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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.297Carriers

(a) Carriers generally.

  (1) Licensed and certificated carrier--A person authorized by the appropriate United States agency or by the appropriate state agency within the United States to operate an aircraft, vessel, train, motor vehicle, or pipeline as a common or contract carrier transporting persons or property for hire in the regular course of business. Certificates of inspection or airworthiness certificates are not the appropriate documents for authorizing a person to operate as a common or contract carrier. These documents relate to the carrier device itself rather than a person's right to operate a carrier business.

  (2) Use tax is not due on repair or replacement parts acquired outside this state and actually affixed in this state to a self-propelled vehicle that is used as a licensed and certificated common carrier. Trailers, barges, and semitrailers are not considered to be self-propelled vehicles.

  (3) Except as provided under subsection (d) of this section, taxable items brought into this state to be assembled into licensed and certificated carrier devices are not exempt from the taxes imposed by the Tax Code, Chapter 151, Subchapter D.

  (4) Sales tax is not due on the sale of taxable items to a common carrier if such items are shipped to a point outside this state using the purchasing carrier's facilities under a bill of lading, and if such items are to be used by the purchasing carrier in the conduct of its business outside the State of Texas.

  (5) Sales tax is due on licensed and certificated carrier devices purchased under valid resale or exemption certificates that are put to a use other than the one specified in the certificate. The sales tax is based on the fair market rental value of the licensed and certificated carrier device for the period of time used. At any time the person using the carrier device in a taxable manner may stop paying tax on the fair market rental value and instead pay sales tax on the original purchase price. When the person elects to pay sales tax on the purchase price, credit will not be allowed for taxes previously paid on the fair market rental value. See §3.285 of this title (relating to Resale Certificate; Sales for Resale) and §3.287 of this title (relating to Exemption Certificates).

(b) Vessels.

  (1) Sales or use tax is not due on the sale by the builder of a vessel in excess of eight tons displacement that is used exclusively for commercial purposes. For the purpose of this section, eight tons displacement means the weight of fresh water displaced by a vessel before being loaded with fuel, supplies, or cargo. Vessels not more than 65 feet in length measured from end to end over the deck, excluding sheer, are subject to Boat and Boat Motor Sales Tax under Tax Code, Chapter 160.

  (2) Sales or use tax is not due on labor to repair vessels, or machinery, equipment, or component parts of vessels in excess of eight tons displacement that are used exclusively for commercial purposes whether purchased by the builder or by a subsequent owner or operator. A component part is:

    (A) a marine cargo container that is fully or partially enclosed to constitute a compartment of a permanent character intended for containing goods. It is strong enough to be suitable for repeated use, specially designed to facilitate the carriage of goods, by one or more modes of transport, without intermediate reloading. It is designed for ready handling, particularly when being transferred from one mode of transport to another. The term "marine cargo container" includes the accessories and equipment of the container provided that such accessories and equipment are carried with the container. The term "marine cargo container" does not include chassis, vehicles, accessories or spare parts of vehicles.

    (B) all tangible personal property that is actually attached to and becomes a part of a vessel qualified under paragraph (1) of this subsection. The term does not include furnishings of any kind that are not attached to the vessel, nor does it include consumable supplies. For example, it does not include bedding, linen, kitchenware, tables, chairs, ice for cooling, refrigerants for cooling systems, fuels or lubricants.

  (3) Materials and supplies, including items commonly known as ships' stores and sea stores, sold to owners or operators of ships or vessels operating exclusively in foreign or interstate commerce for use and consumption in the operation and maintenance of such ships or vessels, are exempt from the sales and use tax.

    (A) "Operating exclusively in foreign or interstate coastwise commerce" is defined, for the purposes of this section, as transporting goods or persons between a point in the State of Texas and a point in another state or in a foreign country. It does not include trips to and from offshore areas or fishing areas on the high seas, or trips between two points in the State of Texas.

    (B) Operation of the vessel in a manner other than in foreign or interstate commerce will result in a loss of the exemption for ships' stores and sea stores for the quarterly period in which the nonexempt operation occurs.

    (C) Any owner or operator of such a vessel shall, when giving an exemption certificate, set forth the title or position of the person issuing the certificate and the name of the vessel on which the items are to be loaded.

    (D) Sales tax is due on sales made to individual seamen operating these vessels.

  (4) Closely associated service companies provide servicing operations such as stevedoring, loading, and unloading vessels. Sales or use tax is not due on materials and supplies purchased by a person providing stevedoring services for a ship or vessel operating exclusively in foreign or interstate coastal commerce if the materials and supplies are loaded aboard the ship or vessel and are not removed before its departure. This includes, but is not limited to, such items as lumber, plywood, deck lathing, turnbuckles, and lashing shackles.

(c) Aircraft other than aircraft used by licensed and certificated carriers.

  (1) The term "aircraft" does not include rockets or missiles, but does include:

    (A) a fixed-wing, heavier-than-air craft that is driven by propeller or jet and is supported by the dynamic reaction of the air against its wings;

    (B) a helicopter;

    (C) an airplane flight simulator approved by the Federal Aviation Administration for use as a Phase II or higher flight simulator under Appendix H, 14 Code of Federal Regulations, Part 121.

  (2) Sales or use tax is not due on aircraft sold to a foreign government.

  (3) An aircraft is not subject to use tax if it is hangared outside this state and is used more than 50% outside this state. In order to qualify for exemption from the use tax, owners or operators of aircraft entering this state must maintain sufficient records to show the percentage of time the aircraft was used in this state.

    (A) In determining whether an aircraft is used more than 50% outside this state, the comptroller will consider all flight time in this state, including the portion of interstate flights in Texas airspace.

    (B) The comptroller may examine all flight, engine, passenger, airframe, and other logs and records maintained on any aircraft brought into this state to determine whether it is used more than 50% in this state.

  (4) An aircraft purchased outside this state is subject to Texas use tax, if not otherwise exempt, if it is hangared in this state. Some factors to be considered in determining whether an aircraft is hangared in this state include:

    (A) where the aircraft is rendered for ad valorem taxes;

    (B) whether the owner owns or leases hangar space in this state; and

    (C) declarations made to the Federal Aviation Administration, an insurer, or another taxing authority concerning the place of storage of the aircraft.

  (5) Sales or use tax is not due on supplies, including aluminum oxide, nitric acid, and sodium cyanide, used in electrochemical plating or a similar process by persons overhauling, retrofitting, or repairing jet turbine aircraft engines and their component parts.

  (6) Persons repairing or remodeling aircraft other than aircraft used by persons qualified under subsection (a)(1) of this section or paragraph (7) of this subsection should refer to §3.292 of this title (relating to Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property).

  (7) Sales or use tax is not due on aircraft purchased by a person who uses the aircraft to provide flight instruction that is recognized by the Federal Aviation Administration (FAA), under the direct or general supervision of an FAA certified flight instructor, and designed to lead to a pilot certificate or rating issued by a rule or regulation of the FAA. See §3.287 of this title (relating to Exemption Certificates).

  (8) A student enrolled in an FAA approved program may claim a tax exemption when renting aircraft for flight training, including solo flights and other flights, under an instructor's direction. When completing an exemption certificate claiming sales tax exemption, the student must identify the flight school (name and address) or if the student is not enrolled in a flight school, the student must list his or her primary flight instructor with the instructor's address. The student must also retain copies of written tests and instructors endorsements. Without evidence that the student is in pursuit of a flight rating, he or she will owe tax on aircraft rentals.

  (9) Texas sales or use tax is not due on aircraft sold to a person for use and registration in another state or nation before any use in Texas. Flight training in the aircraft in Texas and flying the aircraft out of state does not constitute a use of the aircraft in Texas.

    (A) To claim the exemption, an exemption certificate, substantially similar in form and content to the certificate shown on the last page of this section, must be signed by both the seller and the purchaser at the time of purchase. The seller may accept a certificate if the seller lacks actual knowledge that the claimed exemption is invalid. The seller must provide a copy of the completed certificate to the Comptroller of Public Accounts within 30 days of the sale.

    (B) By signing the certificate, the purchaser authorizes the comptroller to provide a copy of the certificate to the state or nation of intended use and registration.

    (C) Issuing an invalid certificate is a misdemeanor punishable by a fine not to exceed $500 in addition to the assessment of tax and, when applicable, penalty and interest on the purchase price of the aircraft.

(d) Licensed and certificated carriers, flight schools, and flight school instructors.

  (1) Sales or use tax is not due on aircraft used by persons defined in subsection (a)(1) of this section in the regular course of business of transporting persons or property for hire.

  (2) The following items or services used in the repair, remodeling, or maintenance of aircraft or aircraft engines or component parts by or for a person qualified under subsection (a)(1) or (c)(7) of this section are exempt if purchased by the aircraft owner or operator, by the aircraft manufacturer, or by a repair facility.

    (A) Machinery, tools, supplies, and equipment used directly and exclusively in the repair, remodeling, or maintenance. Included in the exemption is equipment used to sustain or support safe and continuous operations or to keep the aircraft in good working order by preventing its decline, failure, lapse, or deterioration, such as battery chargers or diagnostic equipment.

    (B) Repair, remodeling, and maintenance services.

  (3) Tax is not due on tangible personal property that is permanently affixed or attached as a component part of an aircraft owned or operated by a person described in subsection (a)(1) or (c)(7) of this section or that is necessary for the normal operations of the aircraft and is pumped, poured, or otherwise placed in an aircraft owned or operated by a person described in subsection (a)(1) or (c)(7) of this section. Exempt component parts include air cargo containers that are secured or attached to the aircraft while in flight, radar equipment or other electronic devices used for navigational or communications purposes, food carts, smoke detectors, fire extinguishers, and seats. Pillows, blankets, trays, ice for drinks, kitchenware, or toilet articles are not exempt from tax.

  (4) Tax is not due on electricity or natural gas used in the off-wing processing, overhaul or repair of a jet turbine engine or its parts for a person described in subsection (a)(1) of this section.

  (5) Machinery, tools, and equipment that support the overall carrier operation such as baggage loading or handling equipment, garbage and other waste disposal equipment, or reservation making or booking machinery and equipment, do not qualify for exemption.

(e) Taxable uses of tangible personal property purchased tax free. Persons making a taxable use of tangible personal property purchased tax free, including aircraft purchased for flight training, should refer to §3.285 of this title (relating to Resale Certificate; Sales for Resale) and §3.287 of this title (relating to Exemption Certificates).

(f) Rolling stock.

  (1) Sales or use tax is not due on the sale or use of locomotives and rolling stock.

  (2) Sales or use tax is not due on the fuel or supplies essential to the operation of locomotives and trains if required by federal or state regulation.

  (3) Sales or use tax is not due on electricity, natural gas, and other fuels used or consumed predominately in the repair, maintenance, or restoration of rolling stock.

(g) Motor carriers. The sale and use of motor vehicles are taxed under the Tax Code, Chapter 152.

(h) Certificate. The comptroller adopts by reference the Texas Aircraft Exemption Certificate Out-of-State Registration and Use (Form 01-907). Copies of the certificate are available for inspection at the office of the Texas Register or may be obtained from the Comptroller of Public Accounts, Account Maintenance, 111 E. 17th Street, Austin, Texas 78774-0100. Copies may also be requested by calling our toll-free number 1-800-252-5555. In Austin, call 463-4600. (From a Telecommunication Device for the Deaf (TDD) only, call 1-800-248-4099 toll free. In Austin, the local TDD number is 463-4621.)


Source Note: The provisions of this §3.297 adopted to be effective January 1, 1976; amended to be effective March 24, 1978, 3 TexReg 817; amended to be effective October 6, 1978, 3 TexReg 3353; amended to be effective March 31, 1982, 7 TexReg 1177; amended to be effective October 30, 1984, 9 TexReg 5387; amended to be effective November 6, 1985, 10 TexReg 4125; amended to be effective January 28, 1992, 17 TexReg 324; amended to be effective December 28, 1993, 18 TexReg 9312; amended to be effective August 12, 1998, 23 TexReg 8182.

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