How did Texas tax steam cleaning, repairs, and air-filter cleaning for motor vehicles versus off-highway equipment?

Plain-English summary

The Texas Comptroller distinguished off-highway equipment from motor vehicles designed to carry people or cargo on public roads.

Steam cleaning or repairing diesel engines and transmissions on off-highway equipment was taxable. The same services on motor-vehicle engines and transmissions were not taxable. The cleaner still had to pay tax on soap because the soap was consumed in the service rather than transferred to the customer.

Parts and materials used in motor-vehicle repairs remained taxable. With lump-sum billing, the repairer could pay tax when purchasing them. With separately stated labor, parts, and materials, the repairer had to collect tax from the customer on the parts and materials.

Air-filter cleaning followed the vehicle's use: taxable for equipment filters and nontaxable for motor-vehicle filters. For filters usable in either category, the cleaner had to collect tax unless the customer gave an exemption certificate stating motor-vehicle use and kept supporting use records.

What this means for you

Cleaning and repair businesses

Classify the vehicle or equipment before invoicing. Paying tax on cleaning supplies did not replace the duty to collect tax on a taxable cleaning charge.

Fleet and equipment operators

Mixed-use air filters required an exemption certificate and records supporting motor-vehicle use.

Accountants and tax professionals

Track service labor separately from taxable parts and materials, and account for whether invoices are lump-sum or separated.

Common questions

Q: Was steam cleaning an off-highway diesel engine taxable?
A: Yes.

Q: Was the same service on a motor-vehicle engine taxable?
A: No.

Q: Could the cleaner buy soap for resale?
A: No. The letter says the soap was not transferred to the customer as part of the service.

Q: How were mixed-use air filters handled?
A: Tax had to be collected unless the customer certified motor-vehicle use and maintained supporting records.

Citations and references

• Tex. Tax Code § 151.010(a)(5) (repair, remodeling, maintenance, and restoration of tangible personal property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8412L0632A14

Original ruling text

December 14, 1984

Dear ***:

Thank you for your November 1, 1984, letter concerning the effect of the
October 2, 1984, changes in the sales tax law on your business.

Section 151.010(a) (5) of the tax code imposes sales tax on the repair,
remodeling, maintenance, and restoration of tangible personal property, except
the repair, maintenance and restoration of a motor vehicle. A motor vehicle is
a vehicle designed for transporting persons or cargo on public roads.

Steam cleaning or repairing diesel engines and transmissions on off-highway
vehicles (equipment) is taxable. These services are not taxable when performed
on motor vehicles engines and transmissions. You are required to pay sales tax on
the soap used in steam cleaning. You may not issue a resale certificate when
purchasing soap because it is not transferred to your customer as part of the
taxable service.

Sales tax is due on the parts and materials used in repairing motor
vehicle engines and transmissions. You may pay sales tax on the parts and
materials if you bill a lump-sum amount for the repairs. If you bill separated
amounts for labor, parts and materials, you must collect sales tax from the
customer on the charges for parts and materials.

Cleaning air filters used in equipment is taxable. Cleaning air filters
used in motor vehicles is not taxable. You are required to collect sales tax
on the charge for cleaning air filters which can be used in equipment and
motor vehicles unless the customer issues an exemption certificate stating
that the filters are for use in motor vehicles. The customer has the burden
of keeping records on the use of the filters. Customers who do not maintain
these records should not claim the exemption. Customers may submit samples of
their methods to document use of the filters in equipment and motor vehicles.

Payment of sales tax on the supplies used in cleaning air filters will
not relieve you of your responsibility to collect the sales tax.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from any where in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division