Is adding 1,000 square feet of new putting surface to an existing golf green new construction or taxable remodeling for Texas sales tax purposes?

Plain-English summary

A contractor asked the Comptroller how to classify a golf course job for sales tax purposes: 1,000 square feet of new putting surface would be built and then tied in to the golf course's existing putting green. The question was whether this counts as new construction (generally not taxable as such) or as remodeling of an existing improvement to realty (taxable).

The Comptroller's answer draws a line within the same job. Adding new square footage that expands an existing improvement — here, enlarging the putting green — is usually treated as new construction. But the "tie-in" portion, where the new surface physically joins the old green, is remodeling, because it involves altering the existing improvement rather than creating an entirely new one. If, instead, the area becoming the new putting surface is actually a fairway or other existing feature being converted into a green, then the whole job is remodeling, not new construction, because no new improvement is being added — an existing one is just being changed.

Because a single contract can contain both an exempt new-construction component and a taxable remodeling component, the letter also addresses how to price and tax the job. If the taxable tie-in work makes up more than 5% of the job, a lump-sum contract price is presumed to be entirely taxable as remodeling. The contractor can overcome that presumption by separately stating the new-construction charge from the remodeling/tie-in charge, so tax applies only to the remodeling portion. The letter further notes that gathering and disposing of debris is a taxable service regardless of whether the disposal happens on the job site, and that debris-removal or other taxable-service charges exceeding 5% of the total contract likewise create a presumption that the whole contract is taxable unless separately stated.

What this means for you

Golf course and landscaping contractors

When a job both expands an improvement (new construction) and ties the new work into an existing feature (remodeling), don't assume the whole contract gets one tax treatment. Separately state the new-construction charge from the remodeling/tie-in charge on the invoice and in your books — if you don't, and the taxable portion exceeds 5% of the job, the Comptroller can treat the entire lump-sum contract as taxable remodeling.

Golf courses and other property owners contracting for course work

Before signing a lump-sum contract for green expansions, fairway conversions, or similar work, ask your contractor to itemize which parts are new construction versus remodeling of the existing course. This affects how much sales tax you'll ultimately pay, and unitemized lump-sum contracts default to taxable treatment once the taxable share crosses the 5% threshold.

Anyone billing for debris removal on a construction site

Charges for gathering and disposing of debris are taxable services under this ruling even when the disposal happens right on the job site — there's no on-site exception. Track these charges separately from labor that's genuinely new construction.

Common questions

Q: We're enlarging a putting green by adding new square footage. Is that new construction or remodeling?
A: The added square footage itself is generally new construction. Only the strip where the new surface ties into the existing green is remodeling.

Q: What if the "new" green is actually a fairway being converted into a putting surface?
A: Then it's not new construction at all — converting an existing improvement (fairway) into a different improvement (green) is remodeling of the whole area, not the addition of a new one.

Q: Our contract is a single lump-sum price covering both the new construction and the tie-in work. How is it taxed?
A: If the taxable (remodeling/tie-in) portion is more than 5% of the job, the entire lump-sum contract is presumed taxable. You can overcome that presumption by separately stating the new-construction charge from the remodeling charge.

Q: Is hauling away construction debris taxable if we dispose of it on the job site rather than trucking it away?
A: Yes. Gathering and disposing of debris is taxable even when disposal takes place on the job site itself.

Citations and references

• 34 Tex. Admin. Code Rule 3.291 (real property repair and remodeling vs. new construction; separated-charge and 5% presumption rules referenced in this letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9406L1305D10

Original ruling text

June 13, 1994

Dear *****:

I am responding to your letter requesting a determination of
taxability on the contract for your customer **,
**, Texas.

You stated that 1,000 square feet of new putting surface
will be built and tied in to the existing putting green on
the golf course. You asked whether this is new construction
or remodeling.

Adding additional square footage to an existing improvement
to realty (putting green) is usually new construction; the
tie-in portion is remodeling. However, if the area that
becomes the new putting surface is being converted or
changed from a fairway (or other improvement) to a putting
green, then the work is remodeling.

If the work qualifies as new construction and the tie-in
portion is more than 5 percent of the job, then a lump-sum
charge is treated as remodeling and taxed. The service
provider may separately state the remodeling (tie-in) charge
from the new construction charge and add tax accordingly.

The gathering and disposal of debris is taxable even if the
disposal takes place on the job site. If more than 5
percent of the contract charge is for taxable services the
total contract is presumed taxable. This presumption can be
overcome by separately stating the charges for taxable
services from new construction labor.

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

If you have additional or different questions, you may call
or write. The address is Tax Administration Division,
Comptroller of Public Accounts, Post Office Box 13528,
Austin, Texas 78711-3528.

Sincerely,

Tax Administration Division

NOTE: Previous Accession Number 9406411L