Could a federal credit union claim Texas sales-tax exemption on parking, storage, repairs, and construction projects?

Plain-English summary

The Texas Comptroller said a federal credit union organized under 12 U.S.C. § 1768 was exempt from sales tax on items purchased for its own use.

The credit union could issue exemption certificates for parking fees if it did not charge the individuals using the parking facilities. It could also issue exemption certificates for storage and repair.

Materials and services used by contractors to build or remodel the credit union's buildings, parking lots, fencing, and similar property were exempt. The contractor, however, had to pay tax on machinery, equipment, and consumable supplies used to perform the federal contract but not incorporated into the improved property.

What this means for you

Federal credit unions

The exemption applied to purchases for the credit union's own use. For parking, the letter expressly conditioned exemption on the credit union not charging the users.

Contractors

Exempt project materials and services did not exempt the contractor's own machinery, equipment, or consumed supplies that stayed outside the finished property.

Accountants and tax professionals

Separate property incorporated into the project from the contractor's tools and consumables, and retain the appropriate exemption certificates.

Common questions

Q: Were parking fees exempt?
A: Yes, if the individuals using the parking were not charged by the credit union.

Q: Were storage and repair charges exempt?
A: Yes, the letter allowed exemption certificates for them.

Q: Did the contractor buy all project-related items tax-free?
A: No. Machinery, equipment, and consumable supplies not incorporated into the improved property remained taxable to the contractor.

Citations and references

• 12 U.S.C. § 1768 (federal credit unions, 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/8412L0607E09

Original ruling text

December 11, 1984

Dear ****:

Thank you for your letter of November 26, 1984, concerning the taxability of
Federal Credit Unions.

Your questions and the applicable answers are following:

As a Federal Credit Union, headquartered on **** Air Force Base, are we
exempt from such taxes as those imposed on parking fees, storage, repairs, and
the like?

Federal Credit unions organized under 12 U.S.C. SEC. 1768 are exempted from
paying sales tax on items purchased for their own use. An exemption
certificate may be issued, in lieu of tax, for parking fees, providing the
individuals using the parking facilities are not being charged by the credit
union. Exemption certification may be issued for storage and repair, also.

From time to time, we hire contractors to build or remodel buildings, parking
lots, fencing and the like. Are the materials and services which go into these
projects exempt from sales taxes?

Yes - however, the contractor must now pay tax on the purchase of his
machinery, equipment or consumable supplies used to fulfill the terms of
federal contract, but are not incorporated into the property being improved.

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,

Dot Burchard
Tax Policy Section
Tax Administration Division