How could an elevator contractor calculate the taxable portion of contracts combining real-property repair and maintenance?

Plain-English summary

The contract combined elevator maintenance and repair. Repair work was taxable as real-property repair, while some scheduled or documented work could qualify as maintenance under Rule 3.357(a)(3) and (c)(2).

For reporting, the contractor could calculate one taxable percentage: total repairs performed under all contracts divided by total repair-and-maintenance receipts for the immediately preceding year. Daily time sheets or similar records could document repair and maintenance time.

The contractor could then apply that aggregate prior-year percentage to individual contracts.

Common questions

Were all contract services automatically taxable? Repair was taxable; qualifying maintenance could receive different treatment under the cited rule.

How was the percentage calculated? Prior-year total repairs divided by total repair-and-maintenance receipts.

Could one percentage be used across contracts? Yes, if derived from the aggregate and properly documented.

Citations and references

• 34 Tex. Admin. Code Rule 3.357(a)(3) and (c)(2)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9001L0981A05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 1, 1990

Dear **:

Thank you for your letter of January 9, 1990, and the accompanying
contract.

The contract is a maintenance and repair contract. Services
performed under the terms of this contract are taxable as real
property repairs. Some of the services may qualify as real
property maintenance as defined under section (a)(3) of the
enclosed Rule 3.357 (Real Property Repair and Remodeling) if your
client has maintenance schedules or work orders that meet this
definition. See section (c)(2) of the rule.

For sales and use tax reporting purposes, your client may compute
a single taxable percentage to apply to these contracts. This
percentage should be derived from the total repairs performed un-
der the contract divided by the total receipts (repairs and main-
tenance). Daily time sheets or other documentation that detail
time spent on repairs and maintenance may be used. The percentage
should be taken on an aggregate of all contracts from the immedi-
ate preceding year. Your client may apply this method to indivi-
dual contracts.

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, you may call
toll-free 1-900-252-5555, ext. 3-4683. The regular number is 512/
463-4600. You may write me at Tax Correspondence, Comptroller of
Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence