Could subcontracts and material orders signed after July 21, 1987 qualify for Texas's prior-contract exemption when based on earlier bids?

Plain-English summary

The general contract was entered before July 21, 1987 and was based on subcontractor and materialman bids received before that cutoff.

The Comptroller said subcontracts and material purchase orders could qualify for the prior-contract exemption even if signed after July 21, provided the earlier bids were intended for the pre-cutoff general contract and the general contract's final terms were substantially similar to those bids.

What this means for you

Under the historical transition rule, the later signature date did not automatically defeat the exemption. The key conditions were the bids' intended connection to the earlier general contract and substantial similarity between the bids and final terms.

Common questions

Could a subcontract signed after July 21 qualify? Yes, if the letter's conditions were met.

What connection to the earlier bid was required? The bid had to be intended for the general contract entered before the cutoff.

Could the final contract materially differ from the bid? The letter required the final terms to be substantially similar.

What is the January 1985 plant-maintenance letter in the source? Separate correspondence appended to the published record; it is not part of the 1987 bid ruling summarized here.

Citations and references

• No statute or administrative rule is cited in the operative December 1987 response.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8712L0854C01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 29, 1987

Dear ***:

We appreciate your inquiry relating to the taxability of a contract
entered into prior to July 21, 1987, which was based on bids from
subcontractors and materialmen received prior to cutoff date.

If the bids were intended for a general contract entered into prior to
July 21, 1987 and the final terms of that general contract are
substantially similar to the original bids, subcontracts and material
purchase orders would qualify for the prior contract exemption even
though
they were actually signed after July 21, 1987.

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,
Julie Pesl
Tax Policy Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller January 10, 1985

Dear ***:

Thank you for your recent letter regarding plant maintenance.

Maintenance of plants belonging to others became taxable October 2,
1984. Maintenance contracts entered into prior to that time are exempt
until September 30, 1987.

In my opinion, the contract you submitted will qualify for this prior
contract exemption.

As we discussed, plant leasing with maintenance provided is not taxable.
You would pay tax on your purchase price or the plant.

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

If I can be of further help, please call me at 1-800-252-5555 toll free
from anywhere in Texas. The regular number is 512/475-1931. You may
write me at the Tax Administration Division.

Sincerely,
AL Van Allen
Tax Policy Section
Tax Administration Division