How did Texas tax plant leasing and maintenance, proprietary consulting for television commercials, and wardrobe clothing rentals?

Plain-English summary

The letter answered questions about two businesses.

Plant leasing and maintenance

A sole proprietor kept ownership and complete control of leased plants and also maintained them. The Comptroller treated plant rental with owner-provided maintenance as a taxable real-property service.

The business could give suppliers resale certificates when buying plants and fertilizer conveyed to customers as part of the service. It paid tax on items not conveyed. Plant rental without maintenance was taxable, and maintenance of a customer's own plant was also taxable.

Television-commercial consulting and clothing

Advice about background-set accessories and wardrobe attire for television commercials was nontaxable proprietary information under proposed Rule 3.342(d)(1) when gathered for one client and not resold by the consultant. A later sale by the client would be taxable.

Leasing clothing for filming was a taxable rental of tangible personal property. Clothing known at purchase to be exclusively for lease could be bought with a resale certificate, with tax collected on rental charges. If the consultant was unsure whether clothing would be rented or used, tax was due at purchase.

What this means for you

The historical answers turned on ownership and control, whether information was proprietary to one client, and whether clothing was committed exclusively to rental at purchase.

Common questions

Was plant leasing with maintenance taxable? Yes.

Was client-specific television consulting taxable? No, under the proprietary-information facts described.

Were clothing rentals taxable? Yes.

Could clothing be bought for resale? Yes, when known at purchase to be exclusively for lease.

Citations and references

• Proposed 34 Tex. Admin. Code Rule 3.342(d)(1) — proprietary information gathered for one client.
• 34 Tex. Admin. Code Rule 3.285 — sales for resale.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0857G07

Original ruling text

January 11, 1988

Dear ***:

I apologize for the delay in answering your letter concerning the
taxability of green plant leasing services and consulting services in the area
of filming television commercials.

Your first question involves a sole proprietor who leases plants and
provides maintenance services for those plants. Your client retains complete
control over the placement and service and remains the owner of the plans.
Rental of plants where the plants are maintained by the owner
or his employees is taxable as a real property service. Your client may
give her supplier a resale certificate when she purchases the plants and
fertilizer. She should pay tax when she buys items not conveyed to her
customers as a part of her service. Tax is also due on plant rental with no
maintenance and maintenance of a customer's plant.

Your second question involves a person who advised clients on background
set accessories and wardrobe attire for television commercials. Although
information services became taxable on October 1, 1987, your client's
consulting services are not taxable information under proposed Rule
3.342(d)(1):

The sale of information which is gathered or compiled on behalf of a
particular client is not subject to tax if the information is a proprietary
nature to that client and may not be sold to others by the person who gathered
or compiled the information. Any subsequent sale of such
information by the client for whom the information was gathered or
compiled is subject to tax. Examples include opinion polls and management
consultant reports.

You further stated that the consultant purchases items of clothing and
allows them to be leased or used for filming. Those clothing items are kept in
an inventory and may or may not be used again. Leasing the clothing is the
rental of tangible personal property, and therefore
taxable. If the consultant knows at the time she purchases the clothing
that it is not for personal use and will be exclusively for lease, she may
issue a resale certificate to the supplier, and collect sales tax on the lease
charges. If she is unsure if the clothing will be rented or used, tax must be
paid at the time of purchase.

I am enclosing a copy of rule 3.285 concerning sales for resale.

This opinion is based upon the facts presented. If there are additional
or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1/800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,

Adina Whittemore
Tax Policy Division