Is a baggage protection wrapping service offered to airline passengers at the airport subject to Texas sales tax?

Subject

Baggage/Luggage Protection Service — Offered To Airline Passengers — Nontaxable Service

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9402L1284B14

Plain-English Summary

The company asked the Comptroller whether its airport baggage protection service was taxable. Under the described process, a passenger arrives at the airport and hires the service; a company employee then takes the passenger's baggage and encloses it in a specially designed plastic bag that uniformly fits over the baggage and seals to protect it during travel. The wrapped bag is then returned to the customer to check in for the flight.

The Comptroller ruled that this is a non-taxable service — the company does not need to collect Texas sales tax from passengers for wrapping their luggage. However, the ruling makes clear this doesn't mean the company operates tax-free: tax is due on the company's own purchases of all equipment and supplies used to perform the service, such as the plastic bags and any wrapping equipment. In other words, the company is treated as the end consumer of its own supplies, and must pay sales or use tax when it buys them.

What This Means For You

If you provide a similar wrapping or protective packaging service directly to consumers: You generally do not need to charge Texas sales tax on the service charge itself, based on this ruling's fact pattern.

If you provide such a service: You still owe tax on your own purchases of the equipment and supplies (bags, machines, etc.) you use to perform the service — you can't buy those tax-free just because the service you sell isn't taxable.

Facts matter: The Comptroller explicitly noted the ruling "is based on the facts presented" and that additional or different facts could change the outcome. If your service differs (for example, if it includes selling a tangible product rather than just applying a protective wrap), you should not assume the same result applies.

Q&A

Q: Does a company have to collect Texas sales tax from airline passengers for wrapping their luggage in a protective plastic bag?
A: No. The Comptroller ruled that this baggage protection service is non-taxable.

Q: If the service itself isn't taxable, does the company avoid Texas tax altogether?
A: No. The company still owes tax on its purchases of the equipment and supplies — such as the plastic bags — that it uses to perform the service.

Q: Is this ruling guaranteed to apply to any luggage-wrapping business?
A: Not automatically. The Comptroller stated the opinion is based on the specific facts presented, and that different or additional facts could lead to a different result.

Original ruling text

February 3, 1994

Dear **:

I have received your letter regarding the taxability of your company's
services.

FACTS: Your company will provide a baggage protection service for airline
passengers. The passengers will arrive at the airport and hire your service in
which one of your employees will take the baggage and enclose it in one of your
specially designed plastic bags. The bag uniformly fits over the baggage and
seals to protect it during the time period of travel. The baggage is then
returned to the customer to be checked in for their flight. You asked if this
service is taxable.

RESPONSE: This is a non-taxable service. Tax is due on your purchases of all
equipment and supplies used to perform your service.

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

If you have any questions, please don't hesitate to write the Tax
Administration Division or call one of our tax specialists toll free at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division

January 19, 1994

State Comptroller
Policy Section

Dear Sirs:

** will provide a baggage protection service for airline
passengers. The passengers will arrive at the airport and hire our service in
which one of our employees will take the baggage and enclose it in one of our
specially designed plastic bags. The bag uniformly fits over the baggage and
seals to protect it during the time period of travel. The baggage is then
returned to the customer to be checked in for their flight.

Please reply with your ruling if this service is taxable or not so that we may
proceed with our preparations for business.

Respectfully,

NOTE: Previous Accession Number 9402015L