Is resurfacing tennis courts and playgrounds — applying colored coatings and coal-tar sealant, and repairing asphalt or concrete — taxable in Texas?

Plain-English summary

A contractor asked how Texas sales tax applies to resurfacing and sealing tennis courts and playgrounds and repairing asphalt and concrete. Specifically: applying coal-tar pitch emulsion to asphalt, applying colored materials to courts and play areas, and repairing existing asphalt/concrete. The Comptroller's answers:

• Repairing existing asphalt and concrete areas is taxable — unless the area repaired is residential property.
• Applying colored materials to tennis courts and play areas is a taxable service — unless the work is on residential property or performed as part of a new-construction contract.
• Applying protective coatings such as coal-tar pitch emulsion is presumed taxable unless it is part of a new-construction contract or the area coated is residential property. Coating or sealing an existing commercial area is taxable repair, remodeling, or restoration.

The Comptroller pointed the taxpayer to Rule 3.357 (real property repair and remodeling), sections (c)(2) and (a)(3), for the documentation needed to prove that a job qualifies for the exemption as real property maintenance rather than taxable remodeling.

What this means for you

Paving, sealing, and court-resurfacing contractors

For commercial work, assume your repair, resurfacing, sealing, and coating charges are taxable repair/remodeling/restoration. The exceptions are narrow: the job is on residential property, or it is done as part of a new-construction contract.

The line between taxable remodeling and nontaxable maintenance

Protective coatings are presumed taxable. If you believe a job is really nontaxable real-property maintenance, Rule 3.357 requires you to document it — keep the records that section describes, or expect the charge to be treated as taxable.

Common questions

Q: Is resurfacing or sealing a commercial tennis court taxable in Texas?
A: Yes. Applying colored materials or protective coatings to an existing commercial court or play area is taxable repair, remodeling, or restoration.

Q: When is this work not taxable?
A: When it is performed on residential property, or as part of a new-construction contract.

Q: Is repairing cracked asphalt or concrete taxable?
A: Yes, on commercial property. Repair of existing asphalt and concrete areas is taxable unless the area is residential.

Q: How do I show a job is exempt maintenance rather than taxable remodeling?
A: Rule 3.357 (sections (c)(2) and (a)(3)) sets out the documentation required to prove the service qualifies as real-property maintenance.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

• 34 Tex. Admin. Code Rule 3.357 — real property repair and remodeling; the letter cites sections (c)(2) and (a)(3) for the documentation needed to support a real-property-maintenance exemption. A copy was enclosed with the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8807L0888A13

Original ruling text

July 27, 1988

Dear ***:

Thank you for your letter of July 18, 1988 concerning the application of coal
tar pitch emulsion to asphalt and colored materials to tennis courts and
playgrounds, as well as the repair of asphalt and concrete areas.

The repair or existing asphalt and concrete areas is taxable unless the area
repaired is residential property. The application of colored materials to
tennis courts and play areas is also a taxable service unless the work is done
on residential property or as a part of a new construction contract.

The application of protective coatings such as the coal tar pitch emulsion
described in your letter is presumed taxable unless the work is a part of a new
construction contract or the area coated is residential property. Coating or
sealing an existing commercial area is taxable repair, remodeling or
restoration. Please refer to section (c)(2) and (a) (3) of the enclosed Rule
3.357 on real property repair and remodeling for information about
documentation necessary to prove that such services qualify for exemption as
real property maintenance.

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 the United States or phone
512/463-4600.

Sincerely,

Julie Pesl
Tax Correspondence