DALLAS, Oct. 7, 2016 /PRNewswire/ -- The Texas Comptroller recently published an administrative hearings decision finding that a frac trailer is not specialized equipment subject to sales and use tax. Instead, the judge found that the frac trailers were "motor vehicles."
Texas imposes state and local sales tax on leases of specialized equipment. No tax is due, however, on leases—agreements for more than 180 days—of motor vehicles, including trailers. In addition, no tax is due on charges for labor to repair, maintain, or restore motor vehicles (including trailers), but tax is due on charges to maintain, restore, or repair specialized equipment.
The administrative law judge determined that the frac trailers were not specialized equipment but were trailers because the frac trailers were designed to also carry separate property in addition to performing hydraulic fracturing. For example, the trailers included fuel tanks and racks to carry high-pressure iron and discharge hoses.
Citing 2006 Texas administrative hearings decisions 41,202 and 42,326, Comptroller staff argued that the frac trailers were not motor vehicles because their "primary" function was not to transport separate property on the highway. The administrative law judge rejected this argument, reminding staff that neither the law nor the Comptroller's regulation regarding specialized equipment (34 TAC Sec. 3.88) included this requirement.
Taxpayers who have paid sales tax on leases of similar equipment may be entitled to sales tax refunds.
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.
TECHNICAL INFORMATION CONTACTS:
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/leases-of-frac-trailers-in-texas-are-not-subject-to-tax-if-the-trailers-are-designed-to-carry-separate-property-300341496.html