Is having tires retreaded, or having alternators, generators, radiators, or transmissions worked on, taxed as a repair of your motor vehicle in Texas?

Plain-English summary

The Texas Comptroller's Tax Policy Division wrote to a potential customer of tire retreaders to share the agency's sales tax policy on tire retreading, following an earlier letter the Comptroller had sent directly to tire retreaders clarifying the same policy.

The key rule: if you have casings retreaded in a number that exceeds the number of tires a motor vehicle is designed to operate with, the Comptroller presumes you are having tangible personal property repaired — and repair of tangible personal property is taxable. This presumption applies, for example, when a business retreads a stock of casings rather than simply retreading the specific tires taken off a specific vehicle.

That presumption isn't final, though. You can overcome ("rebut") it by keeping records showing the tires were put right back on the vehicles they were removed from — records such as casing serial numbers, motor vehicle numbers, trip logs, repair logs, fuel records or receipts, and anything else the Comptroller deems necessary. With those records in hand, you can give the retreader an exemption certificate claiming the work is really the repair of a motor vehicle component (not taxable retreading of inventory), rather than a taxable transaction.

The letter also addresses refunds: if you've requested a refund that's still pending, you need the same rebuttal records ready. If you've already received a refund, you're obligated to issue the exemption certificate and keep records supporting the claim, since the Comptroller can review them later.

Finally, the letter states this same policy — the repair-vs-rebuilt presumption and the recordkeeping needed to rebut it — also applies to other motor vehicle components, specifically alternators, generators, radiators, and transmissions. The Comptroller enclosed a bulletin titled "Repairing Motor Vehicle Components" describing the policy in more detail.

What this means for you

Fleet operators and businesses that retread tires or replace vehicle components

If you have casings retreaded (or have alternators, generators, radiators, or transmissions worked on) in quantities beyond what your vehicles need at one time, expect the Comptroller to presume you're buying a taxable repair. To treat the transaction as a non-taxable repair of your own vehicle's component instead, keep detailed records tying the specific part back to the specific vehicle it came from — serial/part numbers, vehicle numbers, trip logs, repair logs, and fuel records — and give your vendor an exemption certificate.

Businesses with a pending or already-received sales tax refund on this issue

If you're waiting on a refund, gather your rebuttal records now, since you'll need them to support the refund claim. If you already received a refund, you're required to issue an exemption certificate to the retreader/repairer and keep the supporting records, because the Comptroller can review them later.

Tire retreaders and motor vehicle component repair shops

Your customers may present you with an exemption certificate claiming their retreading or component repair isn't taxable. This letter (and the companion letter sent directly to retreaders) explains the presumption your customers are trying to rebut and the kind of records that should back up any exemption certificate you accept.

Common questions

Q: Is tire retreading always taxable in Texas?
A: Not always, but it's presumed taxable as a repair of tangible personal property once you retread more casings than the vehicle is designed to use. You can rebut that presumption with adequate records showing the tires went back on the same vehicle.

Q: What records do I need to avoid tax on retreading?
A: The letter lists casing serial numbers, motor vehicle numbers, trip logs, repair logs, fuel records or receipts, and any other record the Comptroller deems necessary to substantiate that the tires were immediately put back on the vehicles they were removed from.

Q: Does this same rule apply to parts other than tires?
A: Yes. The letter states this policy also applies to other motor vehicle components such as alternators, generators, radiators, and transmissions.

Q: What if I already got a sales tax refund related to this?
A: The letter says it's your obligation to issue an exemption certificate to the retreader claiming the work is repair of a motor vehicle component, and to keep records supporting the claim, since the Comptroller can review them.

Citations and references

No specific statutes or administrative rules are cited by section number in this letter; it refers to an enclosed Comptroller bulletin, "Repairing Motor Vehicle Components," which is not reproduced here.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9511728L

Original ruling text

November 21, 1995

Dear ** :

The Comptroller's office was asked to review the taxation of tire retreading.
As a potential customer of tire retreaders, we wanted to share the following
information with you.

We recently mailed a letter to tire retreaders clarifying this agency's sales
tax policy regarding tire retreading. In particular, we explained that when
you have casings retreaded in a number that exceeds the number of tires that a
motor vehicle is designed to operate with, the presumption is you are having
tangible personal property repaired. As you are aware, the repair of tangible
personal property is taxable.

This presumption may be overcome if you maintain records to prove that the
tires were immediately put back on the vehicles from which they were removed.
You must maintain records such as casing serial numbers, motor vehicle numbers,
trip logs, repair logs, fuel records or receipts and any other record the
Comptroller deems necessary to substantiate the claim. You may rebut this
presumption with proper records and issue an exemption certificate to the
retreader claiming the retreading is the repair of a motor vehicle component.

If you have requested a refund and that refund is pending, you must have
records to rebut the presumption set out in the preceding paragraph. If you
have received a refund, it is your obligation to issue an exemption certificate
claiming the retreading is the repair of a component of a motor vehicle, and
you must have records to support the claim. These records are subject to our
review.

This policy also applies to other motor vehicle components such as alternators,
generators, radiators and transmissions. I have enclosed a copy of our new
bulletin, Repairing Motor Vehicle Components, which outlines this policy.

If you have any questions or need more information, you may call Eddie
Washington toll free at 1-800-531-5441, extension 3-4683. Eddie's Austin number
is 512/463-4683. From a telecommunication device for the deaf (TDD) only, call
1-800-248-4099. You may also write to Tax Policy Division, Comptroller of
Public Accounts.

Sincerely,

Karey W. Barton
Manager, Tax Policy Division