Ezel / Tax Rulings / TX
TX 8910L0964C05 Sales and/or Use Tax (State,Local,MTA) 1989-10-10

How did Texas tax new underground-cable construction, moving existing buried cable for road work, and repairing or replacing that cable?

Short answer: New construction followed the contractor rules: a lump-sum contractor paid tax on materials and did not collect from the customer, while a separated contractor could buy incorporated materials for resale and collect tax on the stated materials price. Moving existing cable aside or deeper was nontaxable, but repair or replacement made the entire charge taxable.

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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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

Installing underground cable and wire for new construction was contractor work governed by Rule 3.291.

Under a lump-sum contract, the contractor paid tax when purchasing materials and supplies and did not collect tax from the customer. Under a separated contract, the contractor could issue a resale certificate for materials incorporated into the realty and collected tax from the customer on the agreed materials price.

Moving cable that already had been buried—either shifting it sideways or burying it deeper to accommodate road work—was not taxable. If the work instead repaired or replaced the cable, Rule 3.357 made the entire charge taxable.

Common questions

Was moving existing buried cable taxable? No.

What if the cable was repaired or replaced? The entire charge was taxable.

How did a lump-sum new-construction contractor handle materials tax? The contractor paid it when buying the materials.

Citations and references

  • 34 Tex. Admin. Code Rule 3.291
  • 34 Tex. Admin. Code Rule 3.357

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller October 10, 1989

Dear *:

Thank you for your letter questioning the taxability of certain
construction work. When you are burying underground cable and
wire for new construction, then you are considered a contractor
and should follow the enclosed Rule 3.291 relating to contractors.
Under a lump sum contract you should pay tax on all your materials,
supplies, etc., when you purchase them and not collect tax from
your customer. Under the separated contract you may issue a resale
certificate for materials incorporated into the realty and collect
tax from your customer on the agreed contract price of the materials.

You also move cable which has already been buried to facilitate
road work. The cable may be moved over or buried deeper. The
charge to move existing cable is not taxable.

However, if you repair or replace the cable, the entire charge is
taxable. See the enclosed Rule 3.357 relating to real property
repair and remodeling.

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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