If my company moves, disassembles, and reassembles office furniture, and also sells, delivers, or repairs furniture, which of these charges are taxable in Texas?

Subject

Moving Companies — Nontaxable Service (Crating, Assembly/Disassembly, Packing, Storage)

Plain-English summary

An office furniture installation company asked the Comptroller how sales tax applies across five different activities it performs: moving modular furniture, delivering/installing furniture sold by itself or a third party, billing freight on resale furniture, repairing furniture, and providing (or selling) boxes to clients. The Comptroller answered each in turn, drawing a consistent line between a genuine moving service (not taxable) and any charge tied to a sale, rental, repair, or remodel of furniture (taxable).

• Moving furniture. A service that simply moves a customer's modular furniture is not taxable, even if the company has to disassemble and reassemble it to complete the move. But if the company is also selling, renting, repairing, or remodeling the furniture, those charges are taxable.
• Delivery and installation of furniture sold by the company or a third party. These charges are taxable, including the labor for final assembly. If a third-party furniture seller pays the company to deliver and assemble furniture that seller sold, the company may accept a resale certificate from that seller instead of charging tax -- but the seller must then collect tax on the total price of the furniture, including the delivery and assembly charges.
• Freight on resale furniture. Freight/delivery charges billed to a customer are taxable when the company is selling, renting, repairing, or remodeling furniture for that customer (citing Rule 3.303). If the company is buying furniture for resale, it can give its supplier a resale certificate to exempt the furniture price and any freight the supplier bills -- but once the company turns around and bills that freight to its own customer, it becomes taxable.
• Repair/service calls. The full charge for repairing or maintaining furniture -- materials, labor, and the service call itself -- is taxable.
• Boxes. Boxes used only to provide a nontaxable moving service are not taxable to the customer, even if listed as a separate line item, but the company must pay tax when it buys those boxes. If boxes are billed as part of a taxable sale, delivery, repair, or remodel, they're taxable to the customer as part of that total charge, and (per Rule 3.314(b)-(c)) the company still owes tax on its own purchase of the boxes unless it's a manufacturer buying boxes for a product it manufactures. If the company simply sells boxes to customers over the counter, it must collect tax on that sale, but may buy the boxes tax-free from its supplier with a resale certificate.

What this means for you

Moving and storage companies

If your service is limited to relocating a customer's furniture, you don't need to charge sales tax on that service, even when disassembly/reassembly is required to get the furniture out the door and set back up. Keep your billing separate and clear when a job also involves selling, renting, repairing, or remodeling furniture, because those pieces of the job are taxable.

Furniture dealers, installers, and delivery contractors

Delivery, installation, and final assembly charges tied to a furniture sale are taxable -- whether you sold the furniture or a third party did. If you're hired by the actual seller to deliver/install, you can take a resale certificate from them instead of charging tax directly, but the seller then owes tax on the full combined price (furniture plus your delivery/assembly charge).

Accountants and tax professionals

The dispositive question in each of these fact patterns is whether the underlying transaction is a taxable sale/rental/repair/remodel of furniture (in which case ancillary charges like freight, delivery, assembly, and boxes ride along as taxable) versus a standalone moving service (which is not taxable even though it may include disassembly and reassembly).

Common questions

Q: Is it taxable to disassemble and reassemble a customer's modular furniture as part of a move?
A: No -- per this letter, a moving service is not taxable even if disassembly and reassembly are needed to complete the move.

Q: Do I charge tax on delivery and installation of furniture I sold?
A: Yes -- delivery, installation, and final assembly charges are taxable when tied to a furniture sale, rental, repair, or remodel.

Q: I deliver and assemble furniture that a different company sold. Do I charge my customer tax?
A: You may instead accept a resale certificate from the furniture seller who hired you, but then that seller must collect tax on the combined price of the furniture and your delivery/assembly charge.

Q: Are boxes I provide during a move taxable to my customer?
A: No, not if the move itself is a nontaxable moving service -- but you owe tax on your own purchase of those boxes. Boxes tied to a taxable furniture sale, delivery, or repair are taxable to the customer.

Citations and references

Rules:

• Rule 3.303 (transportation/delivery charges on taxable sales)
• Rule 3.314(b)-(c) (wrapping and packing supplies)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9604L1407C12

Original ruling text

April 25, 1996

Dear ****:

Thank you for your letter concerning your office furniture installation
company. You are trying to determine if the following items are taxable:

1) If you disassemble, move, and reassemble modular furniture.

Response: A moving service to move a customer's modular furniture is not
taxable even if you have to disassemble and reassemble the modular furniture
in order to effect the move. However, if you are selling, renting, repairing
or remodeling modular furniture, these charges are taxable to your customer.

2) Deliver and install product purchased from you or a third party.

Response: If you are selling, renting, repairing or remodeling furniture,
these charges are taxable to your customer. If you provide these services
when a third party sells furniture, these charges are also taxable to a
customer. The labor for the final assembly of the furniture is taxed.
However, you may accept a properly completed resale certificate if the
seller of the furniture is paying you to delivery and assemble the furniture
that they sell. The third party seller must collect tax on the total price
of the furniture including your delivery and assembly.

3) Freight charges - from product purchased for resale.

Response: Transportation and delivery charges billed to your customer are
taxable if you are selling, renting, repairing or remodeling furniture for
the customer. See enclosed Rule 3.303. If you are purchasing furniture
for resale, a resale certificate that you give a supplier exempts the total
price of the furniture including any freight charges billed by your supplier.
However, if these freight charges are in turn billed by you to the customer
purchasing the furniture, these freight charges are taxable to your customer.

4) Service calls - Repair of furniture, touch-ups, etc.

Response: The total price you charge for a repair or maintenance service
to furniture is taxable to a customer including charges for materials,
labor and service calls.

5) Rental or purchases of boxes to your clients (you purchased the boxes).

Response: If you are providing your customer a nontaxable moving service,
the boxes you use to move furniture are not taxable to the client even if
separately stated on your moving bill. You are required to pay tax when
purchasing boxes used in providing moving services.

If you bill customers for boxes when you are selling, renting, repairing or
remodeling furniture, these charges are taxable to your customer as part of
the total price of the taxable item or the taxable service. You are
required to pay tax when purchasing boxes used in delivering furniture that
you sell, rent, repair or remodel. Unless you are a manufacturer purchasing
boxes for a product you manufacture, wrapping and packaging supplies are
not exempt. Please review subsections (b) and (c) of enclosed Rule 3.314
on wrapping and packing supplies.

If you are only selling boxes to a customer, collect tax from the customer
on the sale. You may give a resale certificate to a supplier to purchase
tax free boxes sold to customers over-the-counter.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line
is 512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division

NOTE: Previous Accession Number 9604187L