Ezel / Tax Rulings / TX
TX 8904L0929D01 Sales and/or Use Tax (State,Local,MTA) 1989-04-14

Did rebuilding previously occupied mall space from bare floors and walls count as nontaxable new construction?

Short answer: No. Because the work replaced or rebuilt parts of previously occupied space, Texas treated it as taxable remodeling.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A tenant took space in a building that had previously been occupied. The area had been stripped to bare floors and walls, and new walls, doors, and other improvements would be installed for the tenant.

Texas treated the work as remodeling, not new construction, because it replaced, rebuilt, or made over parts of an existing, previously occupied structure. The letter therefore described the work as taxable remodeling under Rule 3.357.

Common questions

Did stripping the space to bare floors and walls make it new construction? No.

What fact was decisive? The space was part of an existing building and had previously been occupied.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

April 14, 1989

Dear **:

When we discussed the issue of remodeling versus new construction a few
days ago, I told you I would look for examples of rulings on situations similar
to that of your client. Copies of two such letters, as well as the pertinent
rule (34 TAX 3.357), are attached.

The situation about which you inquired involved space in a building which
had been occupied. Your client will take possession of an area which has been
stripped down to bare floors and walls, and will have improvements installed to
meet its needs. The issue is whether this work will be considered remodeling
and therefore taxable, or new construction, which is not taxed.

Since the statute does not define "remodeling" we have attempted to
follow its normal, everyday meaning. Thus we've defined it in terms of work
done on an existing structure to replace a part of it, or to rebuild or make it
over.

Since the work will be done to replace or rebuild the walls, doors, etc.,
in an area of a building which has previously been occupied, I believe it is
appropriate to treat this as remodeling.

I hope the attached letters and rule fully explain our position and the
basis for it. If you need anything more, please call me. I can be reached at
463-4606.

Sincerely,
Martin Cherry
Assistant Director
Legal Services Division

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