Was a flat monthly charge for testing residential pool water, adding chemicals, and cleaning taxable, and how were chemicals and service equipment purchased?

Plain-English summary

The provider charged residential pool owners a flat monthly fee to test pool water and add chemicals used to eradicate and prevent algae and bacteria. It bought chemicals in bulk and used refillable chlorine cylinders, metering and transfer equipment, and other tools.

The Comptroller said the total customer charge was taxable, including materials, labor, transportation, and incidentals, whether billed as one lump sum or separately.

Chemicals transferred to the customer could be purchased tax-free with a resale certificate. Equipment and supplies used to perform the service, such as suction hose, were taxable to the provider, which paid tax to the supplier.

What this means for you

The historical letter distinguished items transferred to the pool owner from equipment the provider retained and used. Separating labor, chemicals, or transportation on the invoice did not reduce the taxable customer charge.

Common questions

Was the flat monthly service fee taxable? Yes, in full.

Could transferred pool chemicals be purchased for resale? Yes.

Could service equipment be purchased for resale? No. The provider paid tax on equipment and items it used to perform the service.

Citations and references

• 34 Tex. Admin. Code Rule 3.356 (real property services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0844G01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

November 2, 1987

Dear ***:

Thank you for your recent letter asking if you are required to collect
sales
tax on services in your business.

Your letter reads in part:

"We provide chemical and cleaning service to residential swimming
pool owners. All chemicals are purchased in bulk quantities, as
is necessary when using chlorine gas. Tax is paid to the supplier
for chemicals at the time of purchase. Customers are then billed
at a flat rate each month for the service of testing pool water
and adding chemicals.

The operation of this service requires a substantial investment in
refillable chlorine cylinders, metering and transfer equipment to
make chemical infusion possible.

The service is expressly performed to eradicate and prevent algae
and bacteria from swimming pool water."

Answer:

Your total charge for material, labor, transportation and other
incidentals is taxable whether a lump sum or separated charge.

Any materials transferred to your customer, i.e. chemicals, may be
purchased tax free with a resale certificate. Equipment and items
such as suction hose used in performing the service would be
taxable to you and you should pay tax to your supplier.

I am enclosing Rule 3.356 for your information.

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 me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division