Are charges for moving telephones and activating, connecting, or adding office cabling and jacks taxable in Texas?

Plain-English summary

The Comptroller treated telephone-system work involving office wiring as taxable real-property remodeling. Moving a phone to an inactive jack and activating it was taxable, including where the customer had already paid tax when the unused jack was first installed.

A move to another office was also remodeling when the provider had to move and reactivate switching equipment or cross-connect it to wiring in the walls. If a relocation combined existing jacks with installation of new cabling and jacks, the entire charge was taxable even when the provider separately stated the functions on its invoice.

The letter distinguished a bare move—unplugging phones, transporting them, and plugging them into already active jacks—from the more involved work described. Installation and transportation were not taxable by themselves, but became taxable when performed as part of a taxable service.

What this means for you

The label "move" did not control. The actual work mattered: activating jacks, connecting switching equipment to building wiring, or adding cabling turned the job into remodeling on these facts, and separately itemizing the moving work did not split it out of the taxable charge.

Common questions

Was moving a phone from an active jack to an inactive jack taxable? Yes. Activating the other jack made the service real-property remodeling.

What if the destination office already had cabling and jacks? A simple unplug-and-plug move to active jacks could be equipment moving, but the letter said the normal switching and cross-connection work made the described relocation remodeling.

Could the provider separately state the nontaxable parts? Not in the mixed job described. The full charge was taxable because moving the phones was part of the remodeling service.

Are installation and transportation always taxable? No. The letter said neither was taxable by itself, but each became taxable when performed with a taxable service.

Citations and references

• Tex. Tax Code Section 151.007(b) — total sales price includes a service that is part of the sale of a taxable item or service

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1133B14

Original ruling text

September 19, 1991

Dear **:

Thank you for your recent letter which is restated in part with
responses below.

Facts: ** sells, installs, moves, and leases telephone
equipment and systems. When we move telephone equipment, situations
arise that need to be clarified as to whether we are providing a
nontaxable or a taxable service.

Situation 1: Our customer has two telephone jacks existing in his
office; one on the north wall and one on the south wall. The telephone
jack on the north wall is active, the one on the south wall
is not. Our customer rearranges the furniture in the office and
calls us to move the telephone to the jack on the south wall. We
plug the telephone into the jack on the south wall, and move a
jumper in the telephone equipment room. Is this move a taxable
service?

Response 1: The charge for moving the phone and activating the
jack is taxable as real property remodeling.

Situation 2: We sell our customer a telephone system equipped with
twelve telephones. Our customer pays to have cabling and jacks
installed for eighteen telephone locations within the office; twelve
are to be active and six are for future use. Sales tax is charged
at the time all eighteen jacks are initially installed. Six months
later, our customer calls us to move a telephone to one of the
inactive jacks. We plug the telephone into the jack and move a jumper
in the telephone equipment room. Is this move a taxable service?

Response 2: Same as for response 1.

Situation 3: Our customer is relocating to a different office
building. At the location our customer is moving to, telephone
cabling and jacks are already in place, left over from a prior
tenant. We pick up the telephone system and move it to the suite our
customer is relocating to. At this location we plug the phones and
equipment into the existing jacks. Is this move a taxable service?

Response 3: If the service rendered was simply for unplugging phones
from jacks, moving them to another location and plugging them into
other already activated jacks, we would view you as an installer or
equipment mover. However, accomplishing such a move normally requires
several other functions, such as:

• having the switching equipment moved, installed and reactivated,
  and

• cross connecting from the switch to the wiring in the walls if
  the wiring in the walls is compatible etc.

For these reasons, the service will be treated as real property
remodeling.

Situation 4: Our customer is relocating to a different office building.
At the location our customer is moving to, telephone cabling
and jacks for seven telephones are already in place, left over from
a prior tenant. Our customer has ten telephones. We pick up the
telephone system and move it to the suite our customer is relocating
to. At this location we plug the phones and equipment into the existing
jacks. Also, we install cabling and jacks for the three additional
telephones our customer has. Is all, or is only part, of this move
a taxable service?

Response 4: The entire charge is taxable as real property remodeling
even if the functions performed are separately stated on the invoice
to the customer. Tax Code Section 151.007(b) explains that the total
amount for which a taxable item (including a taxable service) is
sold, includes a service that is a part of the sale. In the four
situations you have mentioned, moving the phones is part of remodeling
the real property.

You also asked whether or not there is a difference between the terms
"install" and "move" according to our definition. For sales and use
tax purposes, the definition of "installation" is to place tangible
property in position, without changing its form, where it will
reasonably accomplish the purpose for which it will be utilized. The
term "move", on the other hand, has the connotation of transportation
of property from point to point. Neither installation nor transportation
charges are subject to sales tax in and of themselves. However,
when these functions are performed in conjunction with a taxable service,
they become, taxable.

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 or write.
You may reach me by calling toll free, (800) 531-5441. My direct line
number is (512) 463-4680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division