Which Texas repair, handling, travel-time, and mileage charges were taxable when work was or was not covered by a manufacturer's warranty?

Plain-English summary

The Texas Comptroller gave three answers about a distributor's service work after the October 2, 1984 sales-tax changes.

Labor performed under a manufacturer's warranty was not taxable. A handling charge billed to the manufacturer when the distributor changed or returned a warranty-covered part was also not taxable.

For the distributor's other service-station-island work, the combined charges for labor, travel time, and mileage were taxable unless the work was performed under a manufacturer's warranty.

What this means for you

Warranty-service providers

The letter distinguished manufacturer-warranty work from ordinary repair service. The warranty labor and described warranty-part handling charge were nontaxable.

Repair businesses

Separately listing travel time and mileage did not make them nontaxable when they were part of taxable service work.

Accountants and tax professionals

Classify each job by warranty status and retain records supporting the treatment. The letter cites Rule 3.292 but does not reproduce it.

Common questions

Q: Was labor under a manufacturer's warranty taxable?
A: No.

Q: Was the handling charge for a warranty-covered part taxable?
A: No.

Q: Were labor, travel time, and mileage for ordinary service work taxable?
A: Yes, unless the work was performed under a manufacturer's warranty.

Citations and references

• Rule 3.292 (repairs and warranty work, as cited in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8411L0609E09

Original ruling text

November 1, 1984

Dear ***:

Thank you for your October 2, 1984 letter concerning the effect of the
October 2, 1984 changes in the sales tax law on your business.

1. We are a distributor for ***, for whom we do warranty
   service work. Is this labor taxable? Answer: Labor involved in manufacturer's
   warranty service work is not taxable.

2. We also change out parts for this company which they replace to us at
   no charge. When we change out a part covered by warranty or receive a part covered
   by warranty and return it to ***, we charge them a handling
   charge for that item. Is this charge taxable? Answer- The handling charge is
   not taxable.

3. The majority of our service work is done on the service station
   island. Our charges are broken-out by labor, travel time and mileage. Are all three
   (3) listings taxable? Answer: The charge for service work (labor, travel time and
   mileage) is taxable unless performed under a manufacturer's warranty.

Rule 3.292, which covers repairs and warranty work, is enclosed for
reference.

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 us if you have additional questions.

Sincerely,

Tax Policy Section
Tax Administration Division