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Ezel / Tax Rulings / TX
TX 9105L1110F13 Sales and/or Use Tax (State,Local,MTA) 1991-05-20

Was labor to operate another company's machine and perforate that company's vinyl sheeting taxable in Texas?

Short answer: Yes. The work was taxable processing of tangible personal property, unless the vinyl owner resold the material and issued a valid resale certificate.

Apply this to your situation

This page answers the general question as of 1991. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1991
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 an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
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

Company B operated a machine owned by Company A to perforate vinyl sheeting that also belonged to Company A. Company A retained possession throughout the work and might or might not resell the vinyl.

The Comptroller classified Company B's labor as processing tangible personal property under Texas Tax Code Section 151.005(4). Company B therefore had to collect sales tax from Company A on the total charge.

If Company A did not use the vinyl and instead sold it to customers, Company B could accept Company A's valid resale certificate instead of collecting tax.

What this means for you

Operating a customer's machine on the customer's material was still taxable processing. Resale treatment depended on the material owner's downstream sale, not on who owned the machinery or retained possession.

Common questions

Who owned the machine and vinyl? Company A.

Who performed the work? Company B.

Was the full processing charge taxable? Yes.

When could Company B accept a resale certificate? When Company A did not use the vinyl and sold it to its customers.

Citations and references

  • Texas Tax Code § 151.005(4) — processing tangible personal property
  • 34 Tex. Admin. Code Rule 3.300 — processing
  • 34 Tex. Admin. Code Rule 3.285 — resale certificates

Source

Original ruling text

May 20, 1991

Dear **:

Thank you for your recent letter concerning labor to operate a
machine that perforates materials for another company.

In our phone conversation on May 10, 1991, you stated that Company
B only operates a machine that belongs to Company A which
perforates vinyl sheeting that also belongs to Company A. Company
A may or may not be reselling the vinyl sheeting. Company A
retains possession of the vinyl sheeting throughout the process.
The question is if Company B is required to collect sales tax on
the labor to operate the machinery belonging to Company A.

Company B is processing tangible personal property as defined in
Section 151.005 Paragraph (4) of the Texas Tax Code and is
required to collect sales tax from Company A on the total charge.
I have enclosed Rule 3.300 on "Processing" which has additional
information for you.

If Company A is not using the vinyl sheeting, but sells it to its
customers, then a valid resale certificate issued by Company A can
be accepted by Company B in lieu of the tax. I have also enclosed
Rule 3.285 on "Resale Certificates" which covers sales for
resale.

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

You may call me toll free at 1-800-252-5555, ext. 33690. The
regular number is 512/463-3690. You may also write to Tax
Administration at the above address.

Sincerely,

David Somerville
Tax Administration Division

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