Did Texas exempt labor to repair real-property pollution-control equipment, and what refund applied to replacement wastewater piping?

Plain-English summary

The requester asked about labor to repair legally required pollution-control equipment that was real property and about replacing all piping in a wastewater-treatment system.

The Comptroller said Texas Tax Code Section 151.338 and Rule 3.300(d)(3)(C) exempted qualifying repair services to tangible personal property used to protect the environment or conserve energy. That exemption did not extend to repairs of real property.

For pipe purchased during 1990 or 1991 for the wastewater project, the taxpayer could claim a refund of 25% of the state tax paid. Tax paid on labor to remove or replace the piping was neither refundable nor exempt if the effluent system was an improvement to realty.

What this means for you

The property's classification mattered. The environmental-repair exemption described in the letter covered tangible personal property, not real-property repairs, and the temporary pipe refund did not extend to installation labor on an improvement to realty.

Common questions

Did a legal requirement to maintain pollution controls make real-property repair labor exempt? No.

What purchases qualified for the partial refund? Pipe purchased during 1990 or 1991 for the described replacement project.

How much state tax could be refunded? 25% of the state tax paid on the pipe.

Did removal or replacement labor qualify? No, if the effluent system was an improvement to realty.

Citations and references

• Texas Tax Code § 151.338 — environmental and energy-conservation repair exemption discussed in the letter
• 34 Tex. Admin. Code Rule 3.300(d)(3)(C) — corresponding sales-tax rule cited by the requester and Comptroller

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1113G04

Original ruling text

May 30, 1991

Dear **:

I apologize for the delay in answering your letter with
questions on the manufacturing exemption and tax refund.

Your first question is whether labor to repair real property
pollution control equipment required by law is exempt. As
you point out, the exemption under Sec. 151.338 of the Tax Code
exempts repair services to tangible personal property
required by law or regulation to protect the environment or
conserve energy. This is the exemption in subparagraph
(d)(3)(C) of Sales Tax Rule 3.300, that you ask about. It
does not apply to repairs of real property.

Your second question concerns the applicability of the
manufacturing exemptions to the replacement of all of the
piping to an affluent system for treatment of waste water.
A refund of 25 percent of the state tax paid may be claimed
on the pipe purchased during 1990 or 1991 for that project.
But, tax paid on the labor to remove and/or replace the
piping is neither eligible for refund nor exempt if the
effluent system is an improvement to realty.

This opinion is based on the facts presented. Other facts
though similar may provide a different result. If you have
other questions or need more information please call or
write. The toll-free number is 1-800-531-5441; my extension
is 3-4675. The regular number is (512) 463-4675.

Sincerely,

Tom Soto
Tax Administration