Was a portable generator mounted on a custom towable platform treated as a motor vehicle or as taxable movable specialized equipment?

Plain-English summary

Texas Tax Administration classified a portable generator mounted on a custom towable platform as movable specialized equipment taxable under the Limited Sales Tax.

The platform was only a component part of the specialized unit. Two facts reinforced that conclusion:

• The generator seller designed the platform and supplied its specifications.
• The platform was built to those specifications specifically for mounting the generator.

The fact that a third-party machine shop built the platform as a subcontractor was not relevant.

What this means for you

Sellers of trailer-mounted equipment

A towable platform did not control the classification where it functioned as a custom component of a larger specialized unit.

Auditors and tax professionals

The memo looked at the finished unit and the platform's design relationship to it, not merely who fabricated the platform.

Common questions

Q: How was the finished generator unit classified?
A: As movable specialized equipment taxable under the Limited Sales Tax.

Q: Was the towable platform treated separately?
A: No. It was treated as a component part of the specialized unit.

Q: Did subcontracting the platform construction matter?
A: No.

Citations and references

The memorandum does not cite a statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8409L0585A02

Original ruling text

DATE: September 6, 1984

TO: Tom Grimes, *** Audit

FROM: Curt Swenson, Tax Administration

SUBJECT: Power Support Systems Portable Generator

As we discussed in our phone conversation, the portable generator sold
by XYZ Systems is moveable specialized equipment and thus taxable under
Limited Sales Tax. The towable platform is only a component part of
the specialized unit.

The fact that the platform is designed by and built to the
specifications of XYZ Systems is further evidence that the platform is
only a component part. The fact that the platform was built by a
"subcontractor" is not relevant.

Date: August 16, 1984

To: Curt Swenson

From: Roy D. Belk, Auditor - ***

Subject: Determination of Status (motor vehicle or specialized equipment)

As per the phone conversation between you and Tom Grimes of this
office on 08-15-84 I am submitting the following. In a recent
audit that I have been involved in, the following item came to
my attention. I am requesting that a decision be made as to the
classification of this item. Below, is listed the information,
provided by the vendor. The purchaser is being audited by me at
this time. Also enclosed please find photos, of the item, taken
at the vendors place of business.

Manufacturing Information

1. Vendor makes drawings and specifications of trailer needed.

2. Vendor submits necessary data to a third party manufacturer
   which is a machine shop.

3. Manufacturer buys the material and builds a trailer per the
   drawings and specifications provided by the vendor. (see photo
   1(a) and 1 (b).

4. Vendor mounts a generator on the trailer from number 3 above.
   The finished product is then sold to their customer. (see photo
   2 (a) and 2 (b).

Your response, as to the classification, of this item would be
appreciated. If you need further information about the manufacture
of this item, contact *** with XYZ Systems at *****
or call me or Tom Grimes at Tex-an 840-1219.