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TEXAS ADMINISTRATIVE CODE
TITLE 34. PUBLIC FINANCE
PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3. TAX ADMINISTRATION
SUBCHAPTER O. STATE SALES AND USE TAX
Date:
08/31/2009
Document:
34 TAC § 3.292 (2011)
§ 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) Commercial vessel--A ship of eight or more tons displacement that is used exclusively in a commercial enterprise including commercial fishing, but excludes any ship used for sports fishing or pleasure.
(2) Extended warranty or service policy--This contract is sold to the buyer of the product for an additional amount. The provisions of the contract become effective after the manufacturer's warranty expires.
(3) Maintenance--All work on operational and functioning tangible personal property necessary to sustain or support safe, efficient, continuous operations, or to keep in good working order by preventing the decline, failure, lapse, or deterioration of tangible personal property.
(4) Manufacturer's written warranty--A guarantee by the manufacturer that the product at the time of sale is operable and will remain operable for specified period of time. The manufacturer's warranty is provided without additional cost to the buyer.
(5) Remodel--To modify the style, shape, or form of tangible personal property belonging to another without causing a loss of its identity or without causing the item to operate in a new or different manner.
(6) Repair--To mend or restore to working order or operating condition tangible personal property that was broken, damaged, worn, defective, or malfunctioning.
(7) Repairman--Any person who, under either lump-sum or separated contracts, restores, repairs, performs maintenance services, or replaces a component of an inoperable or malfunctioning item.
(8) Private aircraft--An aircraft that is operated or used for a purpose other than as a certificated carrier of persons or property or by a flight school for the purpose of training pilots. Persons repairing aircraft belonging to or operated by a certificated carrier of persons or property or flight schools should refer to § 3.297 of this title (relating to Carriers).
(b) Services to tangible personal property other than aircraft, commercial vessels, and motor vehicles. Persons who repair, restore, remodel, or maintain tangible personal property belonging to another are providing taxable services. Persons who remodel motor vehicles are also covered by this section. Persons who repair, maintain, or restore private aircraft should refer to subsection (i) of this section. Persons 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).
(1) A service provider is a retailer and must obtain a tax permit and collect sales or use tax on the entire charge for materials, parts, labor, consumable supplies, equipment, and any charges connected to the repair, remodeling, restoration, or maintenance service.
(2) A service provider may issue a resale certificate instead of paying sales or use tax to the supplier when purchasing materials that will be transferred to the care, custody, and control of a customer.
(3) A service provider must collect sales or use tax on services (labor) under an agreement that provides that the customer will furnish the parts and materials required for the repair.
(4) A service provider may accept an exemption certificate instead of sales or use tax when performing a taxable service for a customer exempt from tax or on an item that is exempt from tax, see subsection (g) of this section.
(c) Consumable supplies and equipment. Sales or use tax must be paid by the service provider on supplies, tools, and equipment that are purchased for use in the performance of the repair but that are not transferred to the care, custody, and control of the customer.
(d) Repairs under warranties.
(1) Manufacturer's warranties. No tax is due on parts or labor furnished by the manufacturer to repair tangible personal property under a manufacturer's warranty or recall campaign.
(A) Records must be kept by the service provider to document that the service and parts were used in repairing an item under a manufacturer's warranty or recall.
(B) The service provider may purchase parts to be used in repairs under a manufacturer's warranty or recall tax free by issuing an exemption certificate to the supplier.
(2) Extended warranties and service contracts for tangible personal property (motor vehicles and private aircraft see subsection (i)(4) of this section).
(A) Tax is due on the sale of an extended warranty, service contract or service policy for the repair or maintenance of tangible personal property.
(B) The person who warrants the item and is obligated to perform services under the terms of the agreement may issue a resale certificate for parts or service to be used in performing the repair or maintenance services covered by the contract.
(C) If the person obligated to perform the services uses a third-party repairman to do the work, the repairman may accept a resale certificate from the warrantor.
(D) The repairman or warrantor performing the service must collect tax on any charge to the customer for labor or parts not covered by the extended warranty.
(e) Contractors and persons who perform real property repair and remodeling. Persons who build new improvements to real property, or repair, restore, or remodel residential real property should refer to § 3.291 of this title (relating to Contractors). Persons who repair or remodel nonresidential real property should refer to § 3.357 of this title (relating to Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance).
(f) Fabricating or processing. Persons who fabricate or process tangible personal property for another should refer to § 3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing).
(g) Services performed on certain tangible personal property.
(1) Labor to repair, remodel, maintain, or restore certain tangible personal property that, if sold, leased, or rented, at the time of the performance of the service, would be exempted under Tax Code, Chapter 151, because of the nature of the property, its use, or a combination of its nature or use is exempted from sales and use taxes.
(2) The exemption provided in paragraph (1) of this subsection does not apply to:
(A) tangible personal property sold by an organization exempted by Tax Code, Chapter 151;
(B) tangible personal property exempted from use tax because sales tax was paid on the purchase;
(C) tangible personal property acquired tax free in a transaction qualifying as an occasional sale under Tax Code, § 151.304, or as a joint ownership transfer exempted under Tax Code, § 151.306;
(D) taxable boat or motor defined by Tax Code, § 160.001;
(E) clothing and footwear purchased tax-free during a sales tax holiday; or
(F) machinery and equipment used in timber operations.
(h) Exemption for labor to repair tangible personal property in a disaster area.
(1) Labor to repair, restore, remodel, or maintain tangible personal property is exempt if:
(A) the amount of the charge for labor is separately itemized; and
(B) the repair is to property 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 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; or
(B) an area declared a disaster area by the President of the United States under 42 United States Code, § 5141.
(i) Responsibilities of repairman or remodelers of private aircraft.
(1) Responsibilities under a lump-sum contract.
(A) Labor to maintain, repair or remodel private aircraft is not taxable. A person maintaining, repairing or remodeling a private aircraft for a lump-sum price is not a retailer of a taxable item and may not issue a resale certificate for parts or material used or consumed in such repair or remodel.
(B) Under a lump-sum contract, the repairman or remodeler is the ultimate consumer of consumable supplies, tools, equipment, and all materials incorporated into the private aircraft. The lump-sum repairman or remodeler must pay the tax to suppliers at the time of purchase. The repairman will not collect tax from customers on the lump-sum charge or any portion of the charge. Under this type of contract, the repairman will pay the tax on materials even when the property is repaired for an exempt customer.
(C) A lump-sum repairman may use materials from inventory that were originally purchased tax free by use of a resale certificate. In those instances, the repairman incurs a tax liability based upon the purchase price of the materials and must report and remit the tax to the comptroller.
(2) Responsibilities under a separated maintenance, repair or remodeling contract. Under a separated contract, the repairman of a private aircraft is a retailer and may issue a resale certificate in lieu of tax to suppliers for materials that will be incorporated into the private aircraft of the customer; the repairman must then collect tax from the customer on the agreed contract price of the materials, which must not be less than the amount the repairman paid to suppliers. The repairman must obtain a tax permit to be able to issue a resale certificate in lieu of tax when materials are purchased. The repairman may also use materials from inventory upon which tax was paid to the supplier at the time of purchase. In these instances, tax will be collected from the customer on the agreed contract price of the materials as if the materials had been purchased with a resale certificate; however, the repairman will remit tax to the comptroller only on the difference between the agreed contract price and the price paid to the supplier. See § 3.338 of this title (relating to Multistate Tax Credits and Allowance of Credit for Tax Paid to Suppliers). A repairman of private aircraft is the ultimate consumer of consumable supplies, tools, and equipment used that are not incorporated into the private aircraft being repaired. The repairman must pay tax to suppliers at the time of purchase. The repairman may not collect tax from customers on any charges for these items.
(3) Repairing jet turbine aircraft engines. Persons engaged in overhauling, retrofitting, or repairing jet turbine aircraft engines and their component parts should refer to § 3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing).
(4) Warranties.
(A) Manufacturer warranties. Manufacturer's warranties are treated in the same manner as those for tangible personal property (see subsection (d)(1) of this section).
(B) Extended warranties and service contracts. A repairman performing services under an extended warranty covering a private aircraft must collect tax on the parts as required under paragraph (2) of this subsection.
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