Was a lump-sum charge to deliver, set up, and operate concert sound equipment taxable?

Plain-English summary

The company delivered, set up, and operated sound systems for concerts, conventions, and other public gatherings, providing equipment, expertise, and labor. A single lump-sum charge covering both the equipment and personnel was a nontaxable service.

Because the company provided a nontaxable service, it had to pay sales tax on all equipment and supplies used in providing that service.

Common questions

What billing structure received the stated treatment? One lump-sum amount covering equipment and operators. Did the provider collect tax from the customer? No under that arrangement. Who paid tax on the equipment and supplies? The service provider.

Citations and references

The reproduced letter cites no numbered statute or 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/8505L0647A01

Original ruling text

May 10, 1985

Dear ***:

Thank you for your letter of April 29, 1985, concerning the taxability of
an aspect of your business, COMPANY A.

The providing of COMPANY A as described in your letter is a nontaxable
service if you charge a single (lump-sum) amount which covers the
equipment and the personnel to operate it.

Persons who provide nontaxable services are required to pay sales tax on
all equipment and supplies used in providing the nontaxable services.

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. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division

April 29, 1985

State Comptroller's Office
Tax Policy Dept.
Capitol Station
Austin, Texas 78774

Dear Sirs;

In a recent conversation with our Sales Tax Auditor, we have become aware
that we perhaps should not be charging tax on one aspect of our business:
COMPANY A. I am enclosing a copy of our standard contract for your
information. Basically, we deliver, set up and operate sound systems for concerts,
conventions, and other public gatherings. In so doing, we provide expertise and
labor for someone's production. Included in the price is our hotel and
transportation costs. In the past we considered any equipment used to be "tools
of the trade" and consequently not subject to tax; since October we have been
charging tax on this service, because of written notification in a flyer with
our tax forms that included "Theatrical Services" as newly taxable.

Would you please be so kind as to clarify this for us in writing? Thank you for
your prompt attention to this matter.

Sincerely,