How did Texas tax labor, parts, mileage, fluids, and subcontract work for heavy equipment versus licensed motor vehicles?

Plain-English summary

Labor to repair heavy equipment not licensed for highway use—such as bulldozers, cranes, and backhoes—was taxable. Labor to repair a licensed motor vehicle was not. Mileage and sublet repair labor followed the same distinction: taxable for heavy equipment and exempt for motor vehicles.

For parts and maintenance fluids, a lump-sum repairer paid tax when purchasing them. A repairer that separately stated parts and labor could give the supplier a resale certificate and collect tax from the customer on the parts or fluids.

A Texas seller also had to collect tax on taxable merchandise unless it had documented proof that the seller placed the goods into their final movement out of state.

Common questions

Was labor to repair a bulldozer taxable? Yes, under the letter's non-highway-equipment classification.

Was labor to repair a licensed motor vehicle taxable? No.

How were parts and fluids treated? The lump-sum repairer paid tax on purchase; a separated repairer could buy for resale and collect tax from the customer.

What proof was needed for an out-of-state sale? Documentation that the seller placed the merchandise in its final movement out of state.

Citations and references

• Texas Comptroller Rule 3.323 — enclosed for the out-of-state shipment documentation 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/8601L0693D01

Original ruling text

January 7, 1986

Dear ***:

Thank you for your letters concerning the taxability of labor to repair; A)
heavy equipment such as bulldozers, cranes, backhoes, and the like(non-licensed
for street use); and B) licensed motor vehicles; and out-of-state shipments of
taxable merchandise.

1. Sale of labor to repair both A and B above.

Labor to repair heavy equipment not licensed for highway use is taxable;
however, labor to repair a motor vehicle is not.

2. Sale of parts used in repairing both A and B above.

Parts are taxable to the lump-sum repairman, at the time of purchase or a
repairman who separates parts from labor may, issue a resale certificate to the
supplier and collect tax from the client.

3. Charges for mileage to and from the respective job sites when repairing both
   A and B above.

Mileage to repair heavy equipment is taxable, mileage to repair a motor vehicle
is exempt.

4. Sale of fluids used in maintaining or repairing the two above
   classifications (i.e., grease, oil, brake fluid, etc.).

Taxable - a lump-sum repairman owes tax at the time of purchase. A separated
repairman may issue a resale certificate to the supplier and must collect tax
from the client.

5. Sale of sub-let labor such as technical machine work or welding, when used
   in repairing A and B above.

Taxable if labor is performed on A; exempt if labor is to repair, restore or
maintain a motor vehicle.

A Texas seller is required to collect sales tax from the buyer unless the
seller has documented proof that the seller placed the taxable merchandise in
the final movement out of state. Enclosed is Rule 3.323 for your reference.

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