34 Tex. Admin. Code § 3.292 - Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property
(a) Definitions.
The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Chapter 160 boat--A vessel not more than
115 feet in length, measured from the tip of the bow in a straight line to the
stern, that is not a canoe, kayak, rowboat, raft, punt, inflatable vessel, or
other watercraft designed to be propelled by paddle, oar, or pole, and that is
subject to tax under Tax Code, Chapter 160 (Taxes on Sales and Use of Boats and
Boat Motors).
(2) Commercial
vessel--A vessel that displaces eight or more tons of fresh water before being
loaded with fuel, supplies, or cargo, and that is:
(A) used exclusively and directly in a
commercial or business enterprise or activity, including, but not limited to,
commercial fishing; or
(B) used
commercially for pleasure fishing by individuals who are paying
passengers.
(3)
Consumable supplies--Tangible personal property that is used by a service
provider to repair, remodel, maintain, or restore tangible personal property
belonging to another; is not transferred into the care, custody, and control of
the purchaser of the service; and, having been used once for its intended
purpose, is completely used up or destroyed. Examples of consumable supplies
include, but are not limited to, canned air used to remove dust from equipment
and solvents used to clean equipment parts.
(4) Extended warranty or service policy--A
contract sold to the purchaser of tangible personal property for an amount in
addition to the charge for the tangible personal property, or sold to an owner
of tangible personal property, to extend the terms of the manufacturer's
written warranty or provide a warranty in addition to or in place of the
manufacturer's written warranty.
(5) Fabricate--To make, build, create,
produce, or assemble components of tangible personal property, or to make
tangible personal property work in a new or different manner.
(6) Maintain--To perform
maintenance.
(7) Maintenance--Work
performed on operational and functioning tangible personal property that is
necessary to sustain or support safe, efficient, continuous operation of the
tangible personal property, or is necessary to keep the tangible personal
property in good working order by preventing decline, failure, lapse, or
deterioration.
(8) Manufacturer's
written warranty--A manufacturer's guarantee made for no additional charge to
the purchaser of an item of tangible personal property that the item is
operable and will remain operable for a specified period of time.
(9) Processing--The physical application of
the materials and labor necessary to modify or to change the characteristics of
tangible personal property. The repair of tangible personal property, belonging
to another, by restoring it to its original condition is not considered
processing of the tangible personal property. The mere packing, unpacking, or
shelving of tangible personal property to be sold is not considered to be
processing of the tangible personal property. Processing does not include
remodeling.
(10) Remodel--To modify
or remake tangible personal property belonging to another in a similar but
different manner, or to change the style, shape, or form of tangible personal
property belonging to another, without causing a loss of its identity or
without causing it to operate in a new or different manner. Remodeling does not
include processing.
(11) Repair--To
mend or restore to working order or operating condition tangible personal
property that was broken, damaged, worn, defective, or
malfunctioning.
(12) Restore--To
return tangible personal property that is still operational and functional, but
that has faded, declined, or deteriorated, to its former or original
state.
(13) Service provider--A
person who repairs, remodels, maintains, or restores tangible personal property
belonging to another.
(14)
Vessel--A watercraft, other than a seaplane on water, used, or capable of being
used, for navigation and transportation of persons or property on water. The
term includes a ship, boat, watercraft designed to be propelled by paddle or
oar, barge, and floating dry-dock.
(15) Warrantor--A person who has a
contractual obligation for a specified period of time to repair, remodel,
maintain, or restore tangible personal property belonging to another.
(b) Taxability of services to
repair, remodel, maintain, or restore tangible personal property.
(1) General rule. Except as otherwise
provided in this section, service providers who repair, remodel, maintain, or
restore tangible personal property belonging to another are providing taxable
services. A service provider is a seller and must obtain a sales and use tax
permit and collect and remit sales and use tax as provided in §
3.286 of this title (relating to
Seller's and Purchaser's Responsibilities). Sales or use tax is due from the
purchaser on the entire charge for a service to repair, remodel, maintain, or
restore tangible personal property, including any separately stated charge for
materials, parts, labor, consumable supplies, or equipment. In addition, the
purchaser owes sales or use tax on any charge connected to the taxable service,
including separately stated charges for inspecting, monitoring, or testing.
(A) Aircraft. Service providers who repair,
remodel, maintain, or restore aircraft should refer to §
3.280 of this title (relating to
Aircraft).
(B) Motor vehicles.
Service providers who remodel motor vehicles are providing taxable services and
are covered by this section. Service providers who repair, maintain, or restore
motor vehicles should refer to §
3.290 of this title (relating to
Motor Vehicle Repair and Maintenance; Accessories and Equipment Added to Motor
Vehicles; Moveable Specialized Equipment).
(C) Vessels. Service providers who repair,
remodel, maintain, or restore a vessel that is a Chapter 160 boat, sports
fishing boat, or any other boat used for pleasure, and that is not a commercial
vessel, are providing taxable services and are covered by this section. Service
providers who repair, remodel, maintain, or restore commercial vessels should
refer to §
3.297 of this title (relating to
Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor
Vehicles).
(D) Locomotives and
rolling stock. Service providers who repair, remodel, maintain, or restore
locomotives or rolling stock should refer to §
3.297 of this title.
(E) Exempt equipment. A service to repair,
remodel, maintain, or restore tangible personal property that, if sold, leased,
or rented at the time the service is performed, would be exempt under Tax Code,
Chapter 151 (Limited Sales, Excise, and Use Tax) due to its nature or its use
is exempt from sales and use taxes. Tax is due on the sale of services to
repair, remodel, maintain, or restore tangible personal property that was
exempt at the time of purchase but would not be exempt at the time the service
is performed. For example, services to repair, remodel, maintain, or restore
the following tangible personal property will not qualify for exemption based
solely on the fact that such tangible personal property was exempt at the time
of its purchase:
(i) tangible personal
property purchased from an organization exempted from paying sales or use tax
under Tax Code, §
151.309 (Governmental
Entities) or §151.310 (Religious, Educational, and Public Service
Organizations);
(ii) tangible
personal property exempted from use tax because sales tax was paid on the
purchase;
(iii) tangible personal
property acquired tax-free in a transaction qualifying as an occasional sale
under Tax Code, §
151.304 (Occasional Sales),
or as a joint ownership transfer exempted under Tax Code, §
151.306 (Transfers of Common
Interests in Property). See §
3.316 of this title (relating to
Occasional Sales; Transfers Without Change in Ownership; Sales by Senior
Citizens' Organizations; Sales by University and College Student Organizations;
and Sales by Nonprofit Animal Shelters) and §
3.331 of this title (relating to
Transfers of Common Interests in Tangible Personal Property; Intercorporate
Services); or
(iv) tangible
personal property purchased tax-free during a sales tax holiday as provided by
§
3.353 of this title (relating to
Sales Tax Holiday--Certain Emergency Preparation Supplies), §
3.365 of this title (relating to
Sales Tax Holiday--Clothing, Shoes and School Supplies) or §
3.369 of this title (relating to
Sales Tax Holiday--Certain Energy Star Products, Certain Water-Conserving
Products, and WaterSense Products).
(2) Resale certificates.
(A) A service provider may issue a properly
completed resale certificate instead of paying sales or use tax on the purchase
of tangible personal property that is integral to repairing, remodeling,
maintaining, or restoring tangible personal property belonging to another and
is transferred to the care, custody, and control of the purchaser of the
taxable service. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale).
(B) A person holding tangible personal
property for sale, lease, or rental may issue a properly completed resale
certificate in lieu of paying sales or use tax on the purchase of labor and
tangible personal property used to repair, remodel, maintain, or restore that
tangible personal property. Refer to §
3.285 of this title and §
3.294 of this title (relating to
Rental and Lease of Tangible Personal Property).
(3) A service provider working under an
agreement that provides that the purchaser of the service will furnish the
tangible personal property required for the service must collect sales or use
tax on the charge for the service.
(4) A service provider may accept a properly
completed exemption certificate instead of collecting sales or use tax when
performing a taxable service for a purchaser who is exempt from sales and use
tax under Tax Code, Chapter 151, or when performing services on tangible
personal property that is exempt from sales and use tax. Refer to §
3.287 of this title (relating to
Exemption Certificates).
(c) Consumable supplies and equipment. Sales
or use tax must be paid by the service provider on consumable supplies and
equipment that are purchased for use in the performance of a service that are
not transferred to the care, custody, and control of the customer.
(d) Warranties. For information on warranties
for the repair of motor vehicles, refer to §
3.290 of this title. For
information concerning warranties for the repair of aircraft, refer to §
3.280 of this title.
(1) Manufacturer's written warranty or recall
campaign. No sales or use tax is due on tangible personal property or labor
furnished by the manufacturer to repair tangible personal property under a
manufacturer's written warranty or recall campaign.
(A) Records must be kept by the service
provider to document that the service and tangible personal property were used
in repairing an item under a manufacturer's written warranty or recall
campaign.
(B) The service provider
may purchase tangible personal property to be used in repairs under a
manufacturer's written warranty or recall campaign tax-free by issuing an
exemption certificate to the seller.
(2) Extended warranty or service policy.
(A) Sales or use tax is due on the sale of an
extended warranty or service policy.
(B) The warrantor may issue a resale
certificate in lieu of paying sales or use tax on the purchase of taxable items
used in performing the services covered by the contract as long as the taxable
items are integral to performing the service and the taxable items are also
transferred to the care, custody, and control of the purchaser. Refer to §
3.285 of this title.
(C) If the warrantor uses a third-party
service provider to perform the service, the third-party service provider may
accept a resale certificate from the warrantor in lieu of sales or use
tax.
(D) The warrantor must collect
sales or use tax on any charge to the purchaser for labor or tangible personal
property not covered by the extended warranty or service policy.
(E) If the warrantor uses a third-party
service provider to fulfill the warranty and the service provider charges the
warrantor or the purchaser for tangible personal property or labor not covered
under the warranty, the service provider must collect sales or use tax on such
charges.
(3)
Replacements and reimbursements.
(A) Trade-in.
If the warrantor is a seller of tangible personal property, and if the terms of
a manufacturer's or extended warranty agreement provide for either the
replacement or the repair, remodeling, maintenance, or restoration of tangible
personal property, then tangible personal property accepted by the warrantor
under the terms of the warranty in exchange for, or towards the purchase of,
tangible personal property of the type sold by the warrantor in the regular
course of business will be considered a trade-in. The provisions of Tax Code,
§
151.007(c)(5)
("Sales Price" or "Receipts") apply to such a transaction and any amount or
credit provided for the trade-in reduces the taxable amount of the sale of the
replacement item.
(B) The sale of a
contract that provides that a warrantor will reimburse a purchaser for payments
made to replace, repair, remodel, maintain, or restore faulty, damaged, lost,
or stolen tangible personal property, including the amount of any sales and use
tax, is not taxable. In addition, the amount reimbursed to the purchaser of the
faulty, damaged, lost, or stolen tangible personal property by the warrantor
under such a contract is not taxable.
(e) Services performed on real property.
Persons who build new improvements to real property, or repair, restore, or
remodel residential real property belonging to others, should refer to §
3.291 of this title (relating to
Contractors). Persons who repair or remodel nonresidential real property
belonging to others should refer to §
3.357 of this title (relating to
Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property
Maintenance).
(f) Fabricating or
processing tangible personal property. Persons who fabricate or process
tangible personal property belonging to another should refer to §
3.300 of this title (relating to
Manufacturing; Custom Manufacturing; Fabricating; Processing).
(g) Exemption for disaster areas.
(1) Labor to repair, restore, remodel, or
maintain tangible personal property is exempt if:
(A) the amount of the charge for labor is
separately stated from any charge for tangible personal property on the
invoice, contract, or similar document provided by the service provider to the
purchaser; and
(B) the service is
performed on tangible personal property that was damaged within a disaster area
by the condition that caused the area to be declared a disaster area.
(2) The exemption does not apply
to tangible personal property transferred from the service provider to the
purchaser as part of the repair.
(3) In this subsection, "disaster area"
means:
(A) an area declared a disaster area
by the Governor of Texas under Government Code, Chapter 418 (Emergency
Management); or
(B) an area
declared a disaster area by the President of the United States under 42 United
States Code, Chapter 68 (Disaster Relief).
(h) Repair services required to protect the
environment or conserve energy.
(1) Labor to
repair, remodel, maintain, or restore tangible personal property is exempt if:
(A) the repair, remodeling, maintenance, or
restoration is required by statute, ordinance, order, rule, or regulation of
any commission, agency, court, or political, governmental, or
quasi-governmental entity in order to protect the environment or to conserve
energy; and
(B) the charge for the
labor is itemized separately from the charge for materials furnished.
(2) The exemption in
paragraph (1) of this subsection does not apply to a lump sum charge for labor
and materials.
(3) Sixty-five
percent of a lump-sum charge for labor and materials for the repair,
remodeling, maintenance, or restoration of tangible personal property is exempt
if:
(A) the repair, remodeling, maintenance,
or restoration is required by statute, ordinance, order, rule, or regulation of
any commission, agency, court, or political, governmental, or
quasi-governmental entity in order to protect the environment or to conserve
energy; and
(B) the labor and
materials are purchased for a health care facility (Health and Safety Code,
§
108.002) or
oncology center.
Notes
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