Did amended construction-contract language separately stating materials from labor satisfy a prerequisite for Texas enterprise-project tax refunds?

Plain-English summary

The Comptroller reviewed amended Paragraph 9.4 of a new-construction contract and concluded that the agreement was now clearly a separated contract. That classification was a prerequisite for enterprise-project tax refunds under Tax Code Section 151.429 and proposed Rule 3.329.

The amended clause required contractors and subcontractors to state material charges separately from labor or services. Progress and final payments depended on separated invoices to the owner, and the owner reserved authority to require change orders or separate invoices protecting its reimbursement rights.

The letter decided the contract-classification prerequisite; it did not state that a refund had already been approved.

What this means for you

Calling an agreement separated was not enough. The reviewed language required the billing records themselves to isolate materials from labor and services.

Common questions

Did the Comptroller accept the amended agreement as separated? Yes.

What feature mattered? Separate statement and invoicing of materials versus labor and services.

Did the letter grant the enterprise-project refund? No; it confirmed a prerequisite.

Citations and references

• Texas Tax Code § 151.429 — enterprise-project tax refunds
• Proposed Comptroller Rule 3.329

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1043A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller September 10, 1990

Dear ****:

Thank you for your letter of September 4, 1990. I have
reviewed amended Paragraph 9.4 of the new construction
contract between **** and *****.
In my opinion, this contract is now clearly a separated
contract. As we established earlier, this is a prere-
quisite for enterprise project tax refunds under Tax
Code Section 151.429 and proposed Rule 3.329.

If you have further questions, please feel free to
write, or call me at 1-800-531-5441, ext. 3-3889.

Sincerely,
John Christian
Taxability Section
Legal Services Division

9.4

Owner shall pay all sales, consumer, use, and other similar taxes.
All Sub-contractors and Contractor shall so state their charges
that all charges for material will be separated from the charges
for labor or services. Progress and final payments to Contractor
and Sub-contractors is conditioned upon their respectively submit-
ting all charges in separated invoices issued to the Owner as Cus-
tomer so that material can be separately calculated and paid from
services and labor. With the assistance of Engineer and Contractor,
Owner will undertake all of these steps necessary to protect its
rights under the Texas State Enterprise Act and the Texas Tax Code
to qualify for appropriate sales tax, use tax, and franchise tax
reimbursements. The Owner reserves the right to issue change or-
ders as necessary to require each and every Contractor and Sub-
contractor to state material charges separately or to furnish sep-
arate invoices to owner.

ARTICLE 10 CONTRACTOR

10.1
The contractor shall supervise and direct the Work using his best
skill and. attention and he shall be solely responsible for all
construction means, methods, techniques, sequences and procedures
and for coordinating all portions of the Work under the Contract.

10.2
Unless otherwise specifically provided in the Contract Documents,
the Contractor shall provide and pay for all labor, materials,
equipment, tools, construction equipment and machinery, water,
heat, utilities, transportation, and other facilities and services
necessary for the proper execution and completion of the Work,
whether temporary or permanent and whether or not incorporated or
to be incorporated in the Work.

10.3
The Contracto r shall at all times enforce strict discipline and
good order among his employees and shall not employ on the Work
any unfit person or anyone not skilled in the task assigned to him.

10.4
The Contractor warrants to the Owner and the Engineer that all ma-
terials and equipment incorporated in the Work will be new unless
otherwise specified, and that all Work will be of good quality,
free from faults and defects and in conformance with the Contract
Documents. All Work not conforming to these requirements may be
considered defect