| (6) Fractional ownership operations. Sales and use
tax is not due on the sale, lease, or rental of an aircraft operated
as part of a fractional ownership program under 14 Code of Federal
Regulations Part 91, Subpart K-Fractional Ownership Operations. Sales
tax is due on the sale or lease of component parts or materials incorporated
into an aircraft that is part of an aircraft fractional ownership
operation, unless otherwise exempt under Tax Code, Chapter 151.
(f) Divergent use.
(1) Exempt aircraft, aircraft engines, and component
parts. Sales and use tax is due when an aircraft, aircraft engine,
or component part sold, leased, or rented tax-free under a properly
completed exemption certificate is subsequently put to a taxable use
other than the use allowed under the certificate. For more information,
refer to §3.287 of this title.
(2) Sales for resale. Sales and use tax is due when
an aircraft engine or component part sold, leased, or rented tax-free
under a properly completed resale certificate is subsequently put
to a taxable use other than the use allowed under the certificate.
For more information, refer to §3.285 of this title (relating
to Resale Certificate; Sales for Resale). Sales and use tax is not
due on the divergent use of an aircraft that is purchased for resale.
(3) Agricultural use and agricultural aircraft operations.
No divergent use may be made of an aircraft exempted under subsection
(e)(5) of this section, relating to agricultural use, without a total
loss of the exemption. Certain limited uses identified in subsection
(e)(5)(C) of this section do not constitute divergent use of an agricultural
aircraft. No divergent use of component parts or necessary tangible
personal property exempted under subsection (e)(5)(B) of this section,
relating to agricultural aircraft operations, can be made without
a total loss of that exemption.
(g) Repair, remodeling, maintenance, restoration, and
completion.
(1) Labor to complete, repair, remodel, maintain, or
restore aircraft in Texas is not subject to sales tax. The sale or
use of materials incorporated into an aircraft, aircraft engine, or
component part being completed, repaired, remodeled, maintained, or
restored in Texas is subject to sales and use tax as provided in paragraph
(2) of this subsection, unless otherwise exempt.
(2) Tax responsibilities of service providers.
(A) Incorporated materials. Whether the service provider
owes tax on the purchase of materials that will become incorporated
materials as part of the completion, repair, remodeling, maintenance,
or restoration of an aircraft, aircraft engine, or component part
depends upon whether the service provider is operating under a lump-sum
or separated contract.
(i) Separated contracts. If the services are performed
under a separated contract, the service provider is regarded as the
seller of the incorporated materials. If the service provider has
a sales and use tax permit, the service provider may issue a properly
completed resale certificate to the supplier in lieu of paying sales
tax on the purchase of the incorporated materials. The service provider
must then collect sales tax from the customer on either the agreed
contract price for the incorporated materials, or the amount the service
provider paid for the incorporated materials, whichever amount is
greater. The service provider may also use incorporated materials
removed from an inventory of items upon which sales or use tax was
paid at the time of purchase. In such a case, sales tax is to be collected
from the customer on the agreed contract price of the incorporated
materials as though the incorporated materials had been purchased
tax-free with a resale certificate.
(ii) Lump-sum contracts. If the services are performed
under a lump-sum contract, the service provider is the ultimate consumer
of all incorporated materials. The service provider may not collect
sales tax from the customer. The service provider must pay sales or
use tax to the suppliers of the incorporated materials at the time
of purchase, unless the service provider works under both lump-sum
and separated contracts and uses incorporated materials removed from
a valid tax-free inventory that were originally purchased tax-free
by use of a resale certificate. In such a case, the service provider
incurs a tax liability based upon the purchase price of the incorporated
materials and must report and remit the tax to the comptroller. The
service provider owes sales or use tax on the purchase of incorporated
materials even when the services are performed for a customer that
is exempt from tax under Tax Code, Chapter 151.
(B) Tools, equipment, and consumable supplies. Sales
and use tax is due on the purchase, lease, or rental of tools, equipment,
and consumable supplies used by the service provider but not incorporated
into the aircraft, aircraft engine, or component part at the time
of the service, regardless of the type of contract used to perform
the service, and the service provider may not collect sales or use
tax from the customer on any charges for such items.
(3) Exemption for certificated or licensed carriers,
flight schools or instructors, and persons operating aircraft for
an agricultural use.
(A) The total charge for services to complete, repair,
remodel, maintain, or restore aircraft, aircraft engines, or component
parts by or for a certificated or licensed carrier, a flight school
or instructor providing qualified flight instruction, or a person
operating aircraft for an agricultural use is exempt from sales and
use tax, whether the charge is lump-sum or separately stated.
(B) Sales and use tax is not due on the sale, lease,
or rental of machinery, tools, supplies, and equipment used directly
and exclusively in the repair, remodeling, maintenance, or restoration
of aircraft, aircraft engines, or component parts by or for a certificated
or licensed carrier, a flight school or a flight instructor providing
qualified flight instruction, or person conducting an agricultural
aircraft operation, provided the purchaser issues the seller a properly
completed exemption certificate. This includes equipment, such as
battery chargers and diagnostic equipment, used to sustain or support
safe and continuous operations and to keep the aircraft in good working
order by preventing its decline, failure, lapse, or deterioration.
(4) Aircraft used outside Texas. The following guidelines
apply to aircraft brought into Texas by out-of-state owners or operators
for completion, repair, remodeling, or restoration.
(A) Separated contracts. Sales or use tax is not due
on the separately stated charge for labor to complete, repair, remodel,
maintain, or restore an aircraft, aircraft engine, or component part
performed under a separated contract. The cost of incorporated materials
is:
(i) subject to sales tax when the owner or operator
takes delivery of the aircraft in Texas; or
(ii) not subject to sales tax when the aircraft is
delivered to an out-of-state location by the service provider.
(B) Lump-sum contracts. Sales tax is not due by the
owner or operator of an aircraft completed, repaired, remodeled, maintained,
or restored under a lump-sum contract. The service provider owes sales
or use tax on the incorporated materials, whether the service provider
delivers the aircraft out of state or the owner or operator takes
delivery of the aircraft in Texas.
(5) The repair, remodeling, maintenance, or restoration
of component parts removed from and returned to an aircraft pursuant
to the repair, remodeling, maintenance, or restoration of that aircraft
is to be treated in accordance with the provisions of this subsection.
The repair, remodeling, maintenance, or restoration of a component
part removed from an aircraft that is not returned to the aircraft
is subject to the provisions of §3.292 of this title (relating
to Repair, Remodeling, Maintenance, and Restoration of Tangible Personal
Property).
(h) Jet turbine aircraft engines.
(1) Sales or use tax is not due on the sale, lease,
or rental of the following items used in electrochemical plating or
a similar process by persons overhauling, retrofitting, or repairing
jet turbine aircraft engines and their component parts:
(A) machinery, equipment, or replacement parts or accessories
with a useful life in excess of six months; and
(B) supplies, including aluminum oxide, nitric acid,
and sodium cyanide.
(2) A person claiming an exemption under paragraph
(1) of this subsection must maintain documentation sufficient to show
that no exclusion under Tax Code, §151.318 (Property Used in
Manufacturing) applies. Also refer to §3.300 of this title (relating
to Manufacturing; Custom Manufacturing; Fabricating; Processing).
(3) Sales tax is not due on the sale of electricity
or natural gas used in the off-wing processing, overhaul, or repair
of a jet turbine engine or its parts for a certificated or licensed
carrier. For more information, refer to §3.295 of this title
(relating to Natural Gas and Electricity).
(i) Warranties.
Cont'd... |
