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Ezel / Tax Rulings / TX
TX 8410L0592E13 Sales and/or Use Tax (State,Local,MTA) 1984-10-16

Was repair labor taxable when a manufacturer paid the full cost under its warranty, and how were those charges reported?

Short answer: No tax was due on repair labor when the manufacturer paid the entire warranty-repair cost. The repairer had to keep warranty records and could deduct charges to the manufacturer from gross sales when computing taxable sales.

Apply this to your situation

This page answers the general question as of 1984. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1984
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Texas Comptroller said no tax was due on repair labor performed under a manufacturer's warranty when the manufacturer paid the entire repair cost.

The repairer had to keep records showing that the charges were for manufacturer-warranty repairs. Charges billed to the manufacturer could be deducted from gross sales when determining the amount subject to tax.

What this means for you

Warranty repairers

The historical exemption depended on the manufacturer paying the full repair cost and on records identifying the work as warranty repair.

Accountants and tax professionals

The letter allowed manufacturer charges to be deducted from gross sales for the taxable-sales calculation. Verify current return-reporting rules.

Common questions

Q: Was the warranty repair labor taxable?
A: No, when the manufacturer paid the entire cost.

Q: What records were required?
A: Records showing the charges were for manufacturer-warranty repairs.

Q: How were charges to the manufacturer treated in gross sales?
A: They were deducted when determining the amount subject to tax.

Citations and references

  • The letter cites no statute or administrative rule.

Source

Original ruling text

October 16, 1984

Dear *****:

Thank you for your recent letter regarding labor performed to fulfill a
manufacturer's warranty.

No tax is due on repair labor for fulfilling a manufacturer's warranty
when the manufacturer pays the entire cost of the repairs. You must
keep records indicating that the charges are for repairs done under a
manufacturer's warranty.

Your charges to the manufacturer would be deducted from gross sales when
determining your amount subject to tax.

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

Please feel free to contact me if you have additional questions. You
may write me, call toll free 1-800-252-5555 from anywhere in Texas or
phone 512/475-1931.

Sincerely,

Al Van Allen
Tax Administration Division

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