A new business installs automatic insecticide spray systems in homes. Does it need a Texas sales tax permit and have to collect tax on its charges, and can it buy the spray equipment it installs tax-free?

Plain-English summary

A new business asked the Comptroller about its Texas sales and use tax responsibilities for installing an automatic home insecticide spray system. The Comptroller classified this as a structural pest control service — activities performed to identify, prevent, control, or eliminate household pests using chemical or mechanical means (Rule 3.356(a)(8)) — which is a taxable real property service under Rule 3.356(b).

Key points from the ruling:

• The business needs a Texas sales tax permit and must collect sales tax on its total charge to customers.
• It can buy the spray equipment it installs tax-free, using a resale certificate to its supplier, because the equipment is transferred to the customer as an integral part of the taxable pest control service (Rules 3.285 and 3.356(c)).
• If it already paid tax to a supplier on equipment later transferred as part of a taxable pest control service, it can take credit for that tax paid by subtracting the equipment's purchase price from its own taxable sales amount on its sales tax return (Rule 3.338(c)).
• The Comptroller also forwarded a copy of the response to the Structural Pest Control Board to separately address any professional licensing requirements — if that board determines a license isn't required for this business's activities, the sales-tax-permit conclusion here would still apply independent of licensing.

What this means for you

Businesses installing automatic pest control / insecticide spray systems in homes

Register for a Texas sales tax permit and collect tax on your full charge to customers — this is treated the same as other structural pest control services under Rule 3.356. But you don't have to eat sales tax on the equipment itself: buy it tax-free from your supplier with a resale certificate, since it passes through to the customer as part of your taxable service.

Pest control businesses that already paid tax on equipment before realizing it qualifies for resale treatment

You're not stuck — Rule 3.338(c) lets you claim credit for tax already paid to a supplier by reducing your taxable sales amount by that equipment's purchase price on your own sales tax return.

Accountants and tax professionals

This is a clean, complete walkthrough of the resale-certificate mechanic for a service provider whose "sale" is really a bundled service-plus-materials transaction: equipment that becomes an integral, transferred part of a taxable real property service qualifies for tax-free purchase under a resale certificate, with a separate credit mechanism if the tax was already paid upstream.

Common questions

Q: Does installing an automatic home insecticide system require a Texas sales tax permit?
A: Yes — it's classified as a structural pest control service, a taxable real property service requiring a permit and tax collection on the total charge to customers.

Q: Can the pest control business buy its spray equipment tax-free?
A: Yes, using a resale certificate, because the equipment transfers to the customer as an integral part of the taxable pest control service.

Q: What if the business already paid tax on equipment before setting up resale certificates?
A: It can take credit for that tax paid by subtracting the purchase price of the tax-paid equipment from its taxable sales amount on its own sales tax return.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.356(a)(8) (definition of structural pest control services)
• 34 Tex. Admin. Code Rule 3.356(b) (real property services — taxability)
• 34 Tex. Admin. Code Rule 3.356(c) (resale certificates for pest control equipment)
• 34 Tex. Admin. Code Rule 3.285 (resale certificates)
• 34 Tex. Admin. Code Rule 3.338(c) (credit for tax paid to suppliers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200006430L

Original ruling text

June 30, 2000

Dear **:

Thank you for your recent letter concerning you Texas sales and use tax
responsibilities for your new business, **, an automatic home
insecticide system.

You are providing or performing a structural pest control service. You are
required have a Texas sales tax permit and to collect sales tax on the total
amount you charge your customers. See Rule 3.356(b) concerning real property
services.

Structural pest control services are activities performed for the purpose of
identifying, preventing, controlling, or eliminating, by use of chemical or
mechanical means insects and other related pests which may infest households.
See Rule 3.356(a)(8).

You may purchase the equipment that you install at your customer's home tax
free for resale because the equipment is transferred as an integral part of the
taxable pest control service. You may buy the equipment installed in you your
customers' homes tax free by issuing a resale certificate to your supplier. See
Rules 3.285 concerning resale certificates and 3.356(c).

You may take credit on your sales tax return for sales tax paid on equipment
transferred as part of the taxable pest control service you provide by reducing
the taxable sales amount. This is done by subtracting the purchase price of the
tax paid items from the taxable sales amount. See Rule 3.338(c) concerning
credit for tax paid to suppliers.

The referenced Comptroller state sales tax rules are available at:
.

You may view or down load a sales and use tax application at
; then click on the following:

1. Tax Forms
2. Sales & Use Tax
3. AP-201 (Texas Application for Sales and Use Tax Permit)

I am forwarding a copy of my response to the Structural Pest Control Board for
a response regarding any licensing requirements. Should the board determine
that your activities do not require a license, you will not need to apply for a
sales tax permit and you may follow the information you received from Mr.
Wiruscheske.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
email address is .

Sincerely,

Eddie C. Washington
Tax Policy Division

cc: Carl Wiruscheske, Tax Assistance

Structural Pest Control Board
Licensing Division
P.O. Box 9536-172
Austin, Texas 78766