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Ezel / Tax Rulings / TX
TX 8609L0765E11 Sales and/or Use Tax (State,Local,MTA) 1986-09-24

Was a single insurance charge covering both loss of and damage to rented pagers taxable?

Short answer: Yes. Separately stated loss-only insurance was not taxed, but damage-waiver fees were taxable from September 1, 1986. A single charge covering both loss and damage was entirely taxable.

Apply this to your situation

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

Currency note: this ruling is from 1986
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The Comptroller said damage-waiver fees on leased or rented equipment became taxable September 1, 1986. Separately stated insurance against loss of the equipment was not taxed.

When one charge covered both loss and damage, however, the entire amount was taxable. The letter therefore approved the sales tax charged on the requester's pager-rental insurance fee.

The letter also noted that labor to repair, restore, remodel, or maintain tangible property had become taxable October 2, 1984, making maintenance and extended-service agreements taxable.

Common questions

Was a damage-waiver fee taxable? Yes, effective September 1, 1986 according to the letter.

Was separately stated loss-only insurance taxable? No.

What if one fee covered both loss and damage? The entire fee was taxable.

Citations and references

  • The letter cited no numbered statute or Comptroller rule.

Source

Original ruling text

September 24, 1986

Dear ***:

Thank you for your recent question regarding insurance charges on pager
rentals.

Effective October 2, 1984, labor to repair, restore, remodel or maintain
tangible property became taxable. For that reason Maintenance Agreements
and Extended Service Agreements also became taxable.

Earlier this year we discovered that we had overlooked taxing damage
waiver fees on leased or rented equipment. These became taxable effective
September 1, 1986; however, we still do not tax separately stated charges
for insurance against loss of the equipment.

If a single charge is made for insurance covering both loss and damage to
rental equipment, the entire charge is taxable.

*** is correct in charging you sales tax on the insurance
charge.

This opinion is based on the facts presented. If there are additional or
different facts, the 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 or
telephone 512/463-4600.

Sincerely,

Tax Policy Section
Tax Administration Division

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