When was a delivered and installed portable building taxable as personal property rather than treated as an improvement to realty?

Plain-English summary

The Comptroller said the total charge for selling, delivering, and installing a portable building was taxable unless the building qualified as an improvement to realty. A portable building became real property only when permanently affixed to a foundation with plumbing and electricity appropriate to its use. Free-standing and skid-mounted buildings did not qualify.

For a qualifying real-property improvement, contract structure controlled the tax result. Under a separated contract, the contractor charged tax on materials and transportation but not erection labor. Under a lump-sum contract, the contractor was the consumer of the construction materials, paid tax to the supplier, and did not separately bill the customer for tax.

What this means for you

Both physical installation and contract drafting mattered. A movable building remained taxable personal property; a permanently affixed building moved into real-property contract rules.

Common questions

Were free-standing or skid-mounted buildings real-property improvements? No.

What made a portable building real property? Permanent foundation attachment plus plumbing and electricity appropriate to its use.

How did a separated contract work? Materials and transportation were taxable; erection labor was not.

How did a lump-sum contract work? The contractor paid tax on materials as the consumer and did not directly bill tax to the customer.

Citations and references

• 34 Tex. Admin. Code Rule 3.291 — construction-contract treatment referenced by the letter

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9104L1099C13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller April 1,1991

Dear *:

Thank you for your recent letter regarding the sale of portable
buildings. You are correct. The total charge you make for sale,
delivery and installation of a portable building will be taxed
unless the building qualifies as an improvement to realty.

Portable buildings are classified as real property only if
permanently affixed to a foundation with plumbing and electricity
appropriate to the building's use. Free standing and skid mounted
buildings are not considered to be improvements to realty.

If you construct a building that qualifies as an improvement to
real property, the tax consequences will be determined by whether
the contract is lump sum or separated. I am enclosing rule 3.291
for your reference. If the contract is separated, you will charge
tax on materials and transportation but not the erection labor.
When you perform a lump-sum contract for an improvement to realty,
you are considered to be the consumer of the material used to
build the structure and do not bill any tax directly to your
customer. You will pay tax on the materials to your supplier at
the time of purchase and recoup all of your costs and profit in
your lump sum price.

I have asked that a sales tax application packet be sent to you
under separate cover. We have two San Antonio offices that can
help you with your application and issue you a temporary permit
immediately. They are located at 5825 Callaghan Rd., Suite 100
and 103 S.W. Military Dr.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call our
toll-free number 1-800-531-5441. My direct line number is 512-
463-4680 (FAX (512) 47471643]. You may write to me in care of
Tax Administration Division.

Sincerely,
Al Van Allen
Tax Administration Division