Were charges for balancing and changing the stroke of an oilfield pumping unit subject to Texas sales tax?

Plain-English summary

The requester described balancing and changing the bore stroke of oilfield pumping units as modifications performed at the customer's request rather than repairs.

The Comptroller treated the pumping units as tangible personal property and classified both bore-stroke modification and balancing as taxable remodeling. Under Rule 3.292(b), the provider had to collect sales or use tax on the entire charge, including materials, parts, labor, consumable supplies, equipment, and incidental services connected with the remodeling.

What this means for you

Calling work a modification rather than a repair did not make it nontaxable. The letter placed the work within taxable remodeling of tangible personal property and included all connected charges in the tax base.

The ruling is from 1991 and applies to the described pump-unit work. Verify current Rule 3.292 and the classification of the property and services before applying it today.

Common questions

Were balancing and stroking taxable? Yes.

How did the Comptroller classify the work? As remodeling of tangible personal property.

Was only the parts charge taxable? No. The entire charge was taxable, including materials, parts, labor, consumable supplies, equipment, and incidental connected services.

Did the customer's request that the unit be modified change the result? No. That was part of the facts, and the Comptroller still treated the work as taxable remodeling.

Citations and references

• 34 Tex. Admin. Code Rule 3.292(b) — repair, remodeling, maintenance, and restoration of tangible personal 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/9108L1124B06

Original ruling text

August 5, 1991

Dear ****:

Your letter, concerning the taxability of balancing and stroking of
pumping units, has been assigned to me for review and response.

You indicated that balancing and stroking is a modification rather than a
repair of the pumping unit and is performed at the customer's request.

Oil field pumping units are considered tangible personal property.
Modification of the bore stroke and balancing are considered taxable remodeling
of tangible personal property. You must collect sales or use tax on the entire
charge, including amounts for any materials, parts, labor, consumable supplies,
equipment, and any incidental service charges connected to the remodeling. See
section (b) of the enclosed Rule 3.292, concerning repair, remodeling,
maintenance, and restoration of tangible personal property.

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

If you have further questions or need more information, you may call
512/463-4600, or 1-800-252-5555 from outside Austin. You may write to Tax
Administration Division.

Sincerely,

Gilbert Zamora
Tax Administration Division