Changes in the Diesel-Powered Equipment Surcharge
The surcharge on heavy-duty, diesel-powered equipment has been increased and broadened effective July 1, 2003.
The Texas Emissions Reduction Plan (TERP)
The 2003 Texas Legislature raised the TERP surcharge from 1 percent to 2 percent and broadened it to include most types of heavy-duty, diesel-powered equipment, including mobile and stationary equipment purchased, rented or leased in Texas or brought in from out of state.
The surcharge applies to equipment subject to state and local sales and use taxes and is collected like sales tax by the dealer or lessor.
What equipment is not subject to the surcharge?The surcharge does not apply to:
- repair or replacement parts or accessories related to the equipment;
- implements of husbandry (including equipment exclusively used on a farm or ranch to build or maintain roads or water facilities);
- processing machinery and equipment eligible for manufacturing exemptions; and
- machinery and equipment used to construct or operate a qualifying water or waste water system and exempt from sales tax under Tax Code Sec. 151.355.
Collecting the Surcharge
The seller or lessor should collect the surcharge along with sales and use tax on the rental, lease or sale of heavy-duty, dieselpowered equipment. No surcharge is due when the purchaser issues a valid resale or exemption certificate for the equipment.
Existing Lease Agreements
The previous 1 percent rate continues to apply to diesel-powered construction equipment leased or rented before July 1, 2003. Renewals or extensions of agreements after June 30, 2003 are subject to the new 2 percent rate.
Reporting the Surcharge
To report the surcharge, taxpayers use a separate form (01-142) which must be filed or postmarked on or before the 20th day of the month following the end of each reporting period.
Buyers who do not pay the sales or use tax to the seller or lessor should accrue the 2 percent surcharge along with sales and use tax and report it directly to the Comptroller. Returns must be filed or postmarked on or before the 20th day of the month following the end of each reporting period.