Ezel / Tax Rulings / TX
TX 8707L0822G01 Sales and/or Use Tax (State,Local,MTA) 1987-07-09

Were construction materials exempt when homeowners hired the contractor but a city paid for housing renovations with federal grant funds?

Short answer: No. The materials were sold for improvements benefiting individual homeowners, not sold to or used exclusively for the city, so no exempt-entity renovation exemption applied.

Apply this to your situation

This page answers the general question as of 1987. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1987
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 a taxpayer-specific July 1987 Texas Comptroller letter about materials used to renovate single-family homes with city-administered federal grant funds. It says the opinion may change if the facts differ. The answer depended on homeowner contracting and benefit rather than city ownership or exclusive use; verify current exempt-contract law. STAR documents may no longer represent current policy even when not marked superseded. Identities 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

Contractors renovated several single-family homes in CITY A. Each contractor contracted with the homeowner, while the city paid the contractor using federal grant funds.

The Comptroller found no exemption for the renovation materials. They were sold for the individual receiving city financing, not to the city, and the improvements were not for the exempt entity's exclusive use and benefit.

What this means for you

The historical decision followed the transaction's actual purchaser and beneficiary. Government funding alone did not turn a homeowner's renovation into an exempt-entity improvement.

Common questions

Who contracted with the contractor? The homeowner.

Who paid the contractor? The city, using federal grant funds.

Were the materials sold to the city? No.

Did the project qualify as an improvement for an exempt entity? No, because it was not for the city's exclusive use and benefit.

Citations and references

  • No statute or rule number is cited in the ruling text.

Source

Original ruling text

July 9, 1987

Dear ***:

Thank you for your letter concerning the taxability of materials purchased by a
contractor to rehab (sic) several single dwelling units in CITY A.

I spoke to *** of CITY A who indicated to me that the contractor
contracts with the home owner to affect the improvements. The city then pays
the contractor with funds furnished by a federal grant.

There is no exemption available for the materials used on the renovations. The
materials are not sold to the city but to the individual who receives financing
from the city. Also it does not qualify as an improvement to real property for
an exempt entity since it is not for the exclusive use and benefit of the
exempt entity.

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

Please feel free to contact me if you have additional questions. You may write
me, call toll free 1-800-252-5555 from anywhere in Texas or phone 512/463-4600.

Sincerely,

F. Wayne McDonald
Tax Policy Section
Tax Administration Division

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