Is a company's charge for maintaining and calibrating the tools it uses to repair aircraft owned by a certificated or licensed carrier subject to Texas sales tax?

Plain-English summary

The taxpayer wrote to the Comptroller asking about the tax treatment of services used to maintain and calibrate tools that are themselves used to repair aircraft — specifically aircraft that are licensed and certified as carriers of persons or property.

The Comptroller's Tax Policy Division responded that the taxpayer's charges to maintain, calibrate, and repair those tools are exempt from sales tax. The letter explains the reasoning in two steps. First, Tax Code Section 151.328(d) exempts machinery, tools, and equipment that are 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. Second, Tax Code Section 151.3111(a) exempts a service performed on tangible personal property if that property, had it been sold, leased, or rented at the time of the service, would itself have been exempt because of its nature, its use, or a combination of both. Putting the two together, because the tools qualify for the exemption under Section 151.328(d) based on their use, services performed on those tools (maintaining, calibrating, repairing them) are also exempt under Section 151.3111(a).

The letter notes that this opinion is based on the facts submitted by the taxpayer, and that other facts, though similar, may yield different results.

What this means for you

Businesses that repair or maintain aircraft for licensed carriers

If your tools, machinery, or equipment are used exclusively to repair, remodel, or maintain aircraft, aircraft engines, or aircraft component parts on behalf of a certificated or licensed carrier of persons or property, those tools themselves are exempt from Texas sales tax under Tax Code Section 151.328(d). Because those tools qualify for the exemption based on their use, any services performed on the tools — such as maintaining, calibrating, or repairing them — are also exempt under Tax Code Section 151.3111(a).

Accountants and tax professionals

This letter is a useful illustration of how Section 151.3111(a) works as a "flow-through" exemption: it does not create a new category of exempt items, but instead exempts services performed on property that is already exempt because of its nature or use. Here, the underlying exemption for aircraft repair tools came from Section 151.328(d), and Section 151.3111(a) extended that exemption to cover services (maintenance and calibration) performed on those tools. The exemption depends on the tools being used exclusively for the exempt purpose — repairing, remodeling, or maintaining aircraft, aircraft engines, or aircraft component parts for a certificated or licensed carrier.

Common questions

Q: Are the aircraft repair tools themselves exempt from sales tax, or just the maintenance services on them?
A: Both. Under Tax Code Section 151.328(d), the tools, machinery, and equipment are exempt if used or consumed exclusively in repairing, remodeling, or maintaining aircraft, aircraft engines, or aircraft component parts for a certificated or licensed carrier. Because the tools are exempt, services performed on those tools — including maintenance, calibration, and repair — are also exempt under Section 151.3111(a).

Q: Does the exemption apply to any aircraft repair tools, regardless of who owns the aircraft?
A: The letter addresses tools used to repair aircraft that are licensed and certified as carriers of persons or property, and Section 151.328(d) as quoted specifies that the repair, remodeling, or maintenance must be by or on behalf of a certificated or licensed carrier of persons or property.

Q: Can other taxpayers rely on this letter?
A: This opinion is rendered based on the facts submitted by this particular taxpayer, and the letter states that other facts, though similar, may yield different results. STAR letters generally may be relied on as the basis of a detrimental reliance claim only by the taxpayer to whom they were issued.

Citations and references

• Tax Code Section 151.328(d): "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."
• Tax Code Section 151.3111(a): "A service that is performed on tangible personal property that, if sold, leased, or rented, at the time of the performance of the service, would be exempted under this chapter because of the nature of the property, its use, or a combination of its nature and use, is exempted from this chapter."

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9503L1345F03

Original ruling text

March 29, 1995

Dear **:

Thank you for your recent letter regarding the tax treatment of services
used to maintain and calibrate tools used to repair aircraft that are
licensed and certified as carriers of persons or property.

Your charges to maintain, calibrate, and repair such tools are exempt
from sales tax. Here's why:

Tax Code Section 151.328(d) states:

(d) 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.

Tax Code Section 151.3111(a) states:

(a) A service that is performed on tangible personal property that, if
sold, leased, or rented, at the time of the performance of the service,
would be exempted under this chapter because of the nature of the
property, its use, or a combination of its nature and use, is exempted
from this chapter.

The result is that services performed on tools that are exempt (based on
use), at the time of purchase, are themselves exempt from tax.

This opinion is rendered based on the facts you submitted. Other facts,
though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct
line is 512/463-4680. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9503061L