Is labor to repair a parking lot damaged by an underground explosion taxable if the repair work was done after October 1, 1993?

Subject

Parking Lot Repair Labor After Underground Explosion — Taxable Because Performed On Or After 10/1/93 Under New Sec. 151.350

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9312l1272B11

Plain-English Summary

A taxpayer wrote to the Comptroller asking about the sales tax treatment of labor to repair a parking lot. In a follow-up phone call on November 30, 1993, the taxpayer explained that the repair work was actually done in November 1993, and that the repair was needed to fix damage caused by an underground explosion.

The Comptroller's answer turned entirely on timing. Because the repair labor was performed on or after October 1, 1993, it is subject to sales tax. That date matters because the Tax Code was amended, effective October 1, 1993, to add a new Section 151.350, and the letter states a copy of that subsection was enclosed for the taxpayer's reference. The letter does not quote or describe what Section 151.350 says beyond noting that it was newly added at that time — it simply applies the October 1, 1993 effective date to conclude that this particular repair labor, done in November, is taxable.

The Comptroller closed with its standard caveat that the opinion is based on the facts submitted, and that other facts — even if similar — could yield a different result.

What This Means For You

If you're having real property damaged by fire, flood, explosion, or another casualty event repaired in Texas: This letter shows that for this taxpayer, the fact that the damage resulted from a casualty (an underground explosion) did not exempt the repair labor from sales tax. What controlled was simply the date the repair work was performed — on or after October 1, 1993 — under the newly added Tax Code Sec. 151.350.

If you are trying to determine whether older, pre-October 1993 contracts or exemptions might apply to casualty repair work: This letter's own facts involve work performed in November 1993, after the October 1, 1993 effective date, so it does not address (and this summary cannot tell you) how repair work performed before that date, or work under a contract entered into before that date, would have been treated. The letter only establishes the outcome for repair labor performed on or after the effective date.

Timeline to note: Effective date of new Sec. 151.350: October 1, 1993. Damage event: an underground explosion (date not stated in the letter). Repair work performed: November 1993. Because the repair work fell after the October 1, 1993 effective date, the labor was taxable.

Q&A

Q: Is labor to repair casualty damage (like from a fire, flood, or explosion) exempt from Texas sales tax?
A: Not according to this letter. The taxpayer's parking lot repair labor, needed because of an underground explosion, was still held taxable — because it was performed on or after October 1, 1993, the effective date of new Tax Code Sec. 151.350.

Q: Why does the date the repair work was performed matter so much here?
A: Because the Tax Code was amended to add Sec. 151.350 effective October 1, 1993. The Comptroller applied that new provision to this repair because the work was done in November 1993 — after the effective date — and concluded the labor was subject to tax on that basis.

Q: Does this letter say what Section 151.350 actually requires or exempts?
A: No. The letter states that Sec. 151.350 was added to the Tax Code effective October 1, 1993, and that a copy was enclosed with the letter, but it does not quote or summarize the text of that subsection. It only states the bottom-line conclusion that this repair labor, performed after the effective date, is taxable.

Original ruling text

December 2, 1993

Dear **:

Thank you for your recent letter regarding the tax treatment of parking lot
repair.

In our telephone conversation of November 30, you said that the work was done
in November and that the repair was performed to repair damage as a result of
an underground explosion.

Because the work is performed on or after October 1, 1993, the labor to repair
the parking lot is subject to sales tax. At that time the Tax Code was amended
to add Sec. 151.350. I am enclosing a copy of that subsection for your
reference.

This opinion is rendered based on the facts you submitted. 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 (ext. 34680). 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

NOTE: Previous Accession Number 9311172L.2 and 9311172L