Ezel / Tax Rulings / TX
TX 9004L1018E02 Sales and/or Use Tax (State,Local,MTA) 1990-04-27

Was labor taxable when a cable television operator completely replaced its distribution plant by hanging a new plant and then tearing out the old one?

Short answer: No. The Comptroller treated the complete cable-plant replacement as new construction, so the installation labor was not taxable, and treated removal of the old plant as nontaxable demolition.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The Comptroller treated the complete replacement of a cable television distribution plant as new construction. The operator would drop the old plant onto J-hooks, install the new plant, and then remove the old plant. The labor for the new construction was not taxable, and tearing down the old plant was nontaxable demolition.

The letter also says FM radio service was not taxable and defines "extended service" as programming above basic cable, including stereo and pay-per-view events. It does not state a separate tax conclusion for every kind of extended service.

Common questions

Was the labor to install the replacement cable plant taxable? No. The Comptroller classified the total replacement as new construction.

Was removal of the old plant taxable? No. The letter classified the tear-down as demolition.

What did the letter mean by extended service? Any programming level above basic cable, including charges for stereo and pay-per-view events.

Source

Original ruling text

April 27, 1990

Dear *****:

As we discussed yesterday, I have an answer to your question
about the taxability of the total replacement of a cable plant.

This replacement is accomplished by dropping the old cable
plant on j hooks, the new cable plant is installed and the
old plant is then torn out. The total replacement of a cable
plant is new construction - and the labor is not taxable. The
tear down is demolition and not taxable.

Thank you for your suggestions for amending Rule 3.313. I
have incorporated them into a new draft - which is enclosed.
I'd be happy to hear of any other suggestions you may have.

The draft of the new rule includes a reference to FM radio
service which, as we discussed, is not taxable.

In your letter you asked for a definition of extended service.
Extended service means any programming level above basic cable
and includes charges for stereo and pay per view events.

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 me. The toll-free number is 1-88-531-5441. The
regular number is 512/463-4614. Or you may write me at the
Taxability Section of Legal Division. [(fax) 512-475-0900]

Sincerely,

Adina Whittemore
Taxability Section
Legal Services Division

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