34 Tex. Admin. Code § 3.356 - Real Property Service
(a) Definitions.
The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Employee--A person providing services for
another for consideration where the employer has the right to control and
direct the employee in the material details of how the work is to be performed,
both under the contract of employment and in fact. The term also includes
personnel provided by a temporary help service, as defined in paragraph (10) of
this subsection.
(2) Employer--In
determining which of several persons is the employer of an individual, factors
which will be considered include:
(A) who
exercises direct control over the details of how the work is performed by the
employee;
(B) who pays the
employee's salary;
(C) who
withholds applicable federal taxes from the employee's salary;
(D) who provides employment-related benefits
such as health insurance, eligibility to participate in a retirement plan, sick
leave, vacation, etc., to the employee; and
(E) who has the right to terminate the
employment of the individual employee.
(3) Garbage or other solid waste--Waste;
refuse; sludge from a waste treatment plant, a water supply treatment plant, or
an air pollution control facility; and other discarded material, including
solid, liquid, semisolid, or contained gaseous material, resulting from
residential, industrial, municipal, commercial, mining, and agricultural
operations, and resulting from community and institutional activities. The term
does not include any of the following:
(A)
solid or dissolved material in domestic sewage; or solid or dissolved material
in irrigation return flows; or industrial discharges subject to regulation by
permit issued pursuant to the Texas Water Code, Chapter 26;
(B) waste materials which result from
activities associated with the exploration, development, or production of oil,
gas, geothermal resources, or any other substance or material regulated by the
Railroad Commission of Texas pursuant to Natural Resources Code, §
91.101;
(C) any waste which requires specific
licensing under Health and Safety Code, Chapter 401, and the rules adopted by
the Texas Board of Health under that law, which for the purposes of this rule
shall be referred to as radioactive waste;
(D) hazardous waste, as identified or listed
as a hazardous waste by the administrator of the United States Environmental
Protection Agency or by other appropriate federal or state agency; or
(E) industrial solid waste, as that term is
defined in Health and Safety Code, Chapter 361, with the exception of
industrial solid waste which meets the definition of garbage or municipal solid
waste.
(4)
Landscaping--The activity of arranging and modifying areas of land, natural
scenery and other areas, such as indoor or outdoor patios, for aesthetic
effect, considering the use to which the land is to be put. The term includes
adding, removing, or arranging natural forms, features, and plantings,
including vegetation, and other features to fulfill aesthetic requirements. It
includes the application of soil, soil additives, and amendments to prepare or
maintain the planting area. Some examples are garden planting or maintenance,
arborist services, ornamental bush or shrub planting, tree planting or removal,
tree surgery, pruning or spraying, and lawn sodding. The term does not include
the addition of sprinkler systems, retaining walls, ponds, pools, or fences, or
other construction activities or services provided by landscape designers or
landscape architects such as consultation, research, preparation of general or
specific design or detail plans, studies, specifications, or supervision, or
any other professional services or functions within the definition of the
practice of engineering or architecture. Landscaping services performed by
landscape designers or landscape architects are taxable.
(5) Lawn and yard maintenance--Mowing,
trimming, fertilizing, watering and any other treatment or service which may be
performed on private or commercial yards or lawns. It also includes maintenance
of trees and plants whether inside or outside a building. The term does not
include clearing land for buildings, power line rights-of-way, pipeline
rights-of-way, or maintenance on land belonging to a governmental entity when
the service is required by the governmental entity.
(6) Property management company--A person
who, for consideration, operates and manages all the activities at a property
held by the owner for purposes of rental, such as: an office building, mall or
other retail or office complex, an apartment complex, duplex, or home. In the
context of this rule, the responsibilities of a property management company
must include, but are not limited to, securing tenants, hiring and supervising
employees for operation or upkeep of the property, receiving and applying
revenues, and incurring and paying expenses derived from the operation of the
property as directed by the owner. The term does not include a person
performing taxable services at a manufacturing facility or at a property held
by the owner for purposes other than rental.
(7) Residential or nonresidential building or
grounds cleaning, janitorial, or custodial services--The activities of keeping
the inside and outside premises of a building clean, orderly, and functional,
including performing minor adjustments, maintenance, or repairs. Examples
include, but are not limited to: window washing; floor, wall, and ceiling
cleaning; collection of waste on the premises, whether from inside a building
or on the grounds; chimney or duct cleaning; lighting maintenance, such as bulb
and fuse replacement; the cleaning, disinfecting, and restocking of restrooms
or lounge areas; cleaning or washing sidewalks, parking garages, or parking
lots; and pool cleaning and maintenance. The term does not include activities
such as painting; wallpapering; or performing significant repairs; nor domestic
services such as those of a baby-sitter, maid or cook employed by a private
household to provide domestic services for the benefit of the
household.
(8) Structural pest
control services--Activities performed for the purpose of identifying,
preventing, controlling, or eliminating, by use of chemical or mechanical
means, infestation of any of the following:
(A) insects, spiders, mites, ticks, ants,
bees, and other related pests, wood infesting organisms, rodents, weeds,
nuisance birds, or any other obnoxious or undesirable animals which may infest
households, railroad cars, ships, docks, trucks, airplanes or other structures
or their contents;
(B) pests or
diseases of trees, shrubs or other plantings in a park or adjacent to a
residence, business establishment, industrial plant, institutional building, or
street; and
(C) the term
"structural pest control services" includes related activities, such as
inspection or evaluation concerning the nature or extent of an infestation;
reports; or performance of services to control pest or insect
infestation.
(9)
Surveying of real property--Activities performed to determine or confirm the
boundaries of real property, or to determine or confirm the location of
structures or other improvements in relation to the boundaries of the property
by the use of relevant elements of law, research, measurement, analysis,
computation, mapping and land description. Examples include, but are not
limited to, boundary recovery, residential surveying, lot surveying, title
surveying, as-built title surveying, and right-of-way surveying. The term does
not include activities performed after taxable surveying has been completed to
search the surveyed area for items of archaeological or historic
significance.
(10) Temporary help
service--An individual, company, or corporation covered by Industry Group 7363,
Group 736, Major Group 73 of the Standard Industrial Classification Manual,
1989, and includes an individual, company, or corporation that supplies
personnel on a temporary basis to supplement a customer's existing work force.
In the context of this section, such temporary personnel must perform a service
that is normally performed by the customer's own employees; the customer must
provide all supplies and equipment necessary; and the temporary personnel must
be under the direct or general supervision of the customer to whom the help is
furnished.
(b)
Responsibilities of persons providing real property services on both
residential and nonresidential real property. With the exception of terms
defined by subsection (a)(6) and (10) of this section, persons providing
services defined in subsection (a) of this section are performing real property
services. Persons performing real property services must obtain a tax permit
and collect and remit sales or use taxes on all charges for real property
services.
(c) Resale certificates.
(1) A properly completed resale certificate
may be used to purchase tangible personal property tax free if the care,
custody, and control of the property is transferred to the customer as part of
the real property service. For example, a taxpayer purchases paper products to
be left at the customer's premises when providing janitorial services, or
garbage dumpsters to leave on the customer's premises as a part of the garbage
collection service. Taxpayer may purchase the paper products and dumpsters tax
free by issuing a resale certificate. Tax is due on the total amount charged
the customer, including amounts for the paper products, dumpster, and for the
services.
(2) A properly completed
resale certificate may be issued for a service if the buyer intends to transfer
the service as an integral part of a taxable service. A service will be
considered an integral part of a taxable service if the service purchased is
essential to the performance of the taxable service and without which the
taxable service could not be rendered. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale).
(3) A properly completed resale certificate
may be issued to purchase a taxable service tax free if the buyer intends to
incorporate the service into tangible personal property which will be resold.
If the entire service is not incorporated into the tangible personal property,
it will be presumed the service is subject to tax and the service will only be
exempt to the extent the buyer can establish the value of that portion of the
service actually incorporated into the tangible personal property. If the buyer
does not intend to incorporate the entire service into the tangible personal
property, the buyer may not issue a resale certificate but he may claim credit
at the time of sale of the tangible personal property for the portion of the
service that was actually incorporated into the tangible personal
property.
(d) Exemption
certificates. Persons providing real property services may accept a properly
completed exemption certificate in lieu of tax when the service is purchased by
an exempt entity. See §
3.322 of this title (relating to
Exempt Organizations), §
3.287 of this title (relating to
Exemption Certificates) and §
3.288 of this title (relating to
Direct Payment Procedures and Qualifications).
(e) Landscaping, lawn, and yard maintenance
provided by persons under 18 years old or by persons 65 years old or older.
Charges for the performance of landscaping, lawn, and yard maintenance services
(subsection (a)(4) and (5) of this section) are exempt if performed by:
(1) a self-employed person under 18 years of
age whose total receipts from providing landscaping, lawn, or yard maintenance
are $1,000 or less during either the preceding calendar quarter or the same
calendar quarter of the preceding year; or
(2) an individual 65 years of age or older
whose total receipts from providing landscaping or yard maintenance are $5,000
or less for the four most recent quarters.
(f) Landfill charges connected with garbage
collection services. Persons providing garbage collection services may not
separate in the bill to their customers the charge for garbage collection from
the charge for use of the landfill for the purpose of reducing the amount upon
which tax must be collected. The charge paid by the service provider for access
to the landfill, while not taxable to the service provider, is a necessary
expense in providing the garbage collection service and is not excludable from
the fee to the service provider's customer for garbage collection.
(g) Garbage removal facilities. When a city,
county, or any other entity provides a facility where garbage may be left and
which will, at another time, be moved to a landfill, the fee charged to persons
depositing garbage into such a facility is considered to be a charge for
garbage collection and is taxable.
(h) Garbage collection services that may be
excluded from tax. Persons providing collection services for customers having
waste excluded from the definition of "garbage or other solid waste" may accept
an exemption certificate from the customer in lieu of tax. The exemption
certificate must state the type of waste being excluded, and that either the
waste to be collected is totally excludable or that the customer has both
taxable and nontaxable waste and the customer will be responsible for accruing
tax on that portion of the charge which represents taxable services. The
customer may use any reasonable allocation for reporting tax on taxable
services which is supportable by books and records.
(i) Unrelated services.
(1) A service will be considered as unrelated
if:
(A) it is not a real property service,
nor a service or labor taxable under another provision of the Tax Code, Chapter
151;
(B) it is not provided as a
part of the taxable service and is of a type which is commonly provided on a
stand-alone basis; and
(C) the
performance of the unrelated service is distinct and identifiable. Examples of
an unrelated service which may be excluded from the tax base include
maintenance charges meeting the definition in §
3.357 of this title (relating to
Labor Relating to Nonresidential Real Property Repair, Remodeling Restoration,
Maintenance, New Construction, and Residential Property), engineering studies,
and architectural or landscaping designs.
(2) When nontaxable unrelated services and
taxable services are sold or purchased for a single charge and the portion
relating to taxable services represents more than 5.0% of the total charge, the
total charge is presumed to be taxable. The presumption may be overcome by the
service provider at the time the transaction occurs by separately stating to
the customer a reasonable charge for the taxable services. However, if the
charge for the taxable portion of the services is not separately stated at the
time of the transaction, the service provider or the purchaser may later
establish for the comptroller, through documentary evidence, the percentage of
the total charge that relates to nontaxable unrelated services. A customer may
presume that a separately stated charge from a service provider for taxable
services is reasonable, in the context of this section. The service provider's
books must support the apportionment between exempt and nonexempt activities
based on the cost of providing the service or on a comparison to the normal
charge for each service if provided alone. If the charge for exempt services is
unreasonable when the overall transaction is reviewed, considering the cost of
providing the service or a comparable charge made in the industry for each
service, the comptroller will adjust the charges and assess the service
provider the additional tax, penalty, and interest on the taxable
services.
(3) Charges for services
or expenses directly related to or incurred while providing the taxable service
are taxable and may not be separated for the purpose of excluding these charges
from the tax base. Examples include charges for meals, telephone calls, hotel
rooms, or airplane tickets.
(j) Governmental entities. When garbage
collection services are provided by a governmental entity without a specific
charge being assessed, such as when this service is provided as a basic part of
services funded by a tax or a set fee structure of the governmental entity,
sales or use taxes are not due. This section does not apply if the fee changes
each billing period based on quantity of consumption of tangible personal
property or service provided individual service recipients.
(k) Local taxes. With the exception of
garbage or other solid waste removal services, local sales and use taxes apply
to services in the same way as they apply to tangible personal property.
Generally, service providers must collect local sales taxes if their place of
business is within a local taxing jurisdiction, even if the service is actually
provided at a location outside that jurisdiction. However, transit sales taxes
do not apply to services provided outside the boundaries of the transit area.
If the service provider's place of business is outside a local taxing
jurisdiction but the service is provided to a customer within a local taxing
jurisdiction, local use taxes apply and the service provider is required to
collect them. Local taxes for garbage or other solid waste removal services are
allocated to the local taxing jurisdiction in which the garbage or other solid
waste is located when its collection or removal begins.
(l) For general information on the collection
and reporting responsibilities of providers and purchasers of taxable services,
see §§
3.286, 3.374, 3.375, 3.424, and
3.425 of this title (relating to Seller's and Purchaser's Responsibilities;
Imposition of the Sales Tax; Collection by Retailer; Bracket System Formula;
Determining City Tax, Administration of Use Tax; Collection by Retailer,
Imposition of Sales Tax, and Administration of Use Tax; Imposition and
Collection).
(m) Use tax. If a
seller of a taxable service is not doing business in Texas or a specific local
taxing jurisdiction and is not required to, or does not voluntarily, collect
and report the applicable Texas tax, it is the Texas customer's responsibility
to report and pay the use tax directly to this office.
(n) Property management companies.
(1) Employees permanently assigned to one
rental property are considered employees of that property when the property
manager is reimbursed by the property owner on a dollar-for-dollar basis. On
managed rental properties, the employees remain assigned to the property while
employed by successive owners or management companies. The reimbursement charge
for taxable services performed on a managed rental property by management
company employees assigned to it will not be taxable. However, if these same
employees provide real property services for other properties, the property
manager must collect tax on the total charge for those services. The management
company owes tax on the purchase price of all taxable items purchased and
provided to the employees providing services on managed rental
property.
(2) Property management
companies whose employees provide taxable services as part of their overall
management and operation of a rental property need not collect tax on those
services if their value is insignificant.
(A)
Such taxable services will be considered insignificant in any billing period in
which their value is 5.0% or less of the amount charged by the management
company for services. The amount charged by the management company for taxable
services is to be determined by deducting from the management company's total
charge any mortgage payments made by the management company for the property
owner and any amounts paid to persons other than employees of the management
company for goods and services.
(B)
If the value of the taxable services exceeds the 5.0% limit, the entire amount
charged by the management company will be considered taxable unless charges for
taxable services are separately itemized and taxed as provided under subsection
(i)(2) of this section.
(3) Purchases by the property management
company for use by the property owner of taxable goods, labor, or services from
third-party suppliers may be handled in either of the following ways:
(A) the management company may issue a resale
certificate to the supplier and collect tax from the property owner on the
itemized charge for the goods, labor, or service; or
(B) the management company may pay tax to the
supplier and collect from the property owner an amount equal to the total of
the amount paid by the management company for the goods, labor, or services and
the tax paid.
Notes
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