How did Texas tax broadcast-receiving equipment, its installation in new or existing buildings, and charges to receive broadcast signals?

Plain-English summary

Broadcast-receiving equipment was taxable tangible personal property. When the seller installed equipment that retained its identity as personal property, the installation charge was taxable too.

If the equipment became a permanent improvement to existing nonresidential realty, the total charge, including installation, was taxable as a real-property repair or remodeling service. For a permanent improvement under a new-construction contract, labor was not taxable: under a separated contract, the contractor could buy incorporated materials for resale and charge tax on their sales price; under a lump-sum contract, the contractor was the consumer and paid tax to the supplier.

The price charged to receive broadcast signals was taxable telecommunications service unless Rule 3.344 supplied a specific exemption. The letter also stressed keeping transaction-level records and obtaining valid exemption or resale certificates.

Common questions

Was the receiving equipment itself taxable? Yes. The letter classified it as tangible personal property.

Was installation always taxed the same way? No. Treatment depended on whether the equipment remained personal property, became part of existing nonresidential realty, or was installed under a new-construction contract.

Were broadcast-signal reception charges taxable? Yes, as telecommunications services, unless a specific Rule 3.344 exemption applied.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9004L1019F12

Original ruling text

April 26, 1990

Dear **:

I am responding to your letter regarding the taxability of:

(a) installation of broadcasting receiving equipment in new and
existing buildings,

(b) the reception of that broadcasting signal.

Perhaps the best information that I can provide is that your
client should carefully document the actual work performed on each
contract, invoice, billing, etc. When he performs jobs for other
entities who claim exemption for resale, etc., he must obtain
correctly completed certificates as required for that specific
transaction. In the absence of properly completed and valid docu-
mentation, he must collect tax on taxable sales. These actions
will prove very valuable to him at the time of audit.

Also, in relation to general sales tax responsibilities, you are
being sent several rules relating to your type of business and to
sales tax in general. Please take time to review this information
with your client. If either of you have any questions, you may
call or write for a detailed response.

Broadcast receiving equipment is tangible personal property and is
taxable. Installation of the equipment is taxable when the equip-
ment retains its identity as tangible personal property once it is
installed and the installation is performed by the seller of the
equipment.

If the equipment becomes a permanent improvement to existing non-
residential realty, the total charge (including installation) is
taxable as a real property repair/remodeling service. If the
equipment becomes a permanent improvement to realty under a new
construction contract, the amount of tax due will be determined
based upon your client's method of billing.

(a) if the contract separately states materials and labor,
he may give a resale certificate on all material purchased
that is actually incorporated into the realty being improved.
When he bills his customers, tax is due on the sales price of
the material. New construction labor is not taxable.

(b) If the contract is a lump-sum contract, he is the end
consumer of all material incorporated into the realty and
must pay tax to his supplier at the time of purchase. Again,
new construction labor is not taxable.

Rule 3.291 provides information regarding responsibilities of a
contractor performing new construction or residential repair or
remodeling. Rule 3.357 provides information regarding responsi-
bilities as a nonresidential repairman or remodeler. Rule 3.292
provides guidelines for repair of tangible personal property.
Rules 3.285, 3.286, 3.287, and 3.322 relate to general sales tax
responsibilities.

For the purpose of sales tax, broadcasting signals fall within the
definition of taxable telecommunications services. Please see the
enclosed copy of Rule 3.344 which explains that telecommunications
services means the electronic or electrical transmission, convey-
ance, routing, or reception of sounds, signals, data, or informa-
tion utilizing wires, cable, radio waves, microwaves, satellites,
fiber optics, or any other method now in existence or that may be
devised, including but not limited to long-distance telephone
service. The price one pays to receive broadcasting signals is
taxable unless Rule 3.344 provides specific exemptions.

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