Ezel / Tax Rulings / TX
TX 8511002L Sales and/or Use Tax (State,Local,MTA) 1985-11-18

Was an automated manufacturing-facility rack system tangible personal property or an improvement to realty in Texas?

Short answer: It was tangible personal property. The contractor was advised to separate materials from installation and collect tax from the customer on materials.

Apply this to your situation

This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1985 Texas Comptroller taxpayer-response letter based on the requester's facts and blueprints for one automated rack system. It classifies that system, suggests a separated contract, and addresses subcontractor resale certificates and material-tax refunds. It expressly says different facts could change the opinion. Current fixture, real-property, tangible-property, construction, resale, refund, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

After reviewing the facts and blueprints, the Comptroller classified the automated rack system as tangible personal property rather than an improvement to realty.

The contractor was advised to amend the customer contract to separate materials from installation. Subcontractors could accept the contractor's resale certificate and give resale certificates to their own suppliers. If subcontractors had already paid tax on incorporated materials, their suppliers could refund it. The contractor had to collect tax from the customer on all materials sold.

Common questions

Was the rack system real property? No.

How should the customer contract be structured? The letter suggested separately stating materials and installation.

Could subcontractors use resale certificates? Yes, under the described arrangement.

Who collected tax from the facility owner? The contractor, on the materials sold.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

November 18, 1985

Dear ***:

Thank you for your letter of November 7, 1985 and blueprints of an

automated rack system for XYZ's manufacturing facility in ***.

A review of the facts presented in your letter and the blueprints

indicate the rack system is tangible personal property rather than an

improvement to realty.

I would suggest *** (ABC) execute an addendum to the contract

with XYZ separating the charge for materials from installation. Your

subcontractors may accept your resale certificate and may issue their

resale certificate in lieu of tax to their suppliers. In the event your

subcontractors have paid tax on materials incorporated into the project,

a refund of tax can be made by the supplier to the subcontractors. ABC

will be required to collect tax from XYZ on all materials sold to XYZ .

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

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