If a ready-mix concrete company buys a mixer drum and a truck chassis, does it owe motor vehicle tax or sales tax, and does invoicing them separately make the drum exempt?

Plain-English summary

The Texas Comptroller's Tax Policy Division answered a question about how to get the sales-tax exemption for mixer drums that are placed on concrete truck chassis. The taxpayer explained that the truck chassis and the mixer drum are usually purchased separately, but sometimes the invoice lists the whole thing as a single unit, and asked how the invoice should be written to make the drum exempt.

The Comptroller's answer: the exemption doesn't depend on how the invoice is written — it depends on what was actually bought. If a customer buys a complete concrete truck with the mixer drum already attached, that is the sale of a motor vehicle, and motor vehicle tax applies to the entire unit, regardless of how the seller itemizes the invoice. That's true even if the chassis seller purchases the mixer drum separately and then bills it to the customer as a separate line item — the Comptroller's office still treats the whole assembled unit as subject to motor vehicle tax in that scenario.

On the other hand, if the customer buys the mixer drum on its own and has it shipped directly to the chassis seller for installation — with the drum billed directly by, and paid directly to, the seller of the mixing drum — then that purchase is tangible personal property that can qualify for the manufacturing equipment exemption from sales tax. To claim it, the ready-mix company should give the mixer drum's seller an exemption certificate and not pay sales tax on the drum.

What this means for you

Ready-mix concrete companies and truck chassis dealers

The key is who bills you and who you pay for the mixer drum. If you're billed directly by, and pay directly to, the company that sells the mixing drum — even if it's shipped to a different location for installation on a chassis — the drum can be exempt as manufacturing equipment, and you should give that seller an exemption certificate. But if you buy a complete truck with the drum already mounted, or if the chassis seller buys the drum and simply passes along the cost as a line item on your invoice, the Comptroller's office treats the whole thing as a vehicle sale subject to motor vehicle tax, no matter how the invoice is itemized.

Truck and equipment dealers who assemble mixer trucks

Don't assume that separately itemizing the mixer drum on your invoice will exempt it from motor vehicle tax. According to this letter, the Comptroller's office looks at the substance of the transaction, not the invoice format. If you are the one purchasing the mixer drum (even if you then bill your customer for it separately), the assembled unit is still treated as subject to motor vehicle tax on the entire unit.

Accountants and tax professionals advising these businesses

Structure the transaction, not just the invoice, if your client wants the manufacturing exemption on the mixer drum: the drum needs to be purchased and billed directly between the customer and the drum's seller, with shipment to the chassis seller for installation. Anything that runs through the chassis seller as purchaser of the drum keeps the transaction in the motor-vehicle-tax category.

Common questions

Q: Does writing the mixer drum as a separate line item on the invoice make it exempt?
A: No. According to this letter, the exemption doesn't depend on the invoicing — it depends on the actual transaction (who buys what from whom).

Q: When is the mixer drum exempt from sales tax as manufacturing equipment?
A: When the customer buys the mixer drum directly — billed by and paid to the seller of the drum — and has it shipped to the chassis seller for installation. The ready-mix company should give the drum's seller an exemption certificate.

Q: When does the whole truck-and-mixer combination get taxed as a motor vehicle?
A: When the customer buys a complete concrete truck with the mixer already attached. It's also taxed as a motor vehicle if the chassis seller is the one who purchases the mixer drum and then bills the customer for it as a separate item — the Comptroller's office still treats that as motor vehicle tax on the entire unit.

Q: Who signed this letter?
A: Wade Anderson, Director, Tax Policy, responding to a question submitted on September 1, 1995.

Citations and references

No specific statutes or administrative rules are cited in this letter; it describes the Comptroller's existing policy on how the sale is characterized.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9509485L

Original ruling text

September 6, 1995

Dear *****:

On September 1, 1995, you asked for counsel as to how to obtain the exemption
for mixer drums placed on concrete truck chassis. Under our existing policy, a
concrete mixing drum is considered manufacturing equipment if purchased as
tangible property subject to the sales tax. However, the sale of a concrete
truck with mixer drum attached is considered the sale of a vehicle.

In your letter, you stated that the truck chassis and the mixer drum were
usually purchased separately. But, sometimes the invoice lists the purchase as
a single unit. Your question was how the invoice should list the purchase in
order to receive exempt status for the drum.

The answer does not depend on the invoicing but rather on the transactions. If
the customer buys a concrete truck with a mixer, it is considered the sale of a
vehicle regardless of invoicing by the seller. On the other hand, if the
customer buys a mixer and has it shipped to the seller of the chassis for
installation, the mixer purchase is exempt because it is tangible property when
purchased from the seller.

Our office has taken the position that motor vehicle tax on the entire unit
even if the mixer is purchased by the chassis seller and billed to the customer
as a separate item. Therefore, in order to be able to claim the manufacturing
exemption under the sales tax, the customer must be billed directly by and
responsible for payment to the seller of the mixing drum.

Your second question was how should the ready mix company request the tax
exemption from our office. If the mixing drum is purchased as separate tangible
property, the ready mix company should give the seller an exemption certificate
and not pay sales tax on the mixing drum.

I hope this satisfactorily answers your inquiry. Please contact me if you have
any further questions.

Sincerely,

Wade Anderson
Director, Tax Policy