Did exempt aircraft parts lose their Texas sales-and-use-tax exemption while held in inventory before installation on qualifying carrier aircraft?

Plain-English summary

Tax Code § 151.328 exempted qualifying items permanently affixed or attached as components of aircraft used as common or contract carriers of people or property.

The Comptroller confirmed that qualifying parts bought in bulk did not become taxable merely because they were held or stored and installed only as needed. The exemption continued between purchase and installation as long as the parts were not diverted to another purpose. Qualifying components also did not lose the exemption when detached for maintenance, servicing, or other purposes.

Common questions

Did bulk storage before installation create tax? No.

What condition applied? The property could not be diverted to another purpose.

What aircraft did the letter cover? Aircraft used as common or contract carriers of people or property.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9004L1023A01

Original ruling text

April 18, 1990

Re: Tax Code Sec. 151.328

Dear **:

You and ** have asked me about the exemption set
out in Tax Code Sec. 151.328 for items that are "permanently
affixed or attached as a component of" aircraft used as a
common or contract carrier of persons or property. The exemption
is not lost if qualifying items are detached from the
aircraft for maintenance, servicing, or other purposes.

You have asked me to confirm that property to be permanently
affixed to qualifying aircraft is exempt from sales tax when
purchased, and does not become subject to sales or use tax
between the time it is purchased and the time it is actually
"permanently a ffixed or attached" as set out in our rule,
found at 34 Tex. Admin. Code 3.297.

Assuming that the property is not diverted to some other purpose,
this conclusion is correct; items bought under this
exemption will not become subject to tax because they are
being held or stored. Thus, for example, if a purchaser were
to buy aircraft parts in bulk, and use those parts on qualifying
aircraft on an "as needed" basis (instead of immediately
attaching or installing them) the parts would still qualify
for the exemption, and would not be subject to tax under
Chapter 151 of the Tax Code.

It has always been Mr. Bullock's position that it's better to
get any unclear issues settled "up front" so taxpayers can
run their business without unnecessary worries about tax
problems. I hope this letter fully covers the issues you asked
about, but if you need further explanation or comments, please
let me know.

You can reach me toll-free at 1/800/ 531-5441, or on my direct
line at 512/463-4606. My mailing address is Post Office Box
13528, Austin, Texas 78711.

Sincerely,

Martin Cherry
Assistant Director
Legal Services Division