Could a cable company give resale certificates for converters and their repair when the converters were included in subscriber service?

Plain-English summary

A cable company supplied converters as part of its subscribers' monthly service package. The Comptroller said the company could buy those converters tax-free with a resale certificate and could also give the repairer a resale certificate when the converters needed repair.

The subscriber-facing result depended on whether the company imposed an extra repair fee. A separately billed repair fee was taxable. If there was no added fee, the letter said no additional tax would be passed along to the customer.

STAR now alerts readers to consult Rule 3.285, as amended November 1, 2017, for specific guidance about care, custody, and control of tangible personal property used in providing a taxable service.

Common questions

Could the cable company buy the converters tax-free? Yes, by giving its supplier a resale certificate.

Could it give the converter repairer a resale certificate? Yes.

Was a separate repair fee to the subscriber taxable? Yes.

What if the subscriber paid no extra repair fee? The letter said there was no additional tax to pass along.

Citations and references

• 34 Tex. Admin. Code Rule 3.313(e)
• 34 Tex. Admin. Code Rule 3.285, identified in the later STAR alert

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8610L0766C10

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale amended 11/01/2017.

October 23, 1986

Dear ***:

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

As we discussed last week, cable television operators and firms that
repair converters have been under the impression that Rule 3.313(e)
required a charge for sales tax when a cable operator repaired a
converter owned by the cable operator that was in the subscribers care,
custody and control as a part of the subscriber's service package for
which a monthly service charge is made.

You have indicated that sales tax is not applicable on converter repairs
when the converter is provided as a part of the monthly service package.

RESPONSE: Cable Television Companies that provide converters to their
customers as part of the service may purchase them tax free by giving
their supplier a resale certificate.

When the converters need repair, the Cable Television Company may issue
the repairman a resale certificate in lieu of tax. If the cable
subscriber is billed an additional fee for the repair, the fee will be
taxable. If there is no additional fee, there would not be any additional
tax passed along to the customer.

This opinion is based upon the facts 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, or telephone 512/463-4600.

Sincerely,

Tax Policy, Tax Administration Division