Is installing internet wiring and wall plugs in a building taxable in Texas, and does it matter whether the building is residential or commercial?

Plain-English summary

A company that installed wire and wall plugs for internet connections asked, through the Comptroller's tax.help email service, whether its charges were subject to Texas sales tax. The answer depends on two things: (1) whether the work is new construction or residential repair/remodeling versus commercial (nonresidential) repair/remodeling, and (2) how the invoice is structured.

New construction, and residential repair/remodeling (single home, duplex, apartment, condominium, nursing home): labor is not taxable.

• If billed lump-sum (labor not separately stated from materials), the installer pays Texas sales tax to its supplier when buying the incorporated wire and plugs, and the lump-sum charge to the customer is not taxed at all.
• If the installer separately states labor from materials, it can buy the wire/plugs tax-free using a resale certificate; the separately stated labor charge to the customer stays untaxed, while the separately stated materials charge is taxed.

Nonresidential (commercial) repair/remodeling: the entire charge — labor and materials together — is taxable, regardless of whether the invoice separates them. The installer may still use a resale certificate to buy the incorporated wire/plugs tax-free, but must then collect tax on the whole billed amount to the customer.

What this means for you

Cabling, wiring, and low-voltage installers

Track whether each job is new construction, residential repair, or commercial repair, since that governs whether labor ever escapes tax. For residential/new-construction jobs, decide between lump-sum billing (simpler, but you eat the materials tax) and separated billing (lets you pass materials tax through and use a resale certificate). For commercial repair/remodel jobs, the whole invoice is taxable no matter how you structure it.

Property owners hiring cabling contractors

Expect no separately billed sales tax on labor for new construction or residential wiring work — but expect the full invoice, including labor, to carry sales tax if you're a commercial property owner having existing wiring repaired or remodeled.

Accountants and tax professionals

This is a standard application of Texas's new-construction/residential-repair versus commercial-repair-and-remodeling framework to a cabling/wiring fact pattern — useful as a quick-reference example for IT infrastructure installers who may not otherwise think of themselves as "contractors" subject to real property service rules.

Common questions

Q: Is labor to install internet wiring taxable in Texas?
A: Not for new construction or residential repair/remodeling — labor stays untaxed whether billed lump-sum or separately. For commercial (nonresidential) repair/remodeling, the entire charge including labor is taxable.

Q: Does it matter if I bill lump-sum or itemize labor and materials?
A: For residential/new-construction work, yes — lump-sum means you pay tax on materials yourself and charge the customer nothing; separated billing lets you pass tax through only on the materials line. For commercial repair/remodeling, the entire charge is taxable regardless of invoice format.

Q: What counts as "residential" for this purpose?
A: The letter lists single-family homes, duplexes, apartments, condominiums, and nursing homes as residential improvements to realty.

Q: Can any cabling company rely on this letter?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the business it addresses (34 Tex. Admin. Code Rules 3.1, 3.10), though the underlying framework reflects general Comptroller policy on new construction and repair/remodeling.

Citations and references

No specific statutes or rules were cited by number in this letter; the response applies the Comptroller's general new-construction/repair-and-remodeling framework (residential vs. nonresidential, lump-sum vs. separated contracts) to the facts presented.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200102078L

Original ruling text

February 26, 2001

To: **

From: Philip Knisely

Subject: Question on taxable service

Dear **:

Thanks for using tax.help email to inquire about your business and Texas sales
tax.

You stated that your company recently installed wire and wall plugs for an
Internet connection. You asked if your charges are subject to Texas sales tax.

A charge for labor to perform new construction (residential and nonresidential)
or to repair or remodel a residential improvement to realty (single home,
duplex, apartment, condominium, nursing home) is not subject to Texas sales
tax. If your company bills "lump sum" (a charge for labor is not separately
stated from a charge for incorporated materials), you must pay Texas sales tax
to your supplier when you purchase incorporated items such as wire, etc. The
"lump sum" charge to your customer for new construction or for residential
repair or remodeling is not subject to Texas sales tax.

If, however, your company separately states a charge for labor from a charge
for incorporated materials, you may issue a Texas resale certificate to your
supplier in lieu of paying Texas sales tax on incorporated materials. The
separately stated charge for labor to your customer is not subject to Texas
sales tax and the separately stated charge for incorporated materials is
subject to Texas sales tax.

The entire charge (labor and incorporated materials) to repair and remodel a
nonresidential (commercial) improvement to realty is subject to Texas sales
tax. Your company may issue a Texas resale certificate in lieu of paying Texas
sales tax for incorporated materials. You should collect Texas sales tax on
the entire charge for nonresidential repair and remodeling.

This opinion is based on the facts presented. Additional or different facts
may yield different results.

Please let me know if you have additional questions.

Sincerely,

Philip Knisely