Is renting film, video, or audio production equipment (cameras, lights, microphones, costumes, fog/wind machines) exempt from Texas sales tax?

Plain-English summary

A company planned to rent equipment to film and video producers and asked the Comptroller's office how the rentals should be taxed. The Comptroller explained that 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, broadcast, or exhibited.

To qualify, the machinery and equipment must be used directly in the production of the film. The letter gives examples: cameras and accessories, lights and accessories, costumes, microphones and accessories, and fog machines and wind machines.

The exemption does not cover office equipment, transportation equipment, motor vehicles, hand tools, and equipment that is only incidental to the production — for example, sun umbrellas, director's chairs, dollies that are not camera accessories, ice chests, pick axes, and shovels.

As a general rule, when a rental company sells, leases, or rents taxable goods or services together with non-taxable goods or services for one price, the entire charge is taxable. So if the rental company rents taxable items along with items that qualify for the production-equipment exemption as a package, it should collect tax on the whole package price. Alternatively, the rental company may separate the charge for the taxable items from the charge for the exempt production equipment and collect tax on only the taxable-item charge. If the rental of the qualifying equipment is exempt, no tax is due on associated transportation and damage waiver charges tied to that rental.

To claim 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, broadcast, or exhibited.

What this means for you

Equipment rental businesses serving film and video producers

If you rent cameras, lights, microphones, costumes, fog machines, wind machines, or similar production gear to producers, those rentals can be exempt from Texas sales tax when the equipment is used directly in producing a motion picture, video, or audio recording intended for sale, license, distribution, broadcast, or exhibition — but only if you obtain a completed exemption certificate from the producer. Keep that certificate on file to support the exempt sale.

Producers renting equipment

You can claim the exemption by giving the rental company a completed exemption certificate stating that the equipment will be used directly in production and that a copy of the resulting motion picture, video, or audio recording will be sold, licensed, distributed, broadcast, or exhibited. Items that are merely incidental to production — such as office equipment, vehicles, hand tools, sun umbrellas, director's chairs, non-camera dollies, ice chests, pick axes, and shovels — do not qualify and remain taxable.

Accountants and tax professionals structuring rental invoices

Watch how mixed rentals are billed. If taxable items (like incidental equipment) and exempt production equipment are rented together for a single package price, the entire charge is taxable. To limit tax exposure, separately state the charge for the taxable items from the charge for the qualifying production equipment, so tax is collected only on the taxable portion. When the production-equipment rental is exempt, associated transportation and damage waiver charges tied to that rental are also exempt.

Common questions

Q: Is rented film and video production equipment exempt from Texas sales tax?
A: Yes, if the equipment is used directly in producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited, and the producer gives the rental company a completed exemption certificate.

Q: What equipment qualifies for the exemption?
A: Examples given in the letter include cameras and accessories, lights and accessories, costumes, microphones and accessories, and fog machines and wind machines.

Q: What equipment does not qualify?
A: Office equipment, transportation equipment, motor vehicles, hand tools, and equipment only incidental to the production — such as sun umbrellas, director's chairs, dollies that are not camera accessories, ice chests, pick axes, and shovels.

Q: If a rental company rents both taxable and exempt items together for one price, is the whole charge taxable?
A: Yes. Unless the rental company separately states the charge for the taxable items from the charge for the qualifying production equipment, the entire package price is taxable.

Q: Are transportation and damage waiver charges taxable?
A: If the underlying equipment rental is exempt, no tax is due on the associated transportation and damage waiver charges.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9411721L

Original ruling text

November 30,1994

Dear **:

I understand that your client, COMPANY will be renting equipment to film and
video producers. As we discussed, 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, broadcast 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. Examples
include sun umbrellas, director's chairs, dollies (that are not camera
accessories), ice chests, pick axes, and shovels.

As a general rule, when your client sells, leases, or rents taxable goods or
services with non-taxable goods or services for one price, the entire charge is
taxable. When your client rents taxable items along with items that qualify for
the new exemption, your client should collect tax on the package price.

On the other hand, your client may separate the charge for the taxable items
from the charge for equipment used directly in the production and collect tax
on only the charge for the taxable items.

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

To claim the exemption, the producer must give your client 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, broadcast or exhibited.

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

Sincerely,

Adina Whittemore
Tax Administration Division