Were labor and materials for restoring Texas historic buildings exempt from sales tax?

Plain-English summary

The Comptroller addressed labor and materials used to repair, remodel, or restore historic real property.

Labor for renovating property listed in the National Register of Historic Places was exempt under the administrative rule described in the letter. Property recorded only as a Texas Historic Landmark with the Texas Historical Commission did not qualify for that labor exemption.

Materials remained taxable unless they fit a construction-contract exemption under Tax Code Section 151.311 and the cited construction or remodeling rules. The Comptroller said any broader materials exemption for historic restoration would require legislative action.

A property that qualified for National Register listing after restoration could provide the required documentation to the service provider and request a refund of tax paid.

What this means for you

State historic designation and National Register listing were not interchangeable for this exemption. The ruling also treated labor and construction materials separately.

Common questions

Was restoration labor for a National Register property taxable? No.

Was Recorded Texas Historic Landmark status alone enough? No.

Were restoration materials automatically exempt? No.

Could a later National Register listing support a refund? Yes, after supplying the required documentation to the service provider.

Citations and references

• Tex. Tax Code § 151.311 (construction-contract exemptions)
• 34 Tex. Admin. Code Rule 3.291(c) (new construction)
• 34 Tex. Admin. Code Rule 3.357(5) (real-property repair and remodeling, as cited)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9011L1059B08

Original ruling text

November 20, 1990

Dear ***:

I am responding to your letters regarding the repair, remodeling, or
restoration of real property listed with the State of Texas Historical
Commission.

Your first letter questioned the application of tax to materials used in
restoration of historical buildings while exempting the labor. You recognized
the exemption provided when the property belongs to an exempt organization
and questioned the inconsistency of the rationale for exempting the labor
component and not the material component.

The labor to remodel, restore, or repair real property became taxable January
1, 1988, due to legislative action. This action excluded the labor to remodel,
restore, or repair residential realty. It was only due to unclear legislative
intent to tax the labor used to renovate historical buildings that allowed the
Comptroller to exempt this labor from sales tax by rule.

Materials used in construction contracts are taxable, except as exempted under
Chapter 151.311 of the Texas Tax Code. This exemption is addressed in Comptroller
Rule 3.291 (c), regarding new construction, and Rule 3.357 (5). Materials used
in any other manner than provided in these two rules are taxable to the end
consumer. A request to exempt materials used in restoration of historical
buildings (regardless of ownership) must be addressed by the Legislature.

I have enclosed copies of letters explaining in more detail the application
of tax in these situations. These letter also address the responsibilities
of persons providing the service.

Your second letter deals with the exemption for the labor. You requested written
confirmation that the exemption from sales tax for labor to repair, remodel, or
restore properties listed in the National Register of Historic Places will also
be provided to properties which are Recorded Texas Historic Landmarks and listed
as such with the State of Texas Historical Commission.

Properties which are Recorded Texas Historic Landmarks and listed as such with
the State of Texas Historical Commission, but are not listed in the National
Register of Historic Places do not qualify for the exemption from sales tax on
labor to repair, remodel, or restore such properties.

Properties which qualify to be listed in the National Register of Historic Places
after the restoration has occurred may submit the required documentation to the
service provider and request a refund of sales tax paid.

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