Is plastic media blasting to strip paint before repainting real property taxable in Texas?

Subject

Plastic Media Blasting In Preparation For Repainting Real Property

Plain-English summary

A company asked the Texas Comptroller about the tax treatment of its plastic media blasting service. The process uses recyclable plastic particles that are harder than paint and other coatings but softer than the underlying substrate. The media is applied at low pressures, typically 20 to 40 psi, producing an effective cutting, shearing, and lifting action that strips coatings without damaging the substrate.

The company's letter did not say what the blasting was used for, so the Comptroller responded based on the presumption that the blasting is used to prepare real or tangible personal property for repainting. The Comptroller treated repainting as a "restoration" or "remodeling" activity. Under Rule 3.357(a)(9), "restoration" means bringing real property that is still functional but has faded, declined, or deteriorated back as near as possible to its original condition. Under Rule 3.357(a)(6), "remodeling" includes replacing or upgrading any part of an existing structure.

Because of that, a business performing repainting or other restoration work on real property must collect tax on its total charge, unless the customer gives it a properly completed exemption certificate under Rule 3.357(c)(2) or (4). Separately, the business itself owes sales tax when it buys materials and supplies that are used in the job but not incorporated into the real property being blasted, and it owes sales tax on the equipment and tools used to perform the service.

If the blasting instead restores or remodels tangible personal property rather than real property, the total charge for that work is taxable under Rule 3.292, Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property.

The Comptroller noted this opinion is based on the facts presented and that other, even similar, facts could produce a different result.

What this means for you

Plastic media blasting or paint-stripping businesses

If you blast paint or coatings off real property (such as buildings or structures) to prepare it for repainting, the Comptroller treats that as taxable restoration or remodeling. You must collect sales tax on your total charge to the customer unless they give you a valid, properly completed exemption certificate under Rule 3.357(c)(2) or (4). You also must pay sales tax yourself on materials and supplies you use on the job that don't become part of the real property, and on the equipment and tools you use to blast.

Businesses that hire a blasting contractor

If you hire a plastic media blasting company to strip and prepare your building for repainting, expect to be charged sales tax on the total invoice unless you qualify to give the contractor an exemption certificate under Rule 3.357(c)(2) or (4).

Accountants and tax professionals

The ruling classifies plastic media blasting in preparation for repainting as restoration/remodeling of real property under Rule 3.357, not simply a nontaxable service. Note the ruling is conditioned on an assumption (blasting is done "in preparation for repainting") because the taxpayer's original letter didn't specify the end use. If the same blasting process is instead performed to restore tangible personal property, the applicable rule shifts to Rule 3.292 instead.

Common questions

Q: Is plastic media blasting taxable in Texas?
A: According to this ruling, when it's done to prepare real property for repainting, yes — the Comptroller treats it as restoration or remodeling under Rule 3.357, and the provider must collect tax on the total charge (absent a valid exemption certificate).

Q: Can a customer avoid paying tax on the blasting charge?
A: Only if the customer provides the blasting company a properly completed exemption certificate as described in subsection (c)(2) or (4) of Rule 3.357.

Q: Does the blasting company owe tax on its own supplies and equipment?
A: Yes. Sales tax must be paid at the time of purchase on all materials and supplies used but not incorporated into the realty being blasted, and sales tax is also due on all equipment and tools used to perform the service.

Q: What if the blasting is done on tangible personal property instead of real property?
A: The ruling states that the total charge to restore or remodel tangible personal property is taxable, citing Rule 3.292, Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property.

Q: Can other taxpayers rely on this letter?
A: The Comptroller notes the opinion is based on the facts presented and that other facts, even if similar, may produce a different result. Under STAR's general rules, letters can only be relied upon as a detrimental-reliance defense by the taxpayer to whom they were issued.

Citations and references

Rules cited:

• Rule 3.357(a)(9) (definition of "restoration")
• Rule 3.357(a)(6) (definition of "remodeling")
• Rule 3.357(c)(2) and (4) (exemption certificate for real property repair and remodeling)
• Rule 3.292 (Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9210L1198C06

Original ruling text

October 7, 1992

Dear ***:

Thank you for your recent letter regarding the taxability of services that your
company performs.

FACT SITUATION

The process your company provides, referred to as ***, employs
recyclable plastic particles, which are harder than paint and other coatings
but softer than the underlying substrates. The media is applied at low
pressures, typically ranging from 20 to 40 psi. The result is an extremely
effective cutting shearing and lifting action without harming the substrates.

RESPONSE

Your letter did not stipulate, but presumably your blasting services are used
in preparation for repainting of real or tangible personal property. Repainting
is presumed to be a restoration or remodeling activity. "Restoration" means to
bring back as near as can be to its original condition real property which is
still functional but which has faded, declined, or deteriorated. Rule 3.357(a)
(9). Remodeling includes replacing or upgrading any part of an existing
structure. Rule 3.357 (a) (6).

Persons performing repainting or other restoration activities on real property
should collect tax on their total charge unless their customer provides a
properly completed exemption certificate as outlined in subsection (c)(2) or
(4) of the enclosed Rule 3.357, Real Property Repair and Remodeling.

Sales tax must be paid at the time of purchase on all materials and supplies
used but not incorporated into the realty being blasted. Sales tax is also due
on all equipment and tools used to perform your service.

The total charge to restore or remodel tangible personal property is taxable.
See Rule 3.292, Repair, Remodeling, Maintenance, and Restoration of Tangible
Personal Property.

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, you may call me at
1-800-252-5555, extension 3-4502. The regular number is 512/463-4600. You may
also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division