How did Texas tax telephone wiring and jack installation in residential, new-construction, and existing commercial property?

Plain-English summary

The business replaced or installed telephone wiring and jacks in homes and businesses and planned to pre-wire new construction. The Comptroller said tax treatment depended on the type of property and work.

For new construction, initial finish-out work, or residential property, the business was treated as a contractor under Rule 3.291. On a lump-sum job, it paid tax on incorporated materials and did not charge the customer tax. On a separated contract, it could buy transferred cable and jacks with a resale certificate and charged tax on the stated materials amount.

Work on existing commercial property was real-property repair and remodeling under Rule 3.357. The total charge was taxable whether or not labor and materials were separately stated.

Common questions

How was lump-sum residential or new-construction wiring treated? The contractor paid tax on materials and did not tax the customer's lump-sum price.

What if materials and labor were separated? The contractor could buy incorporated materials for resale and charged tax on the materials amount.

What about existing commercial property? The total repair-or-remodeling charge was taxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8901L0932D01

Original ruling text

January 30, 1989

Dear ***:

Thank you for your letter of January 17, 1989, regarding the telephone wiring
service.

Based on what you described in your letter, your business:

a) replaces damaged wiring or telephone jacks or installs new wiring and jacks
in an area in a residential property.

b) replaces damaged wiring or telephone jacks or installs new wiring in an area
in a business.

You are also planning to do pre-wiring of new homes or businesses in the
future.

The type of property you are working on will make a difference in the
taxability of your activity. When working under a new construction contract or
doing initial finish out work as defined in the enclosed Comptroller's Rule
3.357(a)(4), or working on residential property (whether new or existing), you
are considered a contractor and are governed by Comptroller's Rule 3.291. As a
contractor, you have a choice of billing your customer lump-sum (without
separation of charges for labor and material) or billing your customer
separately for labor and material. In your letter, you stated that you charge
your customer a flat fee of $30.00 per jack. In this case, you are billing
your customer lump-sum. As stated in the rule, you must pay the sales tax on
all the materials used in the job and not charge any tax to your customer. If
you decide to separate your charges for labor and material, you can issue
resale certificates when you buy materials transferred to your customer (i.e.,
the cable and the jacks) in lieu of paying the tax. You would then charge
sales tax on the amount charged to your customer for material.

When working on existing commercial property, you are doing real property
repair and remodeling and are governed by Rule 3.357 (enclosed). The total
charge will be taxable, regardless of whether you separate labor and material
or not. See Section (b) of the rule.

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 1-800-252-5555. The regular number is 512/463-4600. You may write me
at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Julie Pesl
Tax Correspondence