When a business refurbishes and resells used or repossessed manufactured homes — sometimes for itself, sometimes as a broker for a lending institution — how is Texas sales tax handled on the sale of the home itself and on the parts/materials/tools used to refurbish it?

Plain-English summary

A business that refurbishes and resells used and repossessed manufactured homes asked how sales tax applies to its two lines of work: homes it buys and resells itself, and homes it refurbishes as a broker on behalf of lending institutions.

The home sale itself: only the very first sale of a new manufactured home into Texas — typically manufacturer to dealer — is a taxable sale. Every resale after that, including a used or repossessed home this business buys and resells, is not taxable.

Parts and materials for homes bought and resold by the business itself: always taxable to the business. Since it's the one buying and reselling the home (not billing a separate customer for repair work), it just pays tax on the parts and materials like any other consumer.

Parts and materials for homes refurbished on behalf of a lending institution: here it depends entirely on how the business bills that customer. A lump-sum charge (one price covering parts, materials, and labor together) makes the business the consumer of the materials — it owes tax on them when purchased. A separately invoiced charge for the parts and materials lets the business buy them tax-free with a resale certificate, and instead collect sales tax from the lending-institution customer on that materials charge.

Tools and equipment: regardless of which billing method is used, equipment and tools bought to perform the refurbishing work (drills, saws, sanders, etc.) are always taxable when the business buys them — these are consumed by the business itself, not resold or incorporated into the home.

What this means for you

Manufactured home refurbishers and resellers

If you buy a used manufactured home and resell it yourself, the resale itself is untaxed, but you pay tax on all the parts/materials you use fixing it up. If you're instead billing a lending institution client for repair work, switch to a separately itemized invoice for parts/materials if you want to buy them tax-free and pass the tax through to the client instead of absorbing it yourself.

Lending institutions using outside contractors to refurbish repossessed homes

Ask your refurbisher how they're billing you — a lump-sum repair invoice bakes the contractor's material tax cost into your price, while a separated invoice shows tax charged directly to you on the materials line, with labor untaxed either way in this arrangement per the letter.

Accountants and tax professionals

This is a clean, general illustration of the lump-sum-vs-separated billing choice's effect on who bears sales tax — worth checking any refurbishing/repair business's invoicing method before assuming their material purchases are handled correctly.

Common questions

Q: Is reselling a used manufactured home subject to Texas sales tax?
A: No. Only the first sale of a new manufactured home into Texas is taxable; subsequent resales, including of used or repossessed homes, are not.

Q: Do I owe tax on parts and materials I use to refurbish a home I bought to resell myself?
A: Yes, always — you're the consumer of those materials in that scenario.

Q: What if I'm refurbishing a home for a lending institution instead?
A: It depends on your invoice. Lump-sum billing means you owe tax on the materials yourself. A separately stated materials charge lets you buy tax-free with a resale certificate and collect tax from the lending institution instead.

Q: Are the tools I use (drills, saws, sanders) ever tax-free?
A: No. Equipment and tools you purchase to perform the work are always taxable to you, regardless of your billing method.

Q: Can I rely on this letter for my own refurbishing business?
A: No. This opinion is based on the facts presented, and additional or different facts could change the result; it binds the Comptroller only as to the taxpayer it was issued to.

Citations and references

• No specific Tax Code section or Comptroller rule number is cited in the body of this letter; it applies the Comptroller's general first-sale-only taxability rule for manufactured homes and the standard lump-sum-vs-separated-contract framework to refurbishing charges.

Subject

Manufactured Houses — Repairs/Refurnishing/Renovations To Used/Repossessed Homes — Also Charges For Moving And Installation

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9801184L

Original ruling text

January 27, 1998

Dear***:

Thank you for your inquiry regarding sales tax.

Your letter indicates an application was enclosed. When I received your
letter, there was no application enclosed. It may have been separated and sent
for processing. In any event, I am enclosing a sales tax permit application.

Facts: Your business refurbishes and resells used and repossessed manufactured
homes. Some of the homes you purchase and resell yourself; others you broker
for lending institutions. You purchase parts and materials for use in
refurbishing the homes in order to make them salable. You ask what types of
items are and are not taxable.

Response: Only the first sale of a new manufactured home into Texas (typically
from the manufacturer to the dealer) is a taxable sale. Subsequent sales of
the home are not taxable. You should pay tax on all parts and materials
purchased to refurbish homes that you purchase to resell yourself. The
taxability of parts and materials purchased and incorporated into the
manufactured home you refurbish for your customer (i.e., the lending
institution) depends on how you bill your customer. If you bill your customer
a lump-sum amount for the repairs to the manufactured home (to include the
parts and materials you purchased and added, along with your labor charge), you
owe tax to the vendor on your purchase of parts and materials. If you
separately invoice the parts and materials you incorporate into the home, you
may issue a resale certificate to your vendor in lieu of tax and charge tax to
your customer. Equipment and tools (e.g., drills, saws, sanders) you purchase
to perform the refurbishing job are taxable when you purchase them.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion could change.

If you have any questions, please do not hesitate to call one of our tax
specialists toll free at 1-800-252-5555. The direct number is 512/463-4600.
You may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale
Tax Policy Division