| (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.
(1) Manufacturer's written warranty or recall campaign.
(A) Sales or use tax is not due on the use of incorporated
materials or services furnished by the manufacturer to repair an aircraft,
aircraft engine, or component part under a manufacturer's written
warranty or recall campaign.
(B) Records must be kept by a service provider showing
that the incorporated materials or services were used in repairing
an item under a manufacturer's written warranty or recall campaign.
(C) A service provider purchasing incorporated materials
used in a repair under a manufacturer's written warranty or recall
campaign may issue a properly completed exemption certificate to the
seller in lieu of paying tax on the purchase.
(2) Extended warranties and service policies.
(A) Sales tax is not due on the sale of an extended
warranty or service policy that covers an aircraft, aircraft engine,
or component part.
(B) A service provider performing services under an
extended warranty or service policy must collect sales or use tax
on the sale or use of incorporated materials as required under subsection
(g)(2)(A) of this section, unless the aircraft, aircraft engine, or
component part is owned by a certificated or licensed carrier, a flight
school or instructor providing qualified flight instruction, or an
agricultural aircraft operation.
(j) Occasional sales. The purchase of an aircraft,
aircraft engine, or component part is exempt from sales and use tax
if the purchase meets the definition of an occasional sale provided
by §3.316 of this title (relating to Occasional Sales; Transfers
Without Change in Ownership; Sales by Senior Citizens' Organizations;
Sales by University and College Student Organizations; and Sales by
Nonprofit Animal Shelters).
(k) Sales for resale.
(1) A person selling, leasing, or renting an aircraft,
aircraft engine, or component part may accept a properly completed
and signed resale certificate from the purchaser at the time of sale
in lieu of collecting tax on the sale if the person does not know,
and does not have reason to know, that the sale is not a sale for
resale. For more information on the good faith acceptance of a resale
certificate, refer to §3.285 of this title.
(2) A person purchasing, leasing, or renting an aircraft
in a transaction that meets the definition of a sale for resale may
provide the seller or lessor with a properly completed resale certificate
if the person:
(A) holds a valid sales and use tax permit at the time
of the transaction; and
(B) does not intend to exclusively lease the aircraft
together with a crew or pilot.
(3) A person purchasing, leasing, or renting an aircraft
in a transaction that meets the definition of a sale for resale who
does not provide the seller or lessor with a properly completed resale
certificate at the time of the transaction may subsequently provide
documentation to the comptroller to prove that the resale exemption
applies.
(4) The purchase of an aircraft for lease or rental
to another does not qualify as a sale for resale unless more than
50% of the aircraft's departures during the one year period beginning
on the date of purchase are made under the operational control of
a person other than the purchaser, pursuant to one or more written
lease agreements, in exchange for consideration. For purposes of this
subsection, consideration is not required to be in the form of a cash
payment, and may be fixed, variable, or periodic.
(l) Local tax. Local sales and use taxes, including
taxes imposed by a city, county, transit authority, or special purpose
district, apply to aircraft in the same manner as any other tangible
personal property.
(1) Sales consummated in Texas. Generally, local sales
taxes are allocated to the local taxing jurisdictions in which the
seller's place of business is located, and the seller must collect
the local sales tax, without regard to whether the aircraft is actually
delivered to, or intended for use in, a Texas location in a different
local taxing jurisdiction. If the seller does not collect the applicable
local tax, the purchaser must accrue and remit local tax to the comptroller.
(2) Sales consummated outside of Texas. When an aircraft
is purchased or leased outside of Texas and brought into Texas, local
use tax is due based on the local taxing jurisdictions in which the
aircraft is first stored or used. If the seller does not collect the
applicable local tax, the purchaser must accrue and remit to the comptroller
any local use tax due.
(3) For more information regarding the local tax collection
and reporting responsibilities of sellers and purchasers, refer to §3.334
of this title (relating to Local Sales and Use Tax).
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