When was labor to install new sheet-metal manufacturing equipment taxable in Texas?

Plain-English summary

For this sheet-metal manufacturer, Texas defined installation as placing tangible personal property in position, without changing its form, so it could perform its intended function.

If an independent company or consultant only performed that installation and neither sold nor assembled the equipment, the charge was not taxable. Assembly or erection—connecting component parts into a finished product—was treated as the final manufacturing stage and was taxable. Installation performed by the equipment seller was also taxable.

Common questions

Was every separately stated installation charge nontaxable? No. The answer depended on who performed the work and whether the work included assembly or erection.

Was simple positioning by a nonseller taxable? No, on the facts described.

Was assembly or seller-performed installation taxable? Yes.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L0945B05

Original ruling text

June 16, 1989

Dear *****:

Thank you for your letter concerning the taxability of separately stated
installation charges.

Per your telephone conversation with ***** on June 13, 1989, we
determined that you are a manufacturer of sheet metal. We also were able to
clarify your questions involving the charges for installing new equipment
purchased by you which is used in the manufacturing of sheet metal. For sales
and use tax purposes, the definition of "installation" is to place tangible
personal property in position, without changing its form, where it will
reasonably accomplish the purpose for which it will be utilized. If the
company/consultant doing the installation per definition did not sell or
assemble/erect the merchandise being installed, the charge is not taxable.

Assembly or erection is the labor to connect component parts into a finished
product; it is the final state in the manufacturing process and is taxable. A
charge by the seller of the equipment to do its installation is also subject to
tax.

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 ext 3-4662. The regular number is 512/463-4600. You may
write me at Tax Correspondence, Comptroller of Public Accounts

Sincerely,

Sandy Skaggs
Tax Correspondence