Does a Texas business that repairs and maintains aircraft for licensed/certificated carriers have to charge sales tax on parts, labor, or the equipment it buys to do the work?

Plain-English summary

This December 11, 1992 letter from the Texas Comptroller's Tax Administration Division answers a follow-up phone call about a firm's client that repairs and provides maintenance for aircraft owned by licensed and certificated carriers of persons or property (the client had two employees in Texas performing this work).

The Comptroller confirmed three things. First, repair and maintenance services on these aircraft are not taxable at all — no tax should be charged for either the parts or the labor. Second, when the client buys parts from Texas vendors for this work, it should issue those vendors a properly completed exemption certificate (the Comptroller enclosed a blank one). Third, equipment and machinery used exclusively and directly in repairing or maintaining these aircraft can likewise be purchased tax-free in Texas, again by issuing an exemption certificate at the time of purchase; the letter also enclosed a copy of Rule 3.297, the Comptroller's rule dealing with carriers.

The letter adds two practical points: a taxpayer number is not required on the exemption certificate, and if the client's business consists exclusively of repairing and maintaining these aircraft, it will not be required to hold a Texas sales tax permit.

What this means for you

Aircraft repair and maintenance businesses serving licensed carriers

If your business repairs or maintains aircraft owned by licensed and certificated carriers of persons or property, this letter shows the Comptroller's position that neither your labor nor the parts you use are taxable, and that machinery/equipment/tools you buy to use exclusively and directly in that repair or maintenance work can also be purchased tax-free. You (or your vendors) document the exemption with a properly completed exemption certificate rather than paying tax and seeking a refund later.

Businesses wondering whether they need a Texas sales tax permit

The letter states that if a business's activity is exclusively the repair and maintenance of these carrier-owned aircraft, it will not be required to be permitted for sales tax in Texas. That's a narrow statement tied to this taxpayer's specific fact pattern (an out-of-state or otherwise unpermitted firm with just two Texas employees performing this one type of service) — a business with other taxable activities in Texas would still need to evaluate its own permit obligations separately.

Accountants and tax professionals

The letter doesn't cite a Tax Code section by number; it points to "our Rule 3.297," the Comptroller's rule on carriers, as the basis for the equipment/machinery exemption. Because this is a letter addressed to one taxpayer's specific facts, it isn't binding precedent for anyone else — treat it as an illustration of how the Comptroller applied Rule 3.297 to this fact pattern, not as a substitute for the current rule or a ruling addressed to your own client's facts.

Common questions

Q: Is labor for repairing or maintaining a licensed carrier's aircraft taxable in Texas?
A: No. The letter states repair and maintenance services on these aircraft are not taxable, and no tax should be charged for either the parts or the labor.

Q: How does the repair business buy parts tax-free from its Texas vendors?
A: By issuing the vendor a properly completed exemption certificate; the Comptroller enclosed a blank certificate for this purpose in the letter.

Q: Can the business also buy the equipment and machinery it uses for the repair/maintenance work tax-free?
A: Yes, if the equipment and machinery is used exclusively and directly in the repair or maintenance of these aircraft — an exemption certificate should be issued at the time of purchase, per the Comptroller's Rule 3.297 on carriers.

Q: Does the exemption certificate need a Texas taxpayer number?
A: No. The letter specifically notes that a taxpayer number is not required on the exemption certificate.

Q: Does the business need a Texas sales tax permit?
A: According to the letter, if the client's business is exclusively the repair and maintenance of these aircraft, it will not be required to be permitted for sales tax in Texas.

Citations and references

• 34 Tex. Admin. Code § 3.297, Carriers (referred to in the letter as "our Rule 3.297, which deals with carriers")

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9212L1209G13

Original ruling text

December 11, 1992

Dear ***:

This letter is in reference to my telephone conversation with *** of
your firm.

*** requested taxability information concerning one of your clients
that repairs and provides maintenance for aircraft that are licensed and
certificated carriers of persons or property. She stated that your client has
two employees in Texas performing these services.

Repair and maintenance services on these aircraft are not taxable. No tax
should be charged for either the parts or labor. When the parts are purchased
from Texas vendors, your client should issue a properly completed exemption
certificate. I have enclosed one of these certificates for your client's
convenience.

Equipment and machinery exclusively used directly in the repair or maintenance
of these aircraft can also be purchased tax free in Texas. Once again, an
exemption certificate should be issued at the time of purchase. I have enclosed
our Rule 3. 297, which deals with carriers.

Please note that a taxpayer number is not required on the exemption
certificate. If your client's business is exclusively the repair and
maintenance of these aircraft, your client will not be required to be permitted
for sales tax in Texas.

Please feel free to write me at the Tax Administration Division or call
toll-free at 1-800-531-5441, extension 3-4565, if you have any questions.

Sincerely,

Larry Koenig
Tax Administation Division