How were a city's separately billed new water taps, sewer taps, and driveways taxed, and how did replacement taps and culverts differ at residential and nonresidential locations?

Plain-English summary

New water taps, sewer taps, and driveways were improvements to realty. Under the city's separated billing, the stated charge for incorporated materials was taxable and the labor charge was nontaxable.

Replacing an existing water or sewer tap at a nonresidential location was real-property repair or remodeling, making the total labor-and-material charge taxable. Installing a culvert in an existing nonresidential driveway received the same repair-or-remodeling classification.

At a residential location, only incorporated materials were taxable for taps and culverts. A separately stated charge for soil was excluded from the taxable materials described by the letter.

Common questions

New tap under separated billing: was labor taxable? No.

New tap: were incorporated materials taxable? Yes.

Replacement tap or existing-driveway culvert at a business location taxable? Yes, on the total charge.

Residential tap or culvert taxable? Only the incorporated materials, excluding separately charged soil.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1041G13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK

August 23, 1990

Dear **:

Thank you for your letter of August 2, 1990, concerning the tax-
ability of certain charges made by the city.

The installation of new water taps, sewer taps, and driveways is
considered improvements to realty. Your letter indicates that
these improvements-to realty are performed under separated bill-
ings (separate charge for materials incorporated and separate
charge for labor). The separately stated charge for the materi-
als is taxable. The charge for labor is not taxable.

If the installation of a water or sewer tap is to replace an ex-
isting tap, the job is considered real property repair or remod-
eling. The total charge (labor and materials) is taxable if the
job is performed at a nonresidential location. The installation
of a culvert in an existing driveway at a nonresidential location
is real property repair or remodeling. If water or sewer taps
and culverts are installed at a residential location, only the
incorporated materials (excluding separated charge for soil) are
taxable.

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

You may call toll free 1-800-252-5555 if you have any questions
or need more information. You may write to Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence