When was parking-lot striping or restriping taxable repair rather than nontaxable scheduled maintenance, residential work, or new construction?

Plain-English summary

Restriping qualified as maintenance only when regularly scheduled and recurring to prevent decline or deterioration, supported by schedules or work orders. Restriping performed after fading, cracking, or other deterioration was taxable repair.

Striping a new parking lot at a new or old building, and striping at an apartment or other residential complex, had nontaxable labor. Existing nonresidential restriping was taxable unless the preventive-maintenance documentation established the exemption.

For nontaxable maintenance, residential, or new-construction lump-sum work, the contractor paid tax on equipment, paint, and supplies. For taxable restriping, transferred paint or supplies could be bought for resale, while equipment and nontransferred supplies remained taxable to the contractor.

Common questions

Was annual scheduling alone enough? The ruling said the facts might qualify but required proof of preventive, recurring maintenance.

Was restriping after fading taxable? Yes.

Was new-parking-lot striping labor taxable? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8911L0969B12

Original ruling text

November 15, 1989

Dear ***:

I am responding to your letter regarding your client's sales and use tax
responsibilities when striping or restriping parking lots for his customers.

You stated that your client's work does not involve any repair of the surface
strictly the repainting of the striping. He provides his own equipment, paint,
and supplies.

He generally has only one customer, a large grocery store chain. This contract
is awarded annually and at the beginning of the contract period, the work for
the following year is scheduled to establish which store will be restriped in
which month. You and your client feel that this is scheduled maintenance.

Parking lot restriping may qualify as maintenance only when performed on a
regularly scheduled and recurring basis. Persons claiming this exemption must
be able to show by maintenance schedules or work orders that the restriping is
performed to sustain or support safe, efficient, continuous operations or to
keep in good working order by preventing the decline, failure, lapse, or
deterioration of the improvement. Any restriping performed due to fading,
cracking, etc., is done after the deterioration has occurred and is taxable as
repair.

It appears that your client's customer (the grocery store chain) may have the
proper documentation necessary to claim an exemption from tax on the labor as
maintenance labor. However, your letter is not completely conclusive in this
matter. Please keep in mind that it is the seller's and/or purchaser's
responsibility to be able to prove the exemption applies and to maintain the
proper documentation.

Labor charges for striping a new parking lot at a new building, a new parking
lot at an old building, a parking lot around an apartment complex or other
residential complex is not taxable. Labor charges to restripe an existing
non-residential parking lot is considered repair or remodeling. This charge
is taxable unless the proper documentation is available to prove that it
qualifies as maintenance because it is performed on a regularly scheduled
and recurring basis even in the absence of any deterioration.

The charges for equipment, supplies, and materials are taxable to the end
consumer. When your client is performing non-taxable restriping maintenance,
residential restriping, or new construction striping and bills his customer
a lump-sum amount for materials and labor, he must pay the tax on the equipment,
paint, and other supplies he uses. When your client is performing taxable
restriping, he may issue a resale certificate to his supplier in lieu of tax
on paint or other supplies that are transferred to his customer. He must pay
tax on equipment and supplies that he uses to perform the service but are not
transferred to the customer.

I am enclosing rules relative to this issue; although, they do not specifically
refer to parking lot striping and restriping they do address repair, maintenance,
and new construction of realty. Your client may be performing work for one entity
and correctly adding the tax, while the same work for another entity qualifies for
exemption. Property record keeping and documentation is essential to protect your
client in event of audit.

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

You may also write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence