Were recurring Texas rental charges for returnable gas cylinders taxable when the cylinders were supplied with gas?

Plain-English summary

The letter addressed returnable cylinders rented with helium, welding gas, or other contents. Under Tax Code § 151.322, the person that filled a returnable container and first sold or rented it with its contents had to pay tax when initially acquiring the container.

Later charges for renting that container were not taxable. The supplier still collected tax on the gas or other contents. A retailer buying the contents for resale—such as a business using the gas to fill balloons for sale—could give the supplier a resale certificate instead.

The letter separately said that selling or renting an empty used returnable container to another retailer that would refill it and supply it to ultimate users was taxable.

What this means for you

Under this 1991 letter, the reusable container and its contents followed different tax paths. Suppliers needed to distinguish the container's initial acquisition, later container-rental charges, taxable contents, and any resale claim for the contents.

Common questions

Were later cylinder-rental charges taxable? No.

Was the gas inside the cylinder taxable? Yes, unless the customer bought it for resale and provided a resale certificate.

Who paid tax when the container was initially acquired? The person that would fill it and sell or rent it with its contents to the user.

Was an empty used container sold or rented to another refilling retailer taxable? Yes, according to the letter.

Citations and references

• Tex. Tax Code § 151.322 (returnable containers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1083D13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNT
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 6, 1991

Dear **:

You asked about the taxability of returnable containers when provided
with their contents to a customer. ** members rent helium bottles
with their contents for gas in filling balloons, welding gas bottles with their
contents and perhaps other returnable containers with their contents.

Tax Code Sec. 151.322 exempts a returnable container sold or rented with
its contents or when resold for refilling. The individual who is going to fill
the returnable container with its contents and sell or rent it to the user of
the contents must pay tax on the container when he initially acquires it.

Subsequent charges for rental of the container are not taxable. The
person renting the container and selling the contents will collect tax on the
charge for the contents. If the rental customer is a retailer who is reselling
the contents (such as filling balloons for sale) they may give the rental
company a resale certificate in lieu of tax when purchasing the gas.

A sale or rental of empty used returnable containers to another retailer
who will fill the containers with contents and sell or rent them to the
ultimate users of those contents will also be subject to tax.

This opinion is based on the facts you presented. Other facts, though
similar, may yield different results.

If you have questions or need more information, please call our toll-free
number 1-800-531-5441. My direct line number is 512463-4680 [FAX (512)
475-0900]. You may write to me in care of Tax Administration Division.

Sincerely,
Al Van Allen
Tax Administration Division