Texas – Newsletter Discusses the Taxability of GPS Equipment and Disaster Relief Services

SALT Report 2580 – In the latest edition of Tax Policy News, the Texas Comptroller addresses the application of sales and use tax to GPS equipment, tax relief for disaster victims, and an upcoming roundtable discussion regarding internet hosting and nexus.

GPS and Agricultural Sales Tax Exemption

The sales tax exemption for machinery and equipment as provided in Texas Tax Code Section 151.316(a)(7) applies to purchases of GPS equipment. To qualify for the exemption, the purchaser must hold an Ag/Timber number issued by the Comptroller and the GPS equipment must be used on a farm or ranch in the production of agricultural products.

However, because services do not qualify for the agricultural exemption, purchases of GPS subscription services, used to operate the GPS equipment installed on tractors and agricultural equipment, are subject to sales tax.

Exemption for Labor to Restore Property Damaged in a Disaster Area

Texas provides a sales tax exemption on separately stated labor charges to restore real or personal property damaged in a disaster if the governor or president declares the area to be a disaster area. Because of this, the Comptroller announced that residents in the following areas may claim the exemption:

  • Ellis, Hood, Johnson, and Parker counties, which were declared disaster areas due to the severe storms and tornado outbreak that occurred on May 15, 2013, and
  • West-McLennan County, which was declared a disaster area due to the explosion that occurred on April 17, 2013

The exemption applies to drapery, upholstery, and carpet cleaning services; laundry and dry cleaning services; and the repair of non-residential real property. Labor to repair residential real property is always exempt. However, the exemption does not extend to materials, equipment, supplies, or other tangible personal property used during restoration. However, if the restoration labor charge is not separately stated from the other charges, the total bill will be taxable.

To claim the exemption, the purchaser must give the repairman an exemption certificate for the labor portion of the bill. The exemption certificate must include both the seller’s and purchaser’s names and addresses, identify the items being repaired, and provide the reason for claiming the exemption.

Roundtable Discussion on Internet Hosting and Nexus

The Tax Policy Division will be holding a roundtable discussion regarding House Bill 1841 and how the legislation should impact the state’s policies on Internet hosting and nexus. As of yet, a date has not been set for the roundtable. However it will likely take place after the 83rd Legislature adjourns. The Comptroller’s office will provide more information as it becomes available.

For Further Information

Texas Comptroller of Public Accounts – Tax Policy News