Did sending employees or contractors into Texas for computer repairs create taxable representation?

Plain-English summary

Sending or employing a repairman in Texas established representation for the New Jersey seller. Repairs by resident or nonresident employees were taxable, and later tangible-property sales were also taxable. Repairs by a Texas independent contractor and rebilled by the seller were taxable to the customer; the seller could give the contractor a resale certificate.

Common questions

Did employee residence matter? No. Were contractor repairs taxable when rebilled? Yes. Could the seller use a resale certificate? Yes.

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/8506L0702D08

Original ruling text

June 28, 1985

Dear ***:

Thank you for your recent letter which is restated with response below.

I have a client who sells computer hardware from his office in New
Jersey to a customer in Texas. I believe that these sales are exempt
from Texas sales tax because the seller does not maintain an office,
warehouse or any other facility in Texas, nor does he accept orders or
payments in Texas.

However, the seller frequently sends technicians to service the
equipment he sells to customers in Texas. He does so under three
types of transactions described below. Please advise me as to
whether any of these transactions are subject to Texas sales tax:

1. Repairs and maintenance service performed in Texas by an employee
   of the seller. The employee is not a resident of Texas.

Response: At the time your client sends or employs a repairman in Texas
he establishes representation. The charge, for repairing the hardware would
be taxable. Subsequent sales of tangible personal property would also be taxable.

2. Repair and maintenance service performed in Texas by an employee of the seller.
   The employee is a resident of Texas.

Response: Taxable.

3. Repair and maintenance service performed in Texas by an independent contractor
   with offices in Texas. The independent contractor is under contract with the seller
   and the bills the seller is in New Jersey. The seller then adds an amount for
   administrative costs and profit margin, and bills the customer in Texas for the
   repairs and maintenance services performed by the independent contractor.

Response: The charge your client makes to his customer is taxable. Your client
may give the third party repairman a resale certificate in lieu of tax. I am
enclosing an application package for his use.

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