Does a technician who installs, services, or repairs gas station pumps, tanks, and related equipment have to charge sales tax on the job?

Plain-English summary

A technician who installs and services equipment at gas stations (submersible pumps, gasoline dispensers, electronic metering/billing systems, tank monitoring systems, underground tanks, compressors, and vehicle lifts) asked the Comptroller how sales tax applies across three scenarios. The Comptroller's answer turns on one key distinction: is this new construction or work on an existing station?

• New construction (pumps, dispensers, and systems installed as a station is being built): only the tax on the materials/equipment sold is due; the installation labor itself is not taxable.
• Existing stations (installing, repairing, or maintaining equipment at a station that's already up and running): the entire charge — materials and labor together — is taxable. This includes flat monthly maintenance-contract fees covering pumps, dispensers, submersible pumping units, underground tanks, compressors, and vehicle lifts.
• Sub-contracted installs (a sub-contractor installing owner-provided EPA Stage II vapor-recovery equipment on existing dispensers under a lump-sum contract): the sub-contractor's total charge is taxable, and it makes no difference whether the technician or the station owner supplies the incidental fittings used in the job.

The Comptroller also flagged that the meaning of "servicing" and "maintain" matters: if those terms mean repair work, the full charge is taxable; if they mean something else, the taxpayer would need to supply more facts for a definitive answer.

What this means for you

Gas station equipment installers and service companies

Whether you owe tax on labor depends entirely on whether the equipment is going into a station under new construction or one already operating. New-construction installs let you avoid tax on your labor charge (materials/equipment are still taxed). Any work — install, repair, or maintenance — performed at an existing station is taxed on your whole bill, materials and labor combined. Flat-fee monthly maintenance contracts covering pumps, tanks, compressors, and lifts fall into this fully-taxable category if the work is repair-type work.

Sub-contractors and EPA-compliance installers

If you're a sub-contractor installing owner-supplied equipment (like EPA Stage II vapor recovery gear) on an existing station under a lump-sum contract, your total charge to the customer is taxable — regardless of whether you or the property owner provided any incidental fittings used in the job.

Accountants and tax professionals

Watch for the "new construction vs. existing station" line when reviewing similar service-station equipment contracts, and note that this ruling explicitly conditions its answer on what "servicing"/"maintain" actually mean in the taxpayer's contract — ambiguous service terms could change the outcome.

Common questions

Q: Do I have to charge tax on labor to install gas pumps in a brand-new station under construction?
A: No. When pumps, dispensers, and systems are installed as the station is being built, that's treated as new construction — you collect tax on the items installed but not on the installation labor.

Q: What if I'm installing or repairing pumps in a station that's already operating?
A: Then your entire charge — both materials and labor — is taxable.

Q: I have a monthly flat-fee contract to maintain pumps, tanks, compressors, and lifts at existing stations. Is that taxable?
A: Yes, if "maintain" means fixing items when they break (i.e., repair). The ruling notes that if "maintain" means something other than repair, additional facts would be needed.

Q: I'm a sub-contractor installing owner-provided EPA vapor-recovery equipment on existing gas dispensers under a lump-sum contract — is my charge taxable, and does it matter who supplies the fittings?
A: Your total charge is taxable, and the result is the same whether the technician or the owner/operator provides the fittings.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9304L1240C09

Original ruling text

April 5, 1993

Dear ***:

Thank you for your recent letter presenting three sales tax scenarios and
asking for sales tax rulings. CASE 1

A qualified technician provides services to operators of gasoline service
stations by:

a) installing and/or servicing submersible pumps which pump fuel from
underground storage tanks.

b) installing and/or servicing gasoline dispensers (commonly called
"pumps").

c) installing and/or servicing electronic systems for measuring and
billing for gasoline dispensed.

d) installing and/or servicing submerged tank monitoring systems.

Billing the materials used at retail prices separately from the charge
for services which are charged on the basis of time consumed.

Response: Are the pumps, dispenser, etc. being installed as the stations
are being constructed new, or, are these items being installed in existing
service stations?

If the pumps, dispensers, and systems are being installed at the time the
stations are constructed, the installation will be treated, for tax
purposes, as new construction. You will be required to collect sales tax
from your customers on your charge for the items installed. The
installation labor will not be taxable.

If the pumps, dispensers, and systems are installed in existing stations,
your total charge to your customers (both materials and labor) will be
taxable.

If the "servicing" portion of your activity means repairing the pumps,
dispensers, and systems, the total charge for servicing (materials
and labor) will be taxable. If "servicing" means something other than
repair, you will need to provide additional information regarding this
activity.

CASE 2

For a fixed cost per station per month, a qualified technician provides
services to operators of gasoline service stations by providing labor
and material to maintain:

a) pumps and dispensers.

b) submersible pumping units.

c) underground tanks, including manhole replacement, replacement of
damaged components.

d) compressors, including frame, air reservoir, pumping units, and
electrical components.

e) vehicle lifts, including superstructure, piston and cylinder, repair
of air or oil leaks.

Billing under this fixed fee/lump-sum contract is monthly for a flat
amount per month for all stations serviced under the contract.

Additional work outside the scope of services in the fixed fee contract
is handled on a negotiated basis, with a guaranteed, not-to-exceed
price for the labor and materials provided.

Response:If you mean by "maintain that you will fix the items if the
items break, the total fixed fee will be taxable. If "maintain" means
something other than repair, you will need to provide additional
information regarding this activity.

CASE 3

A sub-contractor is under contract to a contractor who is replacing
underground piping and tanks for a service station owner/operator
and upgrading the station to comply with current EPA standards.

The sub-contractor, in accordance with a written contract which provides
for a lump-sum payment for each installation, installs owner-provided
EPA State II equipment on existing gasoline dispensers (pumps) utilizing
a small amount of common use fittings.

Question: How is the sales tax law applied to the sub-contractor's
transaction?

Question: Is the result different if the fittings are provided by:

a) the technician, or
b) the owner operator?

Response: The sub-contractor's total charge is taxable to the customer.
The results are the same regardless of who provides the fittings.

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

If you have any questions or need more information, you may call me toll
free at 1-800-531-5441, extension 3-4633. The regular number is
512/463-4633. You may also write to the Tax Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division

NOTE: Previous Accession Number 93070040.6 and/or 9307040L