A construction company acts as authorized purchasing agent and general contractor for the Federal Home Loan Bank on a construction job, billing equipment rentals to the Bank (paid by Bank check) as a federal exemption claim. Are those equipment rentals exempt from Texas sales tax?

Plain-English summary

A taxpayer's customer, a construction company, was retained as the authorized purchasing agent and general contractor for the Federal Home Loan Bank on a construction job. The taxpayer billed equipment rentals to the Federal Home Loan Bank in care of the construction company, and payment was made by a check issued from the Bank, which claimed exemption because the job was federal.

The Comptroller confirmed the equipment rentals are exempt, because they are made to the Federal Home Loan Bank. Tex. Tax Code § 151.309(1) through (3) exempts sales, rentals, and leases of taxable items to — and purchases of taxable items by — the United States, its unincorporated instrumentalities, and a corporation wholly owned by the United States or by another corporation wholly owned by the United States. The Federal Home Loan Bank qualifies under this framework.

What this means for you

Contractors and equipment rental companies working federal jobs

If your customer is a federal instrumentality or a wholly-U.S.-government-owned corporation (like a Federal Home Loan Bank) and payment for the rental actually comes from that entity, the rental can be exempt under § 151.309(1)-(3) — even when billed through an authorized purchasing agent/general contractor acting on the federal entity's behalf.

Accountants and tax professionals

Verify who is actually paying and who holds the exemption claim (here, direct payment by Bank check) before extending a federal-instrumentality exemption through an intermediary purchasing agent — the exemption follows the true purchaser's federal status, not just any party billed "in care of" that agent.

Common questions

Q: Is equipment rented for a construction job exempt from Texas sales tax if the job is for a federal instrumentality like a Federal Home Loan Bank?
A: Yes, per this letter — the rentals are exempt under Tex. Tax Code § 151.309(1)-(3) because the true purchaser is the Federal Home Loan Bank.

Q: Does billing the rental "in care of" a general contractor change the exemption analysis?
A: Not in this letter's facts — the rental was still treated as made to the Bank, since the Bank itself issued payment and claimed the exemption.

Q: What kinds of entities does § 151.309(1)-(3) cover?
A: The United States itself, its unincorporated instrumentalities, and corporations wholly owned by the United States (or by another wholly-U.S.-owned corporation).

Q: Can I rely on this letter for my own federal-instrumentality construction job?
A: No. This opinion is based on the facts presented, and additional or different facts could change the opinion; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.309(1)-(3) (exemption for sales, rentals, and leases to the United States, its unincorporated instrumentalities, and wholly-owned federal government corporations)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200001030L

Original ruling text

January 14, 2000

Subject: Interpretation on Construction Job

Dear **:

Thank you for your recent e-mail concerning the taxability of equipment rentals
used on a construction job.

Your customer, CONSTRUCTION COMPANY, has been retained as the authorized
purchasing agent and general contractor for the Federal Home Loan Bank of
**. You have been billing the rentals to Federal Home Loan Bank in
care of CONSTRUCTION COMPANY. Payment is made by check issued from the Federal
Bank which is claiming exemption because it is a federal job.

The equipment rentals are exempt because they are made to the Federal Home Loan
Bank of **. Texas Tax Code Section 151.309(1) through (3) exempts
sales, rentals and leases of taxable items to and purchases of taxable items by
the United States, its unincorporated instrumentalities...a corporation that is
wholly-owned by the United States or by another corporation that is
wholly-owned by the United States.

You may view or down load the sales tax law at and
then click on the following:

1. State Government
2. Texas Statutes
3. Tax Code
4. Chapter 151
5. Scroll down to the referenced statutory section

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

You may call me toll free 1-800-531-5441, extension 3-4683 if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts. My e-mail address is
.

Sincerely,

Eddie C. Washington
Tax Policy Division