Were lump-sum artwork restoration, frame-selection advice, and restoration work for charitable entities taxable in Texas?

Plain-English summary

Sales tax was due on the total lump-sum charge to repair artwork. Helping a customer select restored frames was nontaxable unless the contractor also reframed the picture or restored the frame.

The contractor could claim credit for sales tax previously paid on repair materials, but it needed a sales-tax permit, should give suppliers resale certificates for taxable repair items, and had to collect tax on the total customer charge.

Work for a charitable entity was exempt only if that organization had actually qualified. The letter warned that not every charitable entity was exempt and directed the requester to verify a specific organization.

Common questions

Was the lump-sum artwork restoration charge taxable? Yes, in full.

Was frame-selection advice taxable? Not by itself.

Could the contractor recover tax paid on materials? Yes, with the permit and resale procedure described in the letter.

Were all charitable customers exempt? No.

Citations and references

• Texas Comptroller Rule 3.322 — qualified exempt organizations.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8510L0668C05

Original ruling text

October 16, 1985

Dear ***:

Thank you for your letter of October 4, 1985 concerning the correct
imposition of sales tax in the following situation:

My client, Contractor is involved in the restoration of art work for both
profit and charitable entities. The scope of her activities include
repairing damage to actual paint canvases and helping in the selection
of restored frames. The services are performed at the customer's home
or office as Contractor has no retail business location, etc. The
services are performed on a lump-sum contract basis as no amounts are
specified for materials or labor. The Contractor pays sales tax on the
small amount of materials used in the restoration work at time of
purchase from the supplier.

1) Is sales tax due on the lump-sum amount charged?

Response: Sales tax is due on the total charge for the repair of
tangible goods. A charge for helping in the selection of restored
frames is not taxable unless your client reframes a picture or
restores the frame.

2) If so, can a credit be claimed for sales taxes paid at time of purchase?

Response: Yes, however your client must have a sales tax permit
and should issue a resale certificate to the supplier, in lieu of
tax, on all taxable items used in the repair. Sales tax should be
collected on the total charge to your customer.

3) Is sales tax due on the lump-sum amount charged to charitable entities?

Response: An exemption has been granted to the organizations shown
in Rule 3.322, enclosed, and in numerous other organizations on
items purchased for their own use. Not all charitable entities have
qualified for this exemption. You should contact our office if you
have a question concerning a specific entity.

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

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division