Were charges for installing, assembling, repairing, refinishing, or moving a customer's tangible personal property taxable in Texas?

Plain-English summary

The Comptroller distinguished installation from assembly or erection. Placing tangible personal property into position without changing its form—such as hanging pictures, mirrors, or chandeliers—was nontaxable installation when the company was not selling or assembling the item.

Connecting component parts into a finished product was assembly or erection, which the letter treated as taxable. Moving a customer's old furniture without reassembling it was not taxable. Repair and refinishing of tangible personal property were taxable on the total charge, regardless of whether the property was old or new.

Other service charges became taxable when performed together with repair, refinishing, assembly, or erection, even if separately stated. The same services were nontaxable when performed on a standalone basis.

What this means for you

The label on an invoice did not control. The company had to determine whether its labor merely positioned an intact item, connected components into a finished product, repaired or refinished property, or simply moved property without reassembly.

For taxable work, the company could accept a valid resale or exemption certificate and could issue a resale certificate for incorporated materials or taxable labor bought for resale. It owed tax on consumable supplies and equipment used in the work. For nontaxable labor, it owed tax when buying taxable items used to perform the service.

Common questions

Was standalone installation taxable? No, when it only placed property into position without changing its form and was not connected with a sale or assembly by the company.

Was assembly or erection taxable? Yes. The letter described it as connecting component parts into a finished product.

Was moving old furniture taxable? Not when the company only moved it and did not reassemble it.

Could separately stating related service charges make them nontaxable? No. If performed with taxable repair, refinishing, assembly, or erection, separating the charges did not change their taxability.

Citations and references

The letter did not cite a rule or statute by number. It stated that repair and refinishing of tangible personal property had been taxable on the total charge since October 2, 1984.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8805L0904G01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 17, 1988

Dear *:

Thank you for your letter of January 26, 1988 concerning your company's
responsibilities under the sales tax law. The content of your letter
leads
me to believe that your company does not sell tangible personal property
(such as furniture, paintings, mirrors). I am basing my response on this
premise.

For clarity purposes, I am not going to discuss the taxability of the
various
service charges in the same order you listed them, but a determination of
each one's taxability can be discerned from the general discussion that
follows.

First, let me go into the installation charges, as outlined in F of your
letter. For sales and use tax purposes, the definition of "installation"
is
to place tangible personal property in position, without changing its
form,
where it will reasonably accomplish the purpose for which it will be
utilized. Examples of this are hanging pictures, mirrors and
chandeliers.
If your company is doing installation per definition, and not selling or
assembly/erecting the merchandise being installed, then the charge is not
taxable. Installation labor performed in conjunction with the repair/
remodeling of tangible personal property is taxable; please see the
discussion below.

"Assembly" or "erection" is the labor to connect component parts into a
finished product; it is the final stage in the manufacturing process.
Sales
tax has been due on a charge for assembly or erection of tangible
personal
property since 1961. If your company is only moving a customer's "old"
furniture from one place to another and not reassembling it, the charge
is
not taxable.

Since October 2, 1984, repair and refinishing of tangible personal
property
has been taxable on the total charge for the service. It does not matter
if
the property is old or new.

The charges for services outlined in A through E and H of your letter are
also subject to tax when done in conjunction with the repair/refinishing
of
tangible personal property or assembly/erection labor. Separating out
the
various charges will not affect their taxability. On the other hand, if
these services are done on a stand-alone basis (not in conjunction with
repairs/refinishing or assembly/erection), the charges for them to your
company's customers are not taxable.

For all taxable charges as described in the above paragraphs, your
company
may accept a properly completed and valid resale or exemption certificate
in
lieu of charging tax. Your company may also issue a resale certificate
to
its suppliers for the materials incorporated into the property being
worked
on or for any taxable labor resold, such as sub-repair or sub-assembly.
Tax
is due at the time of purchase on the cost of consumable supplies and
equipment used in doing the work.

For the labor charges that are not taxable, your company owes tax at the
time
of purchase on all taxable items used to perform the work.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may write
me
at the Tax Policy Division.

Sincerely,
Sandi Skaggs
Tax Policy Division