A distributor of trade show display booths sells, rents, ships, sets up, breaks down, and stores booths that travel to trade shows around the country. Depending on where a booth is first delivered/set up (Texas or out of state) and where it's later stored, which charges are taxable?

Plain-English summary

A distributor of trade show displays and graphics sells, rents, and stores exhibit booths, shipping them around the country for various trade shows. A storage customer had requested a refund of sales tax the company charged, prompting the company to ask the Comptroller to walk through several scenarios of where tax applies.

The controlling factor throughout is where the booth is FIRST delivered/set up after the sale, and where it's later stored:

• Out-of-state delivery first: No Texas sales tax is due on the booth or related charges if the customer takes delivery out of state immediately after the sale (e.g., delivered directly to an out-of-state trade show). If the customer later has the booth dismantled and shipped BACK to Texas for storage, the customer (not the seller) owes Texas USE tax on the booth's cost — the seller isn't required to collect it — though the customer can credit any sales tax already legally paid to another state. The subsequent Texas dismantling, transport, and storage charges are not taxable.
• Texas delivery first: If the customer takes delivery in Texas (e.g., a Texas trade show), the initial sale, freight to the show, and set-up are all taxable. If the booth is first stored, then initially set up, IN Texas, the storage, transportation to the show, and set-up are taxable — but the later dismantling/return-transport/storage are not.
• Texas storage first, then out-of-state set-up: If the booth is stored in Texas first and only later set up out of state, Texas tax is due on the booth itself (storage in Texas is itself a taxable "use" by the owner) plus the outbound transportation (treated as part of the booth's sales price). But the out-of-state storage/set-up/breakdown and the transportation back to Texas are NOT taxable, nor are the subsequent Texas storage/set-up/breakdown charges.
• Repairs after return to Texas: Once a booth is back in Texas, any repair, remodeling, maintenance, fabrication, processing, or other modification charge is taxable if the booth's NEXT use will be at a Texas location.
• Rental agreements: Labor charges bundled into a rental agreement — supervision, set-up, hook-up, assembly/disassembly, erection, dismantling — are part of the taxable lease price under Rule 3.294(d), regardless of the delivery-location analysis above (which applies to sales, not leases).

What this means for you

Trade show display/exhibit companies operating multistate

Track precisely where each booth is FIRST delivered and where it's later stored — that single fact determines whether the initial sale, freight, set-up, and storage charges are taxable. The same booth's lifecycle (Texas delivery vs. out-of-state delivery vs. Texas storage-then-out-of-state-use) can trigger completely different tax outcomes at each stage.

Customers renting or storing exhibit booths in Texas

If your booth is rented (not purchased), expect the entire lease price — including set-up/breakdown labor — to be taxable regardless of delivery location, under the separate rental-and-lease rule.

Accountants and tax professionals

This letter is a clean multi-scenario reference for the "first delivery location" and "storage-as-use" doctrines that also appear in other multistate equipment/property Texas rulings — useful for any client whose tangible property moves in and out of Texas for temporary use.

Common questions

Q: Is Texas sales tax due if I sell a booth and it's first delivered to an out-of-state trade show?
A: No, not on the sale or delivery — but if the booth later comes back to Texas for storage, the customer owes Texas use tax on its cost (creditable against sales tax already paid elsewhere).

Q: What if the booth is stored in Texas before its first-ever use out of state?
A: Tax is due on the booth and the outbound transportation, because storing it in Texas first counts as a taxable use in Texas.

Q: Are repair charges on a returned booth always taxable?
A: Only if the booth's next use will be in Texas.

Q: Does the delivery-location analysis apply to rentals too?
A: No — rental agreement labor (set-up, breakdown, assembly, etc.) is part of the taxable lease price under Rule 3.294(d) regardless of delivery location.

Citations and references

• 34 Tex. Admin. Code Rule 3.294(d) (Rental and Lease of Tangible Personal Property — labor charges included in taxable lease price)

Subject

Trade Show Exhibit Booth Contractor/Supplier — Sales, Rentals, Removal And Storage, Repairs, Delivery, Installation, Design And Construction, Miscellaneous Charges

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9710970L

Original ruling text

October 27, 1997

Dear **:

This is in response to your request for a ruling on the taxability of charges
related to display booths that you sell, rent and store. Your fact situation
and questions are restated below followed by my response:

Background information on your company:
You are a distributor of trade show displays and graphics. You sell, rent, and
store display booths and ship them around the country for different trade show
activities.

Recently, one of your storage customers requested a refund of sales tax that
you charged them. You asked that we advise you should if you should charge
sales tax in the following two scenarios:

1. You sell a display that the customer wants to put into your storage program.
   You store the display and ship it around the country several times a month. You
   asked that we advise you in writing if sales tax is due on the storage of the
   display and freight charges to ship the display?

2. You sell a display that the customer wants you to put into your storage
   program. You are asked to ship and set-up the display in another city. After
   the trade show is over, you breakdown the display and bring it back to Houston.
   You are asking if you use your truck and your employees to ship, set-up, and
   breakdown the display, is sales tax due? Is sales tax charged on the set-up and
   breakdown charges?

Response: No Texas sales tax is due on the display booth or related charges if
immediately after the sale your customer takes delivery of the booth out of
state (e.g., if you first deliver the booth to a trade show outside Texas). If
the customer then directs you to dismantle the booth and ship it back to Texas
for storage, the customer owes Texas use tax on the customer's cost of the
booth. You are not required to collect the use tax. The customer may take
credit against the Texas use tax for sales taxes legally due and paid on the
booth by the customer to another state. Your charges for the subsequent
dismantling, transporting, and storing the booth in Texas are not taxable.

Texas sales tax is due on the initial sale, freight charge for delivery to the
trade show, and set-up if the customer takes delivery of the booth in Texas
(for example, if you first deliver the booth to a trade show in Texas). If the
display is first stored and later initially set-up in Texas, the charge for
storage, transportation to the trade show, and set-up are taxable. Charges for
dismantling, transportation back to your storage location, and subsequent
storage are not taxable.

If the display is first stored in Texas and then initially set up out of state,
Texas sales tax is due on the charge for the display because storage of the
display in Texas constitutes a use in Texas by the owner of the display. The
charge for transportation out of state is considered part of the sales price of
the booth and is also taxable. Charges for storage, set-up out of state,
breakdown, and transportation back to Texas are not taxable. Subsequent
charges for storage, set-up and breakdown of the display in Texas are not
taxable.

After a display has been returned to Texas, any charges that you make for
repairing, remodeling, maintaining, fabricating, processing, or other
modification of the display, are subject to Texas sales tax, if the display's
next use will be at a Texas location.

Some of the charges connected with the rental of displays for use in Texas are
taxed differently. Charges in the rental agreement for labor, such as charges
for supervision, set-up, hook-up, assembly or disassembly, erection, and
dismantling, are included in the lease price and are taxable. For more
information on rental charges, see subsection (d) of the enclosed Rule 3.294 -
Rental and Lease of Tangible Personal Property.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please
call me toll-free at 1-800-531-5441, extension 3-4502. The direct line is
512/463-4502. You may also write to Tax Policy Division, Comptroller of Public
Accounts or e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division