How did Texas tax different methods of installing, repairing, and maintaining flagpoles?

Plain-English summary

Texas treated flagpoles bolted to a building wall or rooftop as tangible personal property because they could be removed. Sales tax applied to the total sale-and-installation charge for those poles.

A pole installed in a concrete footing with a steel sleeve was instead a permanent improvement to real property. Labor for that installation was not taxable when performed on residential property or as part of original construction, subject to the contractor rules in Rule 3.291. The total labor-and-material charge was taxable when the same work was nonresidential remodeling or repair under Rule 3.357.

Repairing or restoring a flagpole was taxable whether the pole remained personal property or had been permanently affixed. Real-property maintenance labor could be exempt only if it met Rule 3.357's maintenance requirements.

Common questions

Was a wall- or roof-mounted flagpole installation taxable? Yes, on the total charge.

Was a concrete-footing installation always taxable? No. Residential and original-construction labor could be nontaxable, while nonresidential remodeling or repair was taxable.

Was flagpole repair taxable? Yes. The letter separately allowed an exemption for qualifying real-property maintenance labor.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L0942G11

Original ruling text

June 22, 1989

Dear **:

Thank you for your letter dated June 14, 1989 concerning the taxability of
labor charges associated with installing flagpoles in various situations.

In situations #2 and #3, the sale and installation of the flagpole is a sale
and installation of tangible personal property. Sales tax is due on the total
charge to your customer. These flagpoles are not permanently affixed to real
property.

In situation #1, if you poured the concrete footing, set the steel sleeve into
the concrete and installed the flagpole into the sleeve, then you would be
permanently improving real property. If this work was done on residential
property or as a part of a contract for new construction of a building or other
permanent improvement to realty, the labor would not be taxable. You should
follow the guidelines in Rule 3.291 for contractors.

If you installed this type of flagpole on nonresidential property and not as a
part of the original construction contract, then you would be remodeling (or
repairing) real property. the total charge for labor and materials is taxable.
See Rule 3.357.

The total charge for repairing, remodeling, restoring or maintaining tangible
personal property is taxable. Repairing or restoring flagpoles which have been
permanently affixed to real property (as in situation #1) is taxable.
Maintaining real property is not taxable; however, you must meet the guidelines
given in sections (a)(3) and (c)(2) of Rule 3.357 in order for the labor to be
exempted as 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 any additional questions. You may
write me, call toll-free 1-800-531-5441 from anywhere in the United States or
phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence

June 14, 1989

Comptroller of Public Accounts
Capitol Station
Austin, TX 78774

Re - Sales tax on labor

Dear Sirs,

The question of labor being taxable has been questioned several times recently
by our customers. I would appreciate a ruling on this subject from your office
as it pertains to the installation work that my company performs.

1) Our labor includes: installation of flagpoles into concrete footings. The
flagpole footings are not part of the building, nor does the building depend on
the flagpoles or flagpole footing for any structure or operation. The footing
involves digging a proportional size hole, setting a steel sleeve in concrete
and sliding the flagpole into the sleeve. The pole can be pulled out at a later
time. Occasionally the flagpole may be installed into a sidewalk, but the
sidewalk and flagpole footing are structurally independent of each other.

2) Another option is to install a flagpole by bolting it to the building wall.
In this case the flagpole is a removable fixture of the building's exterior
wall.

3) As a third option, the flagpole can be bolted to the rooftop structure of a
building. Although it is bolted down it can still be removed easily without
damage to the building or its operation.

4) As a fourth method, we incur labor when we maintain the service of flagpoles
previously installed. This includes changing ropes, tying up flags, repairing
cables, pulleys, etc.

Our installation work is involved in new construction and remodeling, both
commercial and residential.

Currently we pay sales tax on all material, labor and freight charges. I would
appreciate a ruling from your office as soon as possible on the above questions
raised.

Thank you for your assistance in this matter.

Sincerely,

President