us-tx/regs
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.
Source Note: The provisions of this §3.292 adopted to be effective December 12, 1996, 21 TexReg 11805; amended to be effective December 25, 2000, 25 TexReg 12809; amended to be effective September 5, 2006, 31 TexReg 7133; amended to be effective June 19, 2017, 42 TexReg 3157; amended to be effective October 13, 2020, 45 TexReg 7270.
Source: official text