TX 8607L0743B04 Sales and/or Use Tax (State,Local,MTA) 1986-07-01

Was the rental of cable-signal decoders taxable, and could the lessor buy the decoders tax-free for resale?

Short answer: Yes. The lessor had to collect tax on decoder rental charges and obtain a sales-tax permit. Decoders actually rented to customers could be bought for resale, but equipment kept for the lessor's own use could not.

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This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The lease or rental of cable-signal decoders was a taxable rental of tangible personal property. The lessor had to collect sales tax on the rental price and obtain a Texas sales-tax permit.

Decoders bought for actual rental to customers could be purchased tax-free by giving suppliers a properly completed resale certificate. Equipment bought for the lessor's own use, and not transferred to a customer, could not be purchased tax-free.

Common questions

Were decoder rentals taxable? Yes.

What amount was taxed? The lease or rental price.

Could the lessor buy rental inventory tax-free? Yes, with a resale certificate for decoders actually rented to customers.

Could own-use equipment be bought for resale? No.

Citations and references

34 Tex. Admin. Code Rule 3.285 — resale certificates.
34 Tex. Admin. Code Rule 3.286 — seller responsibilities.
34 Tex. Admin. Code Rule 3.294 — rentals and leases of taxable items.

Source

STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
Opinion: https://star.comptroller.texas.gov/view/8607L0743B04

Original ruling text

July 1, 1986

Dear ***:

Thank you for your letter of June 23, 1986 concerning the taxability of
the lease or rental of cable signal decoders.

The lease or, rental of tangible personal property is subject to sales
tax. You must collect sales tax from your customers based on the lease or
rental price of the decoders. You are required to obtain a sales tax permit
from the Comptroller's office. Cable signal decoders purchased for rental
purposes may be purchased tax-free by issuing a properly completed resale
certificate to your suppliers. Equipment that you purchase for your own
use, and not actually transferred to the customer, may not be purchased
tax free.

Please find Rule 3.286; Seller's Responsibilities, Rule 3.285; Resale
Certificate and Rule 3.294; Rental and Lease of Taxable Items, enclosed
for your reference. An application packet will be mailed under separate
cover.

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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