Ezel / Tax Rulings / TX
TX 8908L0959C10 Sales and/or Use Tax (State,Local,MTA) 1989-08-31

Were charges to cut, shape, and install insulation in existing nonresidential property taxable?

Short answer: Yes. A single contractor's entire charge was taxable; with separate contractors, cutting and shaping were taxable fabrication and installation was 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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

When one company cut, shaped, and installed insulation in existing nonresidential real property under one contract, the entire charge was taxable. The letter noted that labor to remodel nonresidential real property had become taxable on January 1, 1988.

Using separate contractors did not avoid tax. The first contractor's cutting and shaping labor was taxable fabrication, and the second contractor's installation labor was taxable remodeling of existing nonresidential real property.

Common questions

Was a combined cut-shape-install contract taxable? Yes, in full.

What if one company fabricated the insulation and another installed it? Both charges were taxable under different classifications.

Did the preserved letter decide residential installation? No. Its operative facts and analysis concern existing nonresidential real property.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN 78774

August 31, 1989

Dear ***:

Thank you for your letter concerning the taxability of labor to
cut and shape insulation which will be installed in real property.
You told me in our telephone conversation on August 31, 1989 that
your company hires someone to cut and shape insulation that your
company provides and then install it into non-residential real
property. You also said that in some instances you hire one
company to cut and shape the insulation and a different company to
install the insulation in the non-residential real property.

When one company cuts, shapes and installs insulation in existing
non-residential real property, under one contract, then the entire
charge is taxable. Labor to remodel non-residential real property
became taxable on January 1, 1988.

When one company cuts and shapes the insulation and a different
company installs the insulation under a separate contract, then
the cutting and shaping labor is taxable as fabricating. The
labor to install the insulation by the other company is also
taxable because the company is remodeling existing non-residential
real property.

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

If you have any questions, please contact Tax Correspondence. You
may call toll free 1-800-252-5555, or our regular number is 512/463-4600.

My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence

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