Does Texas use tax apply to mobile lodging camp buildings brought in from Canada and set up on leased land to house oil and gas workers?

Plain-English summary

The Texas Comptroller ruled that mobile lodging camp buildings — brought from Canada into Texas to house oil and gas industry workers — remain taxable tangible personal property and owe Texas use tax, because hooking them up to utilities doesn't turn them into part of the real estate.

The taxpayer runs mobile camps (modular lodging, dining, and recreational buildings, built on I-beams and moved by flatbed trailer) that it acquires from a related company in Canada and sets up on land it leases in Texas, forming an "open lodge" that anyone can book. The taxpayer installed power, water, propane, and sewage systems to support the lodge and separately collects Texas Hotel Occupancy Tax on room rentals there.

The key legal question was whether the modular buildings had become part of the real property (in which case they'd be treated differently) or remained tangible personal property subject to Texas use tax when brought into the state. The test: property becomes part of the realty only when it's affixed to the land in a genuinely permanent manner; property that's readily removable without substantial damage to itself or the land keeps its identity as personal property. Because the buildings are mobile, transportable on flatbed trailers, and merely connected (not permanently annexed) to utility lines, they stayed tangible personal property. As a result, the taxpayer owes Texas use tax on the camp facilities when it brings them into Texas for use, separate from — and in addition to — the Hotel Occupancy Tax it already collects on room rentals.

What this means for you

Companies operating modular, mobile, or "man camp" lodging for industrial workforces

Bringing modular buildings into Texas from out of state (or another country) triggers Texas use tax on those buildings as tangible personal property, even if they're set up as a semi-permanent facility with utility hookups. Utility connections alone don't convert them into exempt real property improvements.

Businesses importing modular/prefabricated structures generally

The "readily removable without substantial damage" test applies broadly beyond lodging — any modular or prefabricated structure that can be disassembled or relocated without permanently damaging itself or the land likely stays tangible personal property for Texas tax purposes, regardless of how long it sits in one place or how developed the supporting utility infrastructure is.

Accountants and tax professionals for oilfield services and lodging operators

Note that use tax on the buildings themselves is a separate tax obligation from the Hotel Occupancy Tax already being collected on room rentals — the two don't offset each other. Also watch the STAR Accession No. 200201717L (2002) precedent cited here, which establishes the general permanent-affixation test the Comptroller applied.

Common questions

Q: Do modular buildings become real property once they're hooked up to water and electric lines?
A: No, per this ruling — connecting utility lines doesn't permanently annex a readily-removable modular structure to the land. It remains tangible personal property unless actually affixed in a way that would cause substantial damage to remove.

Q: Does collecting Hotel Occupancy Tax on room rentals cover the use tax on the buildings themselves?
A: No. These are separate tax obligations — Hotel Occupancy Tax applies to the room rental transactions, while use tax applies to bringing the taxable tangible personal property (the buildings) into Texas for use.

Q: Does it matter that the buildings came from outside Texas (from Canada)?
A: Yes — that's exactly what triggers use tax. Texas use tax applies to the storage, use, or consumption of taxable items brought into the state, as opposed to sales tax, which applies to in-state sales.

Q: Can I rely on this ruling for my own modular building operation?
A: Only if you're the taxpayer it was issued to. It binds the Comptroller solely as to that taxpayer's specific facts and can't be relied on by others, though it's a clear illustration of the personal-property-vs-real-property test for modular structures.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.101 (Use Tax Imposed)
• Tex. Tax Code § 151.102(a) (User Liable for Tax)
• Tex. Tax Code § 151.010 (Taxable Item)
• Tex. Tax Code § 151.009 (Tangible Personal Property)
• 34 Tex. Admin. Code § 3.357(a)(10) (Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance — real property definition)
• 34 Tex. Admin. Code § 3.347(b) (Improvements to Realty — readily removable property retains TPP identity)
• STAR Accession No. 200201717L (Jan. 14, 2002) (permanent affixation test)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202107007L

Original ruling text

July 7, 2021

RE: Private Letter Ruling No. 20200205145048

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General

Information Letters. [ENDNOTE 1] We are responding to your request dated Feb. 3, 2020, and additional

information received via email on March 23, 2020, June 22, 2021, and during a conference call on

June 7, 2021. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill

of Rights.

You requested guidance on the applicability of Texas use tax to mobile camps that are transported

from Canada to Texas for use as lodging, generally for the oil and natural gas industry.

Facts Presented

The facts are drawn from **’s (Taxpayer’s) information as referenced above

and from Taxpayer’s website (https://**.com/).

Taxpayer is in the business of providing mobile lodging and related services (e.g., catering and

housekeeping) to oil and gas industry workers by setting up mobile camps at locations with

convenient access to industry projects. The mobile camps consist of lodging, dining, and

recreational facilities. Taxpayer’s website identifies the lodging facilities as modular buildings

and states that they can be set up within a twenty-four- hour period.

Taxpayer acquires its mobile camps from a related entity and brings them from Canada to Texas where

they are placed to form an open lodge on land that Taxpayer leases. The open lodge is accessible to

anyone wishing to book a room. Taxpayer has installed power, propane, water, and sewage conveyance

systems on the leased land to support the open lodge.

Taxpayer states it operates one lodge in Texas where the modules are built on I-beams and

transported only by flatbed trailer. Taxpayer provided invoices for room rentals at its open lodge

which indicate that Taxpayer is collecting Hotel Occupancy Tax on the room rentals.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are Taxpayer’s mobile camps, including mobile lodging, dining, and recreational

facilities, brought from Canada to Texas tangible personal property subject to use tax under

Chapter 151?

Ruling: Taxpayer’s mobile lodging, dining, and recreational facilities located at its lodge in

Texas are tangible personal property subject to sales and use tax under Tax Code, Chapter 151 upon

storage, use, or other consumption in Texas.

Analysis: Texas imposes a use tax on the storage, use, or other consumption of taxable items in

this state. Section 151.101 (Use Tax Imposed). A person storing, using, or consuming a taxable item

in this state is liable for the tax until it is paid to the state. Section 151.102(a) (User Liable for Tax).

The term “taxable item” includes tangible personal property and taxable services. Section

151.010 (Taxable Item). Tangible personal property means personal property that can be seen,

weighed, measured, felt, or touched or that is perceptible to the senses in any other manner.

Section 151.009 (“Tangible Personal Property”).

Real property is defined as land, including structures and other improvements that are embedded

into or permanently affixed to the land. Rule 3.357(a)(10) (Nonresidential Real Property Repair,

Remodeling, and Restoration; Real Property Maintenance. (Tax Code, §§151.0047, 151.0101, 151.056,

151.058, 151.311, 151.350, 151.429)).

Whether tangible personal property retains its identity as tangible personal property or becomes an

improvement to real property is dependent upon the method of attachment or installation.

For tangible personal property to become part of the realty the tangible property must be

affixed to the land in a permanent manner. See, for example, STAR Accession No. 200201717L

(Jan. 14, 2002). Tangible personal property that is readily removable without causing substantial damage

to the tangible personal property itself or to the realty retains its identity as tangible personal

property. See Rule 3.347(b) (Improvements to Realty). Taxpayer’s camp facilities are mobile and

easily transportable. The hooking up of electric, water, or sewage lines to the camp facilities

does not permanently annex the facilities to the realty.

Taxpayer’s camp facilities retain their identity as tangible personal property. The facilities are

used by Taxpayer to provide lodging, dining, and recreation to guests staying at its lodge.

Taxpayer is responsible for accruing and remitting use tax on the facilities.

STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system.

The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at

www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at

https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No.

20200205145048.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1.Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.