When is having tires retreaded (or an alternator, generator, radiator, or transmission repaired) treated as taxable 'repair' of tangible personal property, rather than an exempt repair of a motor vehicle component, under Texas sales tax rules?

Plain-English summary

This is a form letter the Texas Comptroller's Tax Policy Division sent to a potential customer of tire retreaders, explaining the agency's sales tax policy on tire retreading — a policy that had just been separately mailed out to tire retreaders themselves.

The core rule: if you have more casings (tire carcasses) retreaded than the number of tires your motor vehicle is designed to run on, the Comptroller presumes you are having tangible personal property repaired, which is taxable. That presumption exists because it's assumed the retreaded tires may not be going back onto the same vehicle they came off of — they could be sold or used elsewhere as ordinary repaired goods.

You can overcome that presumption, though, if you keep records proving the tires were put right back on the vehicles they were removed from — casing serial numbers, motor vehicle numbers, trip logs, repair logs, fuel records or receipts, and anything else the Comptroller says is needed. With those records, you can give the retreader an exemption certificate stating the work is really the repair of a motor vehicle component (not taxable repair of tangible personal property).

The letter also covers what to do if a refund is pending or already received: you still need the supporting records, and if you already got a refund you're obligated to issue the exemption certificate and back it up with proof. Importantly, the letter states this same policy — the repair-vs-rebuilt presumption — also applies to other motor vehicle components such as alternators, generators, radiators, and transmissions, and references an enclosed bulletin, "Repairing Motor Vehicle Components," that lays out the full policy.

What this means for you

Fleet operators and businesses that have tires retreaded

If you send in casings for retreading in a quantity that exceeds what your vehicle needs, expect the Comptroller to presume the work is taxable repair. To avoid tax, keep detailed records tying each retreaded casing back to a specific vehicle (serial numbers, vehicle numbers, trip logs, repair logs, fuel records/receipts) and give the retreader a properly supported exemption certificate.

Businesses with pending or already-received refunds on retreading purchases

If you sought a refund of tax paid on retreading and it's still pending, you need the same rebuttal records described above. If you already received the refund, the letter says it becomes your obligation to issue the exemption certificate and maintain the supporting records — which the Comptroller can review.

Owners of vehicles needing alternator, generator, radiator, or transmission repair

The letter states this same repair-vs-rebuilt presumption "also applies to other motor vehicle components such as alternators, generators, radiators and transmissions." The Comptroller's enclosed bulletin on "Repairing Motor Vehicle Components" spells out the full policy for those parts, so the same record-keeping and exemption-certificate approach used for tires would apply to them as well.

Common questions

Q: Is having my tires retreaded always taxable?
A: Not necessarily. It's taxable as a "repair" if you retread more casings than your vehicle is designed to use, unless you can rebut that presumption with adequate records showing the retreaded tires went right back on the vehicles they came off of.

Q: What records do I need to avoid tax on tire retreading?
A: The letter lists casing serial numbers, motor vehicle numbers, trip logs, repair logs, fuel records or receipts, and any other records the Comptroller deems necessary to substantiate the claim.

Q: What do I do with those records once I have them?
A: Issue an exemption certificate to the retreader stating the work is the repair of a motor vehicle component, supported by your records.

Q: I already got a refund on retreading tax — what now?
A: The letter says it becomes your obligation to issue the exemption certificate claiming the retreading is repair of a motor vehicle component, and you must have records to support that claim; the records are subject to the Comptroller's review.

Q: Does this same policy apply to parts other than tires, like alternators or generators?
A: Yes. The letter states this policy also applies to other motor vehicle components such as alternators, generators, radiators, and transmissions, and points to an enclosed bulletin, "Repairing Motor Vehicle Components," for the details.

Citations and references

No specific Texas statutes or administrative rule numbers are cited in this letter; it references an enclosed Comptroller bulletin titled "Repairing Motor Vehicle Components" that is not reproduced here.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9511729L

Original ruling text

November 21, 1995

Dear ** :

The Comptroller's office was asked to review the taxation of tire retreading.
As a potential customer of tire retreaders, we wanted to share the following
information with you.

We recently mailed a letter to tire retreaders clarifying this agency's sales
tax policy regarding tire retreading. In particular, we explained that when
you have casings retreaded in a number that exceeds the number of tires that a
motor vehicle is designed to operate with, the presumption is you are having
tangible personal property repaired. As you are aware, the repair of tangible
personal property is taxable.

This presumption may be overcome if you maintain records to prove that the
tires were immediately put back on the vehicles from which they were removed.
You must maintain records such as casing serial numbers, motor vehicle numbers,
trip logs, repair logs, fuel records or receipts and any other record the
Comptroller deems necessary to substantiate the claim. You may rebut this
presumption with proper records and issue an exemption certificate to the
retreader claiming the retreading is the repair of a motor vehicle component.

If you have requested a refund and that refund is pending, you must have
records to rebut the presumption set out in the preceding paragraph. If you
have received a refund, it is your obligation to issue an exemption certificate
claiming the retreading is the repair of a component of a motor vehicle, and
you must have records to support the claim. These records are subject to our
review. This policy also applies to other motor vehicle components such as
alternators, generators, radiators and transmissions. I have enclosed a copy
of our new bulletin, Repairing Motor Vehicle Components, which outlines this
policy.

If you have any questions or need more information, you may call Eddie
Washington toll free at 1-800-531-5441, extension 3-4683. Eddie's Austin number
is 512/463-4683. From a telecommunication device for the deaf (TDD) only, call
1-800-248-4099. You may also write to Tax Policy Division, Comptroller of
Public Accounts.

Sincerely,

Karey W. Barton
Manager, Tax Policy Division