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Ezel / Tax Rulings / TX
TX 8505L0647B01 Sales and/or Use Tax (State,Local,MTA) 1985-05-10

Were computers used by contractors on federal real-property contracts taxable?

Short answer: Yes for purchases, leases, or rentals effective October 2, 1984, including parts and supplies. A contractor could claim the historical preexisting-contract exemption for a federal contract entered before that date by issuing an exemption certificate.

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This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Effective October 2, 1984, computers bought, leased, or rented by a contractor for use in improving federal-government real property were taxable. Computer parts and supplies were taxable too.

A contractor could claim the historical preexisting-contract exemption for a computer purchase or lease, and for computer parts and supplies, when used in a federal contract entered before October 2, 1984. The contractor had to issue an exemption certificate when claiming that relief.

Common questions

Did federal ownership make the contractor's computers exempt? No under the stated post-October 2 rule. Were parts and supplies taxable? Yes. What contracts could qualify for historical relief? Federal contracts entered before October 2, 1984, with an exemption certificate.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

May 10, 1985

Dear ***:

Thank you for your letter of April 24, 1985, concerning the taxability of
computers purchased, leased or rented by contractors for use on federal
contracts.

Effective October 2, 1984, computers which are purchased, leased or
rented by a contractor for use in a contract to improve real property
belonging to the federal government are taxable. Parts and supplies for
the computer equipment are also taxable.

A contractor may claim a preexisting contract exemption on a purchase
or lease of a computer and the purchase of computer parts and supplies
for use in a federal government contract entered into before October 2,
1984. An exemption certificate must be issued when a contractor claims
the preexisting contract exemption.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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