How did Texas tax oilwell pump-unit motor work, control-panel repairs, incidental charges, and overhead power-line construction?

Plain-English summary

The Texas Comptroller said that, effective October 2, 1984, labor to repair, remodel, maintain, or restore taxable items was taxable.

For the oilfield and electrical work described:

• The full motor-rewinding charge, including parts and labor, was taxable.
• Labor to install a repaired motor on a taxable oilwell pumping unit was taxable.
• Mileage, service charges, meals, and similar incidental charges connected with the repair were taxable.
• Parts and labor to repair control panels, cables, and related equipment were taxable, as were connected incidental expenses.
• Separately stated labor to set poles and build new overhead power lines was not taxable, although the materials were taxable.
• Labor to repair power lines already in use was taxable.

The sample invoices followed those rules: the motor-rewind and motor-change charges were fully taxable; the control repair was fully taxable; and the new overhead-line materials were taxable while the separately billed construction labor was not.

What this means for you

Oilfield electrical and pump-service businesses

The letter treated pump-unit and control-system work as taxable repair service, including related travel and other incidentals.

Power-line contractors

New-line construction labor received different treatment from repair of an existing line, and the nontaxable construction labor had to be separately stated from materials.

Accountants and tax professionals

Separate new construction from repair and separate labor from materials where the historical rule requires it. Verify current law before using this 1984 matrix.

Common questions

Q: Was motor rewinding taxable?
A: Yes, on the total parts-and-labor charge.

Q: Were mileage, meals, and service charges tied to repair taxable?
A: Yes.

Q: Was labor to build a new overhead power line taxable?
A: No, when separately stated from materials.

Q: Was labor to repair a line already in use taxable?
A: Yes.

Citations and references

• The letter cites no 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/8410L0598C14

Original ruling text

October 24, 1984

Dear **:

Thank you for your September 14, 1984, letter concerning the effect of the new
changes in the sales tax law on your business.

Effective October 2, 1984, labor to repair, remodel, maintain or restore taxable
items is taxable.

You are collecting sales tax correctly on motor rewinding jobs. The total
charges for rewinding (parts and labor) is taxable.

Oilwell pumping units are taxable items. The labor to install a repaired motor
on a pumping unit is taxable. Incidental charges such as mileage, service
charges, meals, etc., are taxable as part of the repair service.

When a serviceman goes out and repairs the control panels, cables, etc., the
parts and labor are taxable. Incidental expenses or charges made in connection
with the repair are also taxable.

Labor to set poles and build overhead power lines is not taxable ,when the
labor charges are separately stated from the charge for materials (poles and
wire).

Labor to repair lines that are in use is taxable.

The following jobs and billings that you submitted are restated below along
with a statement whether or not the tax is computed on the correct charges:

Job I
Invoice A
Shoe Repair #88426
Rewind and replace bearing in
10 Hp. 1800 RPM Motor Century Serial #BA876: $100.00
1-6202 Bearing: $4.00
1-6304 Bearing: $8.00
Machine work on end bell: $22.00
Total: $134.00
Tax is due on the total amount.

Invoice B
To lease and take off our loan motor and set your repaired motor.
1 hour 3. Electrician and Pickup: $30.00
Tax is due on this charge.

Job II
To lease and repair control and replace fuses.

1 size one G.E. Coil: $24.00
1-100 amp 600 v. fusetron: $10.00
1 hour Electrician and Pickup: $30.00
Total: $64.00
Tax is due on the total charge ($64.00)

Job III

Invoice A
Material to build over head line and set poles, set control and run conduit.
1-30 ft. class 6 highline pole: $80.00
900 ft. 3 2 ACSR overhead line wire: $90.00
Pole line hardware: $60.00
Control panel: $200.00
Conduit: $30.00
THW Cable: $20.00
Anchors and rod: $20.00
Guy line Assemblies: $24.00
$524.00
$20.96
Total: $544.96
Tax is due on the total amount.

Invoice B
Labor to dig holes 5 ft. deep for poles, set poles, put up overhead line, set
control panel, bury conduit underground.
Hotel and meals exp. Ticket attached $40.00 + $2.00 tax: $42.00
Electrician and Bucket truck: $40.00
J. Lineman: $16.00
Hole digger and operator: $42.00
Winch truck and operator: $30.00
Ditcher and operator: $30.00
Total: $200.00
The charges are not taxable.

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

Sincerely,

Eddie C. Washington
Tax Policy Section
Tax Administration Division