Were stand-alone inspection and X-ray services on casing or drill pipe taxable, and what changed when they accompanied a repair?

Plain-English summary

The Comptroller said stand-alone inspection and X-ray charges for casing or drill pipe were not taxable. If those services were performed with a repair, however, they were taxable unless the inspection and X-ray charges were separately stated from the repair charge.

Pipe purchased for resale was exempt under Rule 3.285(a). If taxable services were performed before the pipe was resold, the requester could issue a resale certificate instead of paying tax on those services. The answer did not depend on whether the service cost was added to the later sales price.

The letter also states that repair of tangible personal property had been taxable since October 2, 1984 under Rule 3.292.

Common questions

Were stand-alone pipe inspection and X-ray services taxable? No.

What if they were performed with a repair? They were taxable unless separately stated from the repair charge.

Could taxable pre-resale services be bought for resale? Yes, with a resale certificate under the stated facts.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8901L0937F13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

January 30, 1989

Dear ****:

Thank you for your letter dated January 24, 1989, on the taxability of
casing and drill pipe which is X-rayed, inspected and/or repaired prior to sale
of the pipe.

The purchase of drilling pipe or casing pipe for resale is exempt from
sales tax as stated in Comptroller's Rule 3.285(a): "A sale for resale is not
taxable."

Charges for inspection and X-ray on a stand-alone basis are not taxable.
However, if done in conjunction with a repair, they are taxable, unless the
charges for the inspection and for the X-ray are separately stated to the
customer from the charges for the repair. Repair of tangible personal property
was taxable effective October 2, 1984. See Comptroller Rule 3.292.

If taxable services are performed on the pipe before the pipe is resold,
your client can issue a resale certificate in lieu of paying the tax on the
services. The answer will be the same whether the cost of the inspection and
repair is added to the subsequent sales price or not.

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 our
toll-free number
1-800-252-5555. The regular number is 512/463-4600. You may write me at
Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Julie Pesl
Tax Correspondence