Was excavation and installation of sloped concrete or treated supports beneath an existing building nontaxable maintenance when intended to prevent soil-heave damage?

Plain-English summary

Excavating earth beneath the existing building and installing sloped concrete or treated supports to create a permanent void was taxable work.

The record did not make clear whether the building was already damaged or the work only prevented future soil-heave damage. Either way, it was not maintenance. Rule 3.357 required maintenance to be scheduled periodic work performed before the property needed repair.

The project was taxable as part of repairing or remodeling the existing building.

Common questions

Was the work scheduled periodic maintenance? No.

Did uncertainty about existing damage change the result? No.

How was the project classified? Taxable real-property repair or remodeling.

Citations and references

• Comptroller 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/9006L1027C14

Original ruling text

June 18, 1990

Dear **:

Thank you for your recent letter concerning the excavation work
performed by Company A Construction for Company B under an existing
building owned by XYZ Corporation.

According to the documents that you submitted, Company A was
hired to excavate earth below the building and install sloped
concrete or wolmanized batts to insure a permanent void. The work
was done "to prevent the building from being upheaved and causing
structural damage if the soil potentially expanded and heaved the
building." Apparently, the work was done as a compromise
settlement of a suit filed by XYZ against Company B and other
parties.

It is not clear whether the building was damaged and the work was
done as a part of the repair or whether the work was done to prevent
damage to the existing building. In either case, the excavation work
does not meet the definition of maintenance given in Rule 3.357 on
real property repair and remodeling services.

In order to qualify as maintenance of real property, the work must
be done on a scheduled, periodic basis before the property is in
need of repair. Work done on an as-needed basis or after the realty
has deteriorated does not qualify as exempt maintenance labor.
Please refer to section (a) (3) and (c) (2) of the rule. The work
that Company A performed is taxable either as a part of the repair
of XYZ 's building or as a part of remodeling XYZ 's existing
building.

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

Please feel free to contact me if you have any additional questions.
You may write me, call toll free 1-800-252-5555 (ext. 3-4685) from
anywhere in the United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence