How did Texas tax repair or remodeling of nonresidential and residential real property under the corrected guidance?

Plain-English summary

STAR labels this record “Chimney Sweeping,” but the preserved body is a correction to broader repair-and-remodeling guidance. For nonresidential real-property repair or remodeling, the provider had to collect tax on the total customer charge even when materials and labor were separately stated.

For residential real-property repair, a lump-sum contractor paid tax on incorporated materials and did not tax the lump-sum customer price. Under a separated contract, only the materials charge was taxable, and the contractor could buy those incorporated materials tax-free with a resale certificate.

Common questions

How was nonresidential repair or remodeling taxed? On the total charge.

What happened on a lump-sum residential job? The contractor paid tax on materials and did not charge tax on the customer's lump-sum price.

What happened on a separated residential job? Only the separately stated materials 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/8902L0924B03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 21, 1989

Dear ****:

This letter is to make a correction to my letter dated December 17, 1987
regarding your sales tax responsibilities. Paragraph 4 of the letter should
read as follows:

Effective January 1, 1988, all persons who repair or remodel
nonresidential real property must collect tax on the total charge to their
customers. This applies even if the charges for materials and labor are
separated. If you repair residential real property and you charge your
customers lump sum, you must pay tax on the materials that will be incorporated
into the repair. You would not charge tax on the lump-sum price charged to the
customer. If you bill your customer a separated charge, only the charge for
materials would be taxable. You may purchase the materials that will be
incorporated into the repair tax free under a resale certificate.

I am enclosing Rule 3.357 Real Property Repair and Remodeling for your
information.

If you have any questions or need more information, please call toll free
1-800-252-5555. My extension is 3-4666. You may write to Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence