Is cloud seeding a taxable service in Texas, and does the company doing the cloud seeding owe tax on the materials and aircraft it uses?

Plain-English summary

A cloud seeding company asked the Comptroller about its Texas sales and use tax treatment. The answer: cloud seeding itself is not a taxable service, so no tax is due on the charge for the service, regardless of whether the customer is an exempt or non-exempt entity. But the firm doing the seeding does owe tax on its own inputs -- the materials used in cloud seeding, and the aircraft itself, are taxable to the firm at the time of purchase. Aviation fuel is the one exception, remaining untaxed. Because Texas belongs to the Multistate Tax Compact, the firm can offset its Texas use tax liability with a credit for any legally imposed sales or use tax it already paid another state on the same property (materials or aircraft), per Rule 3.340.

What this means for you

Cloud seeding and weather-modification service providers

Don't charge your customers sales tax on the cloud seeding service itself -- it's nontaxable regardless of whether the customer is tax-exempt. But budget for sales/use tax on your own purchases of seeding materials and aircraft (aviation fuel is the exception).

Businesses purchasing equipment or aircraft in multiple states

If you already paid sales/use tax to another state on the same property you're now using in Texas, claim the Multistate Tax Compact credit under Rule 3.340 against your Texas use tax liability rather than paying tax twice on the same purchase.

Common questions

Q: Is cloud seeding a taxable service in Texas?
A: No, per this letter -- regardless of whether the customer is exempt or non-exempt.

Q: Does the cloud seeding company owe tax on anything?
A: Yes, per this letter -- on the materials it uses for seeding and on the aircraft itself when purchased, but not on the aviation fuel.

Q: Can the firm get credit for tax already paid to another state on the same property?
A: Yes, per this letter -- as a Multistate Tax Compact member, Texas allows a credit against Texas use tax for legally imposed sales/use tax already paid to another state on the same property, per Rule 3.340.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.340 (Multistate Tax Compact credit)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9703448L

Original ruling text

March 19, 1997

Dear ***:

Thank you for your recent letter regarding the tax treatment of cloud seeding.

Cloud seeding is not a taxable service. Accordingly, no tax is due on your
charges whether done for and exempt or a non-exempt entity.

The materials used in the cloud seeding are taxable to your firm at the time of
purchase. This would include the aircraft as well, but not the aviation fuel.
Texas is a member of the Multistate Tax Compact. As a member of the multistate
compact, Texas will allow as a credit against Texas use tax due any combined
amounts of legally imposed sales or use taxes paid on the same property to
another state. I am enclosing a copy of Rule 3.340 for your reference.

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 .

Sincerely,

Al Van Allen
Tax Policy Division