Is moving a customer's sign to a new location taxable in Texas, and how are servicing, re-facing, and lettering signs taxed?

Plain-English summary

A sign company asked the Comptroller to clarify the sales-tax treatment of various sign jobs. The central question was about moving a customer's sign from one location to another; the file also includes an earlier response covering seven related scenarios.

Moving a sign (the main holding). When the company does nothing to the customer's sign except relocate it, and the sign is an improvement to real property, the company is providing third-party transportation — that charge is not taxable. The charges to dig the hole and to re-install the sign at the new location are also not taxable. Only the separately stated charge for material to install the sign and post is taxable to the customer (and the company may issue a resale certificate to its supplier when buying that material). If instead the company bills a lump-sum charge for materials and labor, it is the end consumer of the materials and must pay tax to its supplier — the lump-sum charge to the customer is then not taxable. If the sign is not an improvement to real property (so it is tangible personal property), moving and re-installing it are still nontaxable transportation, and incidental materials the company uses are taxable to the company at purchase. These answers depend on the company not altering, remodeling, restoring, or performing any other taxable service on the sign.

The seven earlier scenarios. The prior letter addressed related jobs:

1. Removing a customer's old sign and installing a new customer-supplied sign on existing poles — taxable remodeling; total charge taxable. Signs are generally improvements to realty, and repair/remodel of a nonresidential realty improvement is taxable whether lump sum or separated. (If the sign is not an improvement to realty, a separately stated installation charge is not taxable unless connected to a taxable repair.)
2. Servicing a pole sign (lamps, ballast, wire, labor) — entire charge taxable.
3. Servicing a building sign — entire charge taxable.
4. Fabricating new faces for an existing sign and installing — entire charge taxable.
5. Moving a sign and pole to a new location — the charge to move is not taxable (the subject of the main letter).
6. Cutting vinyl letters the customer picks up and installs himself — total charge for the lettering is taxable (a sale of tangible personal property).
7. Cutting and applying vinyl lettering to a customer's door/window — taxable as repair and remodeling of nonresidential real property, except when performed as part of a new-construction contract.

What this means for you

Sign companies relocating signs

If you only move a customer's existing sign — no repair, remodel, or alteration — your transportation, hole-digging, and re-installation charges are not taxable. Watch how you bill materials: separately stated install material is taxable to the customer (buy it for resale), but a lump-sum job makes you the consumer who owes tax to your supplier.

Servicing, re-facing, and lettering

Repairing, servicing, re-facing, or lettering signs that are improvements to nonresidential real property is taxable remodeling — the whole charge is taxable, lump sum or separated — unless it is part of a new-construction contract. Selling vinyl letters the customer installs is a taxable sale of tangible personal property.

Document exactly what you did

The nontaxable treatment for moving hinges on your not performing any taxable service on the sign. Note precisely on each invoice what was done, and keep the taxable and nontaxable items clearly separated.

Common questions

Q: Is moving a customer's sign to a new location taxable?
A: No. If you only relocate the sign and do nothing else to it, that is nontaxable third-party transportation, and the re-installation and hole charges are also not taxable.

Q: Which charge in a sign move is taxable?
A: A separately stated charge for material to install the sign and post is taxable to the customer; you can buy that material with a resale certificate. If you bill lump-sum, you owe the tax to your supplier instead.

Q: Is servicing or re-facing a sign taxable?
A: Yes. Servicing, repairing, or fabricating new faces for signs that are improvements to real property is taxable — the entire charge, lump sum or separated.

Q: Is applying vinyl lettering to a door or window taxable?
A: Yes, as repair and remodeling of nonresidential real property — except when performed as part of a new-construction contract. Selling letters the customer installs himself is a taxable sale of tangible personal property.

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

Rules and statutes: The letter applies the Comptroller's positions on third-party transportation, the consumer-of-materials rule for lump-sum jobs, and repair/remodeling of nonresidential real property (a Sales Tax Review copy was enclosed), but does not cite a specific rule or Tax Code section by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8808L0893B06

Original ruling text

August 1, 1988

Dear ***:

I am responding to your second request for clarification on the
taxability of charges for services you perform. I will restate your
inquiry and my response.

Question: We removed customer's sign and pole at one location and took
to a new location and installed. We cut the pole off at the grade at
old location and dug a hole and set the pole in concrete at the new
location.

Our invoice reads:

Labor and Truck to Remove Old Pole Sign $500.00
Material to Install Sign and Pole $300.00
Hole Labor and Truck to Install Sig and Pole at New Location $900.00
$1,760.00

Response: The charge to move the sign from one location to another is
not taxable.

You did not understand this initial response and asked:
(1) Are you saying to haul the sign from one location to another is not
taxable, or

(2) Material and labor and truck to remove sign and re-install is
non-taxable, or

(3) Are certain parts non-taxable?

The enclosed copy of the sales tax review list seven categories of signs
that are considered to be improvements to real property. During our
telephone conversation of July 26, 1988, you affirmed that in this
situation you do nothing to your customer's sign except move it from one
location to a new location. If you are moving a sign that belongs to your
customer and that sign is an improvement to real property, then you are
providing third party transportation. This charge is not taxable. The charge
to dig the hole is not taxable. The charge for "re-installing" the sign at
the new location is not taxable. The separately stated charge for material to
install the sign and post is taxable to your customer. You may issue a
resale certificate to your supplier when you buy these materials.

However, when you perform the same service as discussed above and you
bill your customer a lump-sum charge for materials and labor, you are the end
consumer to materials. You must pay tax to your supplier at the time of
purchase. This lump-sum charge is not taxable to your customer.

If you move a sign that is not an improvement to real property and is
therefore tangible personal property and the sign belongs to your
customer, then your charge for third party transportation is not taxable.
The charge for third party "re-installation" is also not taxable; in this
situation neither charge is connected with the sale of tangible personal
property or the performance of a taxable service. Incidental material used
by you to perform this non-taxable service are taxable to you at the time of
purchases.

As I stated in our telephone conversation, these responses are strictly
limited by your affirmation that you do not alter, change, remodel,
restore, or perform any other taxable service in connection with moving these
signs. Also, you should carefully note on your invoices exactly what is being
done. I hope this letter and our telephone conversations clarified this matter
for you.

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, you may write the Tax
Policy Division.

Sincerely,

Tax Policy Division

July 1, 1988

Dear ***:

Thank you for your letter regarding the taxability of signs.

Question: 1. We receive a new sign from our customer. We take this sign
to *** for installation. We remove customer's old sign from
steel poles set in concrete and install the customer's new sign on the
existing poles.

Removed customer old sign from existing poles and installed new sign
supplied by customer on customers poles.

Material--------------- $20.00
Labor and Truck-------- $480.00
Driving Time----------- $120.00
$620.00

This is an example of taxable remodeling; the total charge is taxable.
Signs are generally considered an improvement to realty. If the sign is an
improvement to realty, the repair or remodeling thereof is subject to
sales tax. The total charge for repair or remodeling of a nonresidential
improvement to real property is taxable whether billed as a lump-sum
figure or separated into charges for material and labor. However, if the sign
is not an improvement to realty, a separately stated installation charge is
not taxable unless the installation is connected to a taxable repair.

Question: 2. An order was written to service customer's pole sign. Our
invoice reads:

Serviced pole sign.
Lamps----------------- $100.00
Ballast--------------- $275.00
Misc. Wire------------ $20.00
Labor and Truck------- $360.00
$755.00

The entire charge is taxable.

Question: 3. An order was written to service customer's sign attached to
customer's building. Our invoice reads:

Serviced building sign.
Material---------------- $200.00
Labor and Truck--------- $90.00
$290.00

The entire charge is taxable.

Question: 4. We are contracted to fabricate new faces for customer's
existing sign on steel poles set in concrete and customer's
building sign attached to customer's building.

Our invoice reads:
New Faces--------------------- $2000.00
Labor and Truck to install---- $400.00
$2400.00

The entire charge is taxable.

Question: 5. We removed customer's sign and pole at one location and
took to a new location and installed. We cut the pole off at the grade
at old location and dug a hole and set the pole in concrete at the new
location.

Our invoice reads:
Labor and Truck to Remove Old Pole and Sign-------- $500.00
Material to Install Sign and Pole----- $300.00
Hole------------------------- $60.00
Labor and Truck to Install Sign and Pole at New Location--$900.00
$1760.00

The charge to move the sign from one location to another is not taxable.

Question: 6. We cut vinyl letters for a customer and the customer
picked-up the letters at our shop and customer installed letters himself,
letters read: ***** AND STORE HOURS.

Our invoice reads:
Custom vinyl letters reading: *** AND STORE HOURS
Customer picked-up letters at our shop-------------- $75.00

The total charge for the lettering is taxable.

Question: 7. We cut vinyl letters for a customer and we take the letters
to the customers store and install on customers door or window.
Letters read: ***** AND STORE HOURS.

Our invoice reads:
Supplied and installed customer vinyl letters on customers door (94) window.
(a) Letters and Labor---------------- $125.00
(b) Letters---------------- $75.00
Labor to Install Letters - $50.00
$125.00

Furnishing and applying vinyl lettering to doors, windows, interior, and
exterior walls is taxable as the repair and remodeling of nonresidential
real property, except when performed as a part of a new construction contract.

The statement contained on page two of the *** Association
etter is correct. Enclosed is a copy of a recent Sales Tax Review
which states the same thing.

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, you may write Tax Policy Division.

Sincerely,

Tax Policy Division