Is a contractor's charge for repairing or remodeling a warehouse for a movie production company exempt under Texas's manufacturing exemption?

Plain-English summary

A contractor asked the Comptroller's Tax Policy Division whether tax was due on a remodeling job done for a movie production company. The production company had rented a warehouse to film a movie, and the contractor was hired to remodel the structure of the warehouse to support the production company's lighting.

The Comptroller's answer: the repair or remodeling of the warehouse is taxable. The letter explains that the production company itself is considered a manufacturer for sales tax purposes, and as a manufacturer it qualifies for the manufacturing exemption on certain manufacturing machinery, equipment, accessories, repair parts, and materials used to produce the movie. But that exemption is narrow — it does not extend to taxable services such as nonresidential repair and remodeling. Because the contractor's work was remodeling a building (a taxable service), it stayed taxable regardless of the production company's manufacturer status.

The letter notes this opinion is based on the facts presented, and could change if the facts were different.

What this means for you

Contractors doing repair/remodeling work for film or TV productions

Don't assume a customer's "manufacturer" status (such as a movie production company producing a film) makes your remodeling or repair charges tax-exempt. Nonresidential repair and remodeling is a taxable service in Texas, and a customer's separate eligibility for the manufacturing exemption on machinery, equipment, and materials doesn't carry over to construction-type services performed on real property.

Movie and media production companies renting space

If you rent a building and have it remodeled to fit your production needs (for example, structural changes to support lighting or equipment), the manufacturing exemption you may be entitled to for machinery, equipment, accessories, repair parts, and materials used to produce the movie does not cover the cost of remodeling the building itself. Expect to pay sales tax on that remodeling work.

Accountants and tax professionals

This letter draws a clean line between two categories: exempt manufacturing purchases (machinery, equipment, accessories, repair parts, and materials used in production) versus taxable services (nonresidential repair and remodeling). A customer's manufacturer classification does not automatically exempt work performed on the structure they occupy.

Common questions

Q: Was the movie production company treated as a manufacturer?
A: Yes. The Comptroller stated the production company is considered a manufacturer for sales tax purposes and qualifies for the manufacturing exemption on certain manufacturing machinery, equipment, accessories, repair parts, and materials used to produce the movie.

Q: Did that manufacturer status make the warehouse remodeling tax-exempt?
A: No. The letter is explicit that the manufacturing exemption does not extend to the purchase of taxable services such as nonresidential repair and remodeling.

Q: What kind of work was done to the warehouse?
A: The contractor was hired to remodel the structure of a rented warehouse to support the production company's lighting for filming a movie.

Q: Can other taxpayers rely on this letter?
A: No. STAR letters can generally support a detrimental reliance claim only for the taxpayer the letter was issued to, and this opinion is explicitly based on the specific facts presented — a different fact pattern could change the answer.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9511721L

Original ruling text

November 30, 1995

Dear ** :

Thank you for your letter of November 28, 1995. You asked whether tax is due
on a remodeling job done for a movie production company.

As I understand it, the production company rented a warehouse to film a movie.
Your company has been hired to remodel the structure of the warehouse to
support the production company's lighting.

The repair or remodeling of the warehouse is taxable. The production company
is considered a manufacturer for sales tax purposes and as such qualifies for
the manufacturing exemption allowed on certain manufacturing machinery,
equipment, accessories, repair parts, and materials used to produce the movie.
However, the exemption does not extend to the purchase of taxable services such
as nonresidential repair and remodeling.

This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change. You may call me toll free at
1-800-531-5441, ext. 5-0037. The direct line is 512/475-0037. You also may
write to Sales Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division