft repair/maintenance exemption

This memo is useful as a historical illustration of how the exemption and Rule 3.297(d) were applied to specific tools and equipment, but it is not a substitute for the statute, the current version of Rule 3.297, or an up-to-date letter ruling addressed to your own facts.

If you are looking for guidance on a specific sales/use tax question

This is an internal audit memo resolving one taxpayer's exemption question, not a generally applicable letter ruling. It carries no reliance protection under 34 Tex. Admin. Code Rules 3.1 and 3.10, even for the taxpayer it was issued to, and it is over three decades old, so current law and rules should be independently verified.

Common questions

Q: Is this a binding letter ruling I can rely on?
A: No. It is an internal Comptroller audit memo resolving one audited airline taxpayer's exemption question. It does not carry letter-ruling reliance protection under 34 Tex. Admin. Code Rules 3.1 and 3.10.

Q: What exemption is being discussed?
A: Tex. Tax Code § 151.328(d), which exempts machinery, tools, and equipment used or consumed exclusively in the repair, remodeling, or maintenance of aircraft, aircraft engines, or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.

Q: Which items were found to qualify for the exemption?
A: Cranes, racks, scaffolding, towbars and pushout tractors, air conditioning trucks, paint booths, machining booths, tape heaters, ladders, forklifts, air chillers, air start units, de-icing fluid, and engine stands — items used directly and exclusively in repairing, remodeling, or maintaining the aircraft.

Q: Which items were found NOT to qualify?
A: Computers, storage bins, computerized storage bins, pallets, latex gloves, masking tape, sweepers and vacuums, and plastic sheeting masks — items that support overall operations rather than being used directly and exclusively in the aircraft repair/maintenance itself.

Q: What about the taxpayer's ground transportation maintenance facility?
A: The memo states no exemption exists for that facility, and that repair parts used to repair ground transportation are taxable.

Citations and references

• Tex. Tax Code § 151.328(d) (quoted in the original text)
• 34 Tex. Admin. Code § 3.297(d), Carriers (quoted in pertinent part in the original text)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9409L1318F01

Original ruling text

Date: September 22, 1994
To: ** Audit
From: Lindey Osborne, Tax Administration
Subject: Machinery and equipment purchased to repair or maintain
licensed and certificated carriers.

Taxpayer, an airlines company, has a maintenance facility in
Texas. This facility is used to repair and maintain aircraft that
are licensed and certificated carriers owned by taxpayer and other
licensed and certificated carriers as well. You question whether
the following items qualify for exemption under Section 151.328(d)
of the Texas Tax Code.

Section 151.328(d) of the Texas Tax Code states:

Machinery, tools, and equipment used or consumed exclusively in the
repair, remodeling, or maintenance of aircraft, aircraft engines,
or aircraft component parts by or on behalf of a certificated or
licensed carrier of persons or property are exempted from the taxes
imposed by this chapter.

By duly promulgated rule, the Comptroller has interpreted this
section in Section(d)of Rule 3.297, Carriers. This section states
in pertinent part.

(d) Licensed and certificated carriers. Sales or use tax is not
due on aircraft used by persons defined in subsection (a)(1) of
this section in the regular course of business of transporting
persons or property for hire.

(1) The following items or services used in the repair,
remodeling, or maintenance of aircraft or aircraft engines or
component parts by or for a person qualified under subsection
(a)(1) of this section are exempt if purchased by the aircraft
owner or operator, by the aircraft manufacturer, or by a repair
facility licensed and certified by the appropriate regulatory
agency.

(A) Machinery, tools, and equipment used directly and
exclusively in the repair, remodeling, or maintenance. Included
in the exemption is equipment used to sustain or support safe and
continuous operations or to keep the aircraft in good working
order by preventing its decline, failure, lapse, or
deterioration, such as battery chargers or diagnostic equipment.
Consumable supplies, such as cleaning solvents, used in providing
the repair, remodeling, or maintenance, but that are not part of
or used in the aircraft, are not included in the exemption.
(emphasis added)

(B) Repair, remodeling, and maintenance services.

(4) Machinery, tools, and equipment that support the overall
carrier operation such as baggage loading or handling equipment,
garbage and other waste disposal equipment, or reservation
making or booking machinery and equipment, do not qualify for
exemption.

The following items qualify for exemption if they are used
directly and exclusively in repairing, remodeling, or maintenance
of the aircraft.

Cranes, racks, scaffolding, towbars and pushout tractors, air
conditioning trucks, paint booths, machining booths, tape heater,
ladders, forklifts, air chiller, air start units, de-icing fluid,
and engine stands.

The following items do not qualify for exemption.

Computers, storage bins, computerized storage bins, pallets,
latex gloves, masking tape, sweepers and vacuums, pallets,
plastic sheeting masks

No exemption exists for the ground transportation maintenance
facility. Repair parts used to repair ground transportation are
taxable.

NOTE: Previous Accessiong Number 9409698L