Is carpet bought for a minister's parsonage exempt from Texas sales tax, and does it matter who pays for it?

Subject

Church — Carpet Purchased For Use In Minister'S/Pastor'S Residence/Home Or Parsonage

Plain-English summary

A taxpayer wrote to the Comptroller asking about the sales tax treatment of carpet bought for a minister's residence. The Comptroller explained that it is an accepted practice for a church to provide its pastor a residence in some manner, ranging from a parsonage to simply paying a living allowance.

Churches may purchase materials to refurbish a parsonage tax-free by giving exemption certificates to their suppliers instead of paying sales tax. To qualify for this exemption on building materials used in a church parsonage, the materials must be billed to the church and paid for by the church. Exemption certificates do not require a number to be valid.

However, if the pastor -- rather than the church -- pays for the materials, sales tax is due. That's true even if the pastor uses money from a housing allowance to pay for the materials.

What this means for you

Churches purchasing parsonage materials

If your church wants to buy carpet or other building materials for a parsonage tax-free, the purchase must be billed to and paid for by the church, and you give the supplier an exemption certificate instead of paying sales tax. No exemption certificate number is required for the certificate to be valid.

Ministers and pastors paying for their own housing materials

If you, as the pastor, pay for the carpet or materials yourself -- even using money from a housing allowance the church gave you -- sales tax is due on that purchase. The exemption only applies when the church itself is billed and pays.

Accountants and tax professionals advising churches or clergy

When structuring parsonage refurbishment purchases, confirm that invoices are billed directly to the church and that the church, not the minister personally, is the one paying. This ruling shows the source of the funds (e.g., a housing allowance) does not matter -- what matters is who is billed and who pays.

Common questions

Q: Can a church buy carpet for its parsonage without paying sales tax?
A: Yes, if the materials are billed to the church and paid for by the church, using an exemption certificate given to the supplier.

Q: Does the exemption certificate need a number to be valid?
A: No. The letter states exemption certificates do not require a number to be valid.

Q: What if the pastor pays for the carpet instead of the church?
A: Sales tax is due. This is true even if the pastor uses housing allowance money to pay for it.

Q: Does it matter whether the church provides a parsonage or a housing allowance?
A: The letter notes both are accepted practices for providing a pastor's residence, but the tax-exempt purchase route only applies when the church itself buys and pays for the materials directly.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610624L

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 14, 1996

Dear ***:

Thank you for your recent letter regarding the tax
treatment of carpet for use in your residence as a minister. It is an accepted
practice for a church to provide in some manner a residence for its pastor.
The methods vary from providing a parsonage to simply paying a living
allowance.

Churches may purchase materials to refurbish a
parsonage tax free by giving exemption certificates to their suppliers in lieu
of paying sales tax. To qualify for exemption from sales tax on building
materials used in a church parsonage, the materials must be billed to the
church and paid for by the church. Exemption certificates do not require a
number to be valid. However, sales tax would be due if the pastor, instead of
the church, paid for the materials. This would be true even if the pastor used
money from a housing allowance to pay for the materials.

If you have any questions about this information, you
may contact Al Van Allen in the
Tax Policy Division at 1-800-531-5441, extension
3-4680.

Sincerely,
Karey W. Barton
Manager, Tax Policy Division