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Ezel / Tax Rulings / TX
TX 8712L0852B09 Sales and/or Use Tax (State,Local,MTA) 1987-12-15

Did a lease stating a fixed rental payment 'plus sales and use tax' lose its Texas prior-contract exemption?

Short answer: No. That wording did not defeat the exemption. Historical Rule 3.319(c)(4) instead disqualified contracts expressly making the customer responsible for tax-rate changes or increases, because the seller's price then varied with the rate.

Apply this to your situation

This page answers the general question as of 1987. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1987
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 a taxpayer-specific December 1987 Texas Comptroller letter based on lease contracts stating a specific rental payment plus sales and use tax. It says the opinion may change if the facts differ. Although the STAR caption mentions renewals and purchase options, the operative letter decides only the quoted rent-and-tax wording and contracts shifting tax-rate changes or increases to the customer. Rule 3.319(c)(4) and the historical prior-contract exemption may have changed or expired; verify current law and exact contract language. STAR documents may no longer represent current policy even when not marked superseded. Identities are redacted. This summary is informational only and is not legal or tax advice.
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 leases stated a specific rental payment “plus sales and use tax.” The Comptroller said that wording did not cause loss of the prior-contract exemption.

Rule 3.319(c)(4) instead targeted contracts expressly making the customer responsible for tax-rate changes or increases. In those contracts, the seller was not harmed by the rate change because the burden shifted to the customer and the price varied with the tax rate.

What this means for you

Under the historical rule, a general obligation to pay tax differed from a clause specifically shifting future rate increases to the customer. The letter does not address renewals or purchase options despite the broader STAR caption.

Common questions

Did “plus sales and use tax” defeat the exemption? No.

What wording could disqualify a contract? Language specifically making the customer responsible for changes or increases in the tax rate.

Why did that language matter? It protected the seller from rate changes and made the price vary with the tax rate.

Did the body decide renewal or purchase-option issues? No.

Citations and references

  • 34 Tex. Admin. Code Rule 3.319(c)(4) — historical prior-contract provision discussed in the letter.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 15, 1987

Dear ***:

Thank you for your letter concerning prior contract exemptions.

Your contracts state a specific rental payment "plus sales and use tax."
Inclusion of this wording will not cause the loss of a prior contract
exemption.

Section (C)(4) of Rule 3.319 is intended to disqualify those contracts
which
specifically state that the customer is responsible for any changes or
increases in the tax rate. In these cases, the seller is not affected or
harmed by a change in the rate. He has allowed for changes in the tax
rate
by shifting the burden to his customer. His price is not fixed; it may
change depending on the tax rate.

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 me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Julie Pesl
Tax Policy Division

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