Is the labor to repair a residential central air conditioner taxable in Texas, and what about the Freon used in the repair?

Plain-English summary

A homeowner (or someone writing on a homeowner's behalf) contacted the Comptroller's office after a contractor repaired their domestic (residential) central air conditioner and charged sales tax calculated on the total of several invoice line items: a charge for Freon, a reclaimer fee, a pump and torch fee, and a leak detector fee. The homeowner believed this was wrong, since apart from the Freon, the equipment generating those other fees belonged to the contractor and was used in the contractor's business, not sold to the homeowner.

The Comptroller's Tax Administration Division agreed the homeowner's understanding was correct. Based on information from similar businesses, the reclaimer fee, pump and torch fee, and leak detector fee all reflect charges for labor, and labor for residential central heating and air conditioning repair is not taxable. Only the $30.00 charge for 4 pounds of Freon (the material actually used in the repair) should have been taxed.

The letter notes this opinion is based on the facts presented, and the outcome could differ with additional or different facts.

What this means for you

Homeowners

If a contractor repairs your residential central air conditioning system, only the materials used in the repair (like the Freon/refrigerant itself) should be taxed. Fees described as reclaimer fee, pump and torch fee, or leak detector fee are treated as labor charges and should not be taxed, because labor on residential central AC repair is not subject to Texas sales tax. If your invoice shows tax calculated on the full total including those labor-type fees, you may be being overcharged.

HVAC contractors and repair companies

When billing for residential central air conditioning repairs, separate out labor-type charges (reclaimer fee, pump and torch fee, leak detector fee) from charges for materials actually transferred to the customer (like Freon). Only the material charge is taxable; the labor fees are not, since this letter found they reflect the use of the contractor's own equipment in performing labor, not equipment sold to the customer.

Accountants and tax professionals

This letter is a useful, narrow illustration of separating taxable tangible personal property (Freon) from nontaxable labor on a residential real property repair invoice, based on the specific line-item fees at issue (reclaimer, pump and torch, leak detector). It does not cite specific statutes or rules, so treat it as an application of the general residential-labor-is-not-taxable principle to a particular invoice, not as authority beyond its own facts.

Common questions

Q: Is the labor to repair a residential central air conditioner taxable in Texas?
A: No. This letter confirms labor for residential central heating and air conditioning repair is not taxed.

Q: Are the reclaimer fee, pump and torch fee, and leak detector fee on an AC repair invoice taxable?
A: Not in this case. The Comptroller determined these fees reflect labor charges, based on information from similar businesses, and are therefore not taxable.

Q: Is the Freon (refrigerant) used in a residential AC repair taxable?
A: Yes. In the invoice reviewed, the $30.00 charge for 4 pounds of Freon was the only amount that should have been taxed.

Q: Can I rely on this exact outcome for my own invoice dispute?
A: Not directly. This is a 1992 Texas Comptroller letter responding to specific facts presented by a specific taxpayer; it states its own opinion is based on the facts presented and may change with additional or different facts. It can be the basis of a detrimental reliance claim only for the taxpayer to whom it was issued.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9211654L

Original ruling text

November 20, 1992

Dear **:

I have reviewed your letter and the attached invoice for air conditioning
repair. Basically, your understanding is correct.

Based upon information obtained from similar businesses, it is our
understanding that charges for reclaimer fees, pump and torch fees, and leak
detector fees reflect charges for labor. The labor for residential central
heating and air conditioning repair is not taxed.

Based upon this information, only the $30.00 charge for 4 pounds of Freon
should be taxed.

This opinion is based upon the facts presented. If there are additional or
different facts, the opinion may change.

Sincerely,

Tax Administration Division

Comptroller of Public Accounts
Office of Tax Administration
Capital Station
Austin, Texas 78774

October 8, 1992

Re: Improperly collected sales tax reference telephone conversation this a.m.
regarding improperly charged sales tax

For the attention of Mr. Mickey Dorsey

Dear Mr. Dorsey,

INDIVIDUAL, dba COMPANY, recently repaired my domestic (central) air
conditioner and provided me with a bill, copy of which is attached. I believe
the Sales Tax of $**, based on a figure calculated by adding the
charges for Freon, Reclaimer fee, Pump and torch fee and the leak detector fee,
to be incorrect. Apart from the Freon, the equipment to which the other charges
relate, belongs to the contractor and is used by him in the conduct of his
business.

I believe that the contractor is wrong in collecting this amount of sales tax
and have told him so. Contractor refuses to budge and is demanding that I pay
him his calculated amount.

I have no idea how long he has been doing this nor do I have any idea if he is
paying all such collected taxes to the State. After talking with your office, I
am relieved that the contractor has been correctly challenged on his method of
calculating sales tax.

It would be greatly appreciated if the Office of the Comptroller of Public
Accounts could verify to me, in writing, that the computation used by the
contractor is in error and could you also provide a correct sales tax figure so
that I may pay him the proper amount.

Thank you for your kind attention to this matter. I remain,

Yours sincerely,