Sales Tax Depends on Context

Recently a sales tax case came up in the Texas comptroller’s office. It involved a company that provided various oil well services and rentals to oil and gas sites. The company rented out equipment and also provided repairs to equipment belonging to customers in the industry.

The oil well servicing company owned an equipment yard, and had salespeople at the equipment yard who took orders by phone. They also delivered rental items to customers and performed repairs and maintenance of the customers’ equipment at the customers’ locations.

The legal question: what sales tax rate should the company use when collecting sales taxes on its sales?

It’s all about the context

The comptroller decided that the company made sales at their equipment yard. Sales completed over the phone should be taxed at the local rate, based on the location of the equipment yard. Call that Town A.

However, when they delivered items or did repairs at a customer’s place of business in another tax jurisdiction, the court figured that the sale was actually consummated at the customer’s location. It should therefore be taxed at the rate applying to the customer’s location.


You bet that’s confusing.

One of the issues was the question of tangible property like riggings vs. nonresidential real property like wells. Remodeling a well? The tax rate should be the rate in effect where the well is located. The rigging? The tax rate should be the one in effect where the sale was made.

That brings up another issue. In Texas, a storage yard is not considered a regular place of business like an office — unless more than three sales are made there each year. Since the sales reps frequently made sales while they were physically present at the equipment yard, it counted as a place of business for the purposes of sales tax. The reps used their cell phones, not a land line in an office at the equipment yard, but their physical presence while making sales was enough to settle that question. Given that decision, all the sales made by the sales reps were considered to take place at the equipment yard, even when they were not physically present there.

As for deliveries, the sale is understood to take place at the location where the customer actually takes possession of the goods, even if the sale was made over the phone.

Sales tax is complicated

We’re not judging Texas. Sales taxes are complicated in every one of the thousands of different tax jurisdictions across the United States. We can say that an oil well servicing company probably shouldn’t have to sort all this out on their own. They are not specialists in this kind of question, and they have lots of other work to do.

Your situation may not be just like the case of this oil well servicing company. But chances are it includes some equally knotty problems. Sales Tax DataLINK has a team of sales tax experts who will not only sort these issue out for you, but will enjoy doing it and taking care of your sales tax needs.

Sales Tax DataLINK is different

We’ll give you a demo with your own data, not a set of numbers we’ve put together. That way you can really see how Sales Tax DataLINK’s sales tax software works, and how it will fit into your workflow.  What’s more, we offer unlimited use of our robust tax tables and patented software at a single predictable price. Just call 479-715-4275 today and let us impress you.

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