Is a real estate inspection service -- checking a building's structural components like plumbing, wiring, and roof and issuing a condition report -- subject to Texas sales tax?

Subject

Inspection/Reinspection Charge — Real Property Repair/Remodeling/Restoration (Tank, Elevator, Structural Components Of Building: Plumbing, Wiring, Roof)

Plain-English summary

A taxpayer asked the Comptroller whether real estate inspection services are subject to Texas sales tax. The taxpayer's client performed inspections only -- it did not perform any repairs to the structures it inspected.

The Comptroller explained that real estate inspections generally involve checking a building's structural components -- plumbing, electrical wiring, air conditioning and heating units, roofs, and similar systems -- and then issuing a written report on the condition of the structure. The Comptroller ruled that this inspection service is not taxable, regardless of whether it is performed on residential or nonresidential real property.

What this means for you

Home and building inspectors

If your business only inspects real property (checking plumbing, wiring, HVAC, roofing, and similar structural components) and issues a written condition report -- without performing any actual repair or remodeling work -- your inspection charges are not subject to Texas sales tax under this ruling. This applies to both residential and nonresidential properties.

Contractors and repair/remodeling businesses

This letter addresses inspection services standing alone, performed by a business not involved in repairs. If your business both inspects and repairs the same property, or bundles an inspection/reinspection charge into a taxable repair or remodeling job, you should confirm separately how that charge is treated, since this ruling's facts were limited to a client that did no repair work.

Accountants and tax professionals

The ruling turns on the nature of the service (inspection and reporting only, no repair) rather than the type of property (residential vs. nonresidential) -- both are treated the same way here.

Common questions

Q: Are real estate inspection services taxable in Texas?
A: No, according to this letter, inspecting a building's structural components and issuing a written condition report is not a taxable service.

Q: Does it matter if the property is residential or commercial?
A: No. The ruling states this service "is not taxable" whether performed on residential or nonresidential real property.

Q: What if the inspecting company also does repairs?
A: This ruling's facts specifically involved a client not involved in providing any repairs to the structures. It does not address how charges would be treated if the same business also performed repair or remodeling work.

Citations and references

No statutes or administrative rules were cited by name 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/9605L1413B03

Original ruling text

May 17, 1996

Dear ***:

Thank you for your letter of May 8, 1996. You asked that we address the
taxability of real estate inspection services. You stated your client is not
involved in providing any repairs to the structures.

Real estate inspections generally involves checking the structural components
of a building such as the plumbing, electrical wiring, air conditioning and
heating units, roofs, etc. and issuing a written report on the condition of
the structure. This service, whether performed on either residential or
nonresidential real property, is not taxable.

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

NOTE: Previous Accession Number 9605271L