Could a builder give contractors exemption certificates for a facility built for two exempt organizations?

Plain-English summary

Two organizations qualified for Texas sales-tax exemption under Tax Code section 151.310. A new facility was being built to their specifications, and their existing building would be exchanged for the new facility when construction was complete.

The Comptroller concluded that the job was for the exempt organizations' benefit. The builder could therefore give contractors an exemption certificate instead of paying tax for the job. The certificate needed to identify the job location and state that the building was being constructed for the two organizations' exempt purposes.

Common questions

Did the exempt organizations have to own the new building during construction? The letter allowed the exemption on the stated arrangement even though the exchange would occur upon completion.

What had to appear on the exemption certificate? The job location and a statement that the building was being constructed for the named organizations' exempt purposes.

Would different facts necessarily receive the same treatment? No. The letter expressly limited its opinion to the facts presented.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L0944B10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

June 21, 1989

Dear ****:

Thank you for your letter concerning the facility * is
building for (Variety) and *** (Services).

I understand the facts are as follows:

Both Variety and Services have been classified by the IRS as
501(c)(3) organizations. Both organizations qualify for an
exemption from sales tax under 151.310.

The facility will be built to the specifications of Variety
and Services. If the construction, engineering costs, and
all other related cost exceed an agreed amount, Variety and
Services will either alter the plans or cover any amount over
the maximum allowance.

Upon completion of the facility, the building presently owned
by Services and Variety will be exchanged for the new facility.

The job is for the benefit of the exempt organizations. *
may give contractors an exemption certificate in lieu of tax on
this job. The certificate should state the location of the job,
and that the building is being constructed for Variety
and ***Services to be used in connection with the organizations'
exempt purpose.

This opinion is based on the facts presented. If there are addi-
tional or different facts, the opinion may change.

If you have any questions or need more information, please call
me. The toll-free number is 1-800-531-5441. The regular number
is 512/463-4614. Or you may write me at the Taxability Section of
Legal Division. [(FAX) 512-475-0900]

Sincerely
Adina Whittemore
Taxability Section
Legal Division