If I rent out a 'grip package' (electrical production equipment plus a 5-ton truck and driver) for one price, do I owe motor vehicle rental tax on the truck, and can I buy the equipment tax free for resale?

Subject

Motor Vehicle/Truck With Driver — Rented Together With Electrical Equipment (Grip Package) For One Price And Used In Motion Picture Production

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610282L

Plain-English summary

The taxpayer offered a "grip package" -- electrical equipment used in motion picture production, bundled with a 5-ton truck and driver to haul the equipment -- all sold to customers for one combined price. The taxpayer asked the Comptroller how to handle motor vehicle tax and motor vehicle rental tax on that arrangement.

The Comptroller's answer had two parts:

1. On the truck itself: Pay motor vehicle tax when you buy the truck. Don't collect motor vehicle rental tax from customers, because you aren't renting the vehicle to them -- you're renting production equipment and providing transportation as part of that deal.
2. On the electrical (grip) equipment: You may buy that equipment tax free for resale, as long as you accept a completed exemption certificate from a customer who is renting the equipment to produce a master film or video -- a copy of which will later be sold, distributed, licensed, exhibited, or broadcast.

What this means for you

Motion picture and video production equipment rental companies

If you bundle a truck-and-driver with production equipment (like a grip package) for one price, treat the truck as something you pay motor vehicle tax on at purchase, not something you charge motor vehicle rental tax on when it goes out with a job -- because the customer is renting equipment and getting transportation, not renting the vehicle itself.

Equipment owners seeking a resale exemption

You can buy grip/electrical production equipment tax free for resale, but only if you collect a completed exemption certificate from the renting customer confirming the equipment will be used to produce a master film or video whose copies will be sold, distributed, licensed, exhibited, or broadcast.

Accountants and tax professionals advising production-services clients

This letter separates the tax treatment of the vehicle (motor vehicle tax at purchase, no rental tax collected on the bundled deal) from the tax treatment of the equipment (resale exemption available with a proper exemption certificate tied to master film/video production). Both pieces need to be tracked correctly even though they're sold together for one price.

Common questions

Q: Do I need to collect motor vehicle rental tax when I rent out a truck bundled with production equipment?
A: No, according to this ruling -- because you're renting production equipment and providing transportation in connection with that rental, not renting the vehicle to the customer.

Q: What tax applies to the truck instead?
A: You pay motor vehicle tax on the truck when you buy it.

Q: Can I buy the electrical/grip equipment tax free?
A: Yes, for resale, if you accept a completed exemption certificate from a customer renting the equipment to produce a master film or video, a copy of which will be sold, distributed, licensed, exhibited, or broadcast.

Q: What if the customer isn't producing a master film or video for later sale/distribution?
A: The letter only describes the exemption in the context of a customer renting the equipment for producing a master film or video a copy of which will be sold, distributed, licensed, exhibited, or broadcast; it does not address other uses.

Original ruling text

October 22, 1996

Dear **:

I understand that you offer a "grip package," which includes electrical
equipment used in production and a 5-ton truck with a driver (to transport the
equipment) for one price.

You should pay motor vehicle tax on the truck when you buy it. Don't collect
motor vehicle rental tax on the truck as you are not renting the vehicle to
your customers you are renting production equipment and providing
transportation in connection with the rental.

You may buy the production equipment tax free for resale and accept a completed
exemption certificate from a customer who is renting the equipment for use in
producing a master film or video a copy of which will be sold, distributed,
licensed, exhibited, or broadcast.

My number is 1-800-531-5441 extension 3-4614, if you have any questions.

Sincerely,
Adina Harrell
Tax Policy Division