I run an FAA repair station that services aircraft components for airlines -- are the machinery, tools, manuals, wire, chemicals, hardware, and shipping supplies I use exempt from Texas sales tax?

Subject

Aircraft — Repair/Remodeling/Maintenance Of Licensed Carrier — Machinery/Equipment/Tools/Services Used Or Consumed

Plain-English summary

An authorized FAA Repair Station that repairs and maintains pneumatic aircraft components for airlines, the airline industry, and related support companies asked the Comptroller whether various items it used in its repair process were subject to Texas sales tax. It listed seven categories: machinery and equipment (test equipment, compressors, tooling, generators, balancing equipment, and magna flux equipment); FAA-required overhaul and repair procedure manuals; small specialty tools (soldering pencils, calipers, micrometers, depth gauges); wire used for safety wiring and rewiring electrical components; chemicals (cleaning, lubricating, sealing, fluorescent penetrant); miscellaneous maintenance hardware (gaskets, switches, threaded pipe, fittings, nipples); and special shipping supplies (protective shipping caps, packaging foam, poly tubing).

The outcome is exempt for nearly everything, taxable for one category. The Comptroller explained that Tax Code 151.328(d) exempts from sales tax machinery, tools, supplies, and equipment used or consumed exclusively in the repair, remodeling, or maintenance of aircraft, aircraft engines, or aircraft component parts, when that work is done by or on behalf of a licensed or certified carrier of persons or property. Applying that standard, the Comptroller confirmed that every listed item -- the machinery/equipment, manuals, small tools, wire, chemicals, and miscellaneous hardware -- qualifies for the exemption, provided the work is performed on aircraft, aircraft engines, or aircraft component parts used by a licensed or certified carrier.

The one carve-out is the "Special Shipping Supplies" (protective shipping caps, packaging foam, poly tubing). The letter states that "with the exception of" that category, everything else qualifies -- meaning shipping supplies used to package and ship the repaired components remain taxable, since they aren't used or consumed in the repair/maintenance process itself.

The Comptroller also noted this opinion is based on the facts presented and could change if the facts are different.

What this means for you

FAA repair stations and MRO shops servicing licensed carriers

If you're an authorized repair station performing repair, remodeling, or maintenance work on aircraft, aircraft engines, or aircraft component parts for a licensed or certified carrier, the machinery, tools, supplies, and equipment you use or consume exclusively in that work -- test equipment, compressors, tooling, generators, balancing equipment, magna flux equipment, FAA-mandated manuals, small specialty tools, wire, chemicals, and general maintenance hardware -- can be purchased tax-free under Tax Code 151.328(d).

Shops that also package and ship repaired parts

Don't assume the exemption extends to your shipping and packaging materials. This ruling specifically flags protective shipping caps, packaging foam, and poly tubing as falling outside the exemption -- expect to pay sales tax on those items.

Anyone relying on this letter for a different fact pattern

The Comptroller was explicit that the opinion is based on the facts as presented, and a different fact pattern (e.g., work performed for a carrier that isn't licensed or certified, or supplies used outside the repair process) could yield a different result.

Common questions

Q: Are the machinery and tools I use to repair aircraft components for an airline exempt from Texas sales tax?
A: Yes, under Tax Code 151.328(d), machinery, tools, supplies, and equipment used or consumed exclusively in repairing, remodeling, or maintaining aircraft, aircraft engines, or aircraft component parts qualify for exemption, as long as the work is for a licensed or certified carrier of persons or property.

Q: Does the exemption cover FAA-required manuals, wire, and chemicals used in the repair process?
A: Yes -- the ruling specifically confirms overhaul/repair procedure manuals, safety wire and rewiring wire, and cleaning/lubricating/sealing/fluorescent-penetrant chemicals all qualify, along with miscellaneous hardware like gaskets, switches, and fittings.

Q: What about the shipping supplies I use to package repaired parts before sending them back?
A: Those are the one exception. Special shipping supplies (protective shipping caps, packaging foam, poly tubing) do not qualify for the exemption under this ruling.

Q: Does it matter who the aircraft belongs to?
A: Yes -- the exemption applies only when the repair, remodeling, or maintenance work is performed on aircraft, aircraft engines, or aircraft component parts used by a licensed or certified carrier of persons or property.

Citations and references

Statutes and rules:

• Tax Code 151.328(d) (exemption for machinery, tools, supplies, and equipment used or consumed exclusively in repair, remodeling, or maintenance of aircraft, aircraft engines, or aircraft component parts for a licensed or certified carrier)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9612988L

Original ruling text

December 3, 1996

Dear **:

Thank you for your recent letter which is restated in part with response below.

**, is an authorized FAA Repair Station. We repair and maintain
pneumatic aircraft components for the airlines, airline industry and related
support companies. These companies are engaged in the carriage of persons
and/or property.

We are uncertain as to our tax liability on several items used in the processing
of thesecomponents. Please review the items listed below and make a
determination as to our tax liability.

Machinery & Equipment: Test Equipment, Compressors, Tooling, Generators,
Balancing Equipment and Magna Flux.

Manuals: Overhaul and Repair Procedure Manuals required by the FAA for each
part number repaired at this facility.

Small Specialty Tools: Soldering Pencil, Calipers, Micrometers, Depth Gauges,
etc.

Wire: Most units require safety wiring. Also rewiring of electrical components.

Chemicals: Cleaning, lubricating, sealing, fluorescent penetrant, etc.

Miscellaneous Hardware: Maintenance items for Item 1 (above) such as, gaskets,
switches, threaded pipe, fittings, nipples, etc.

Special Shipping Supplies: protective shipping caps, packaging foam, poly
tubing, etc.

Response: Tax Code 151.328(d) exempts from sales
tax machinery, tools, supplies, 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 licensed or certified carrier of
persons or property.

With the exception of the "Special Shipping Supplies," each of the items
mentioned will qualify for exemption when the work is performed on aircraft,
aircraft engines, or aircraft component parts used by a licensed or certified
carrier of persons or property.

This opinion is rendered based on the facts presented. If there are
additional or different facts, the opinion may change.

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 Policy, Comptroller of Public
Accounts. My Internet address is [email protected].

Sincerely,

Al Van Allen
Tax Policy Division