If a Texas repair/calibration company sends its own inspection equipment out of state for repair, does it still owe Texas use tax when the equipment comes back?

Plain-English summary

A company that provides repair and calibration services for major manufacturers' dimensional inspection equipment asked the Comptroller to confirm its existing practice: it had been paying Texas use tax on the amount charged when its own equipment needed to be repaired/calibrated out of state, and wanted to verify that use tax is still owed.

The Comptroller confirmed the practice is correct. As a repairman, the company must pay tax on the machinery and equipment it uses to perform its own repair services — and separately, repair services performed on that equipment are also taxable. When the company's own equipment is sent out of state for repair, Texas use tax is owed on the repair charge once the item ships back to Texas for the company's continued use here.

What this means for you

Repair, calibration, and inspection-equipment service companies

If you send your own tools or equipment out of state for repair or calibration, don't assume that work escapes Texas tax just because it was performed elsewhere — Texas use tax applies to the repair charge once the equipment returns to Texas for your use. This is on top of the tax you already owe on your own machinery/equipment purchases used to run your business.

Accountants and tax professionals

This is a straightforward use-tax mechanics letter: the taxable event is bringing the repaired item back into Texas for use, not where the repair work itself was physically performed.

Common questions

Q: If I send my company's equipment out of state for repair, do I owe Texas tax on that repair?
A: Yes — use tax is owed on the repair charge when the equipment ships back to Texas for your continued use.

Q: Is a repair company's own machinery/equipment taxable, separate from the repair-of-equipment question?
A: Yes — a repairman must also pay tax on the machinery and equipment it uses to perform its repair services.

Q: Can another repair/calibration company rely on this letter?
A: Only the taxpayer who requested it can use it for detrimental reliance, and the answer is based on the facts presented.

Citations and references

No specific Tax Code section or Comptroller rule number is quoted in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9910824L

Original ruling text

October 25, 1999

Subject: Use Tax

Thank you for your recent e-mail.

You are a repair and calibration service company for major manufacturers who
have dimensional inspection equipment.

The equipment you use sometimes has to be repaired and calibrated out of state.
You have normally paid use tax to the State of Texas on the amount of the
repair or calibration. You ask that I verify that Use Tax is still payable on
these items.

Response. As a repairman, you must pay tax on your machinery and equipment
used in performing your repair services. Also taxable are repair services
performed on this equipment. If you send your equipment out of state for the
repair, you owe use tax on the repair when the item is shipped back to Texas
for your use.

Several publications and other items of interest (including the Texas Tax Code)
are also available on our web page .

Sales tax rules are available on the Internet
.

This opinion is based on the facts presented. Different facts though similar,
may result in different answers.

If you have any questions or need more information, you may call me toll free
at 1-800-531-5441, extension 5-0613. You may also write to Tax Policy
Division, Comptroller of Public Accounts, Post Office Box 13528, Austin, Texas
78711.

Kevin Koller
[email protected]