Welcome to the Comptroller's Contractor video series.
This video discusses the tax responsibilities
of people who perform non-residential real property
repair, remodeling and restoration work.
While they're often thought of as contractors under sales tax law,
they are service providers providing taxable services.
If you don't understand the terms used in this video,
please watch the contractor overview video.
Any restoration, repair or remodeling work
completed after the initial finish out of an existing non-residential
or commercial building is taxable.
The total charge for labor and materials
used to repair, restore or remodel non-residential real property is taxable.
It makes no difference whether you use a lump sum or separated contract
to bill your customer.
When you perform non-residential real property repair,
remodeling and restoration work,
you must apply for a sales tax permit.
Tax is due on the entire charge to your customer.
When you collect the local sales tax,
you will collect it based on the tax rate at the job site location.
You can use our sales tax rate locator
available on our website
to search for the sales tax rates by physical address.
You can give a properly completed resale certificate to vendors
when you're buying taxable and corporative materials
and subcontractor services resold to your customer
to complete the construction work.
You must still pay sales tax when you buy equipment or consumables that you will use
in performing your construction work.
Here's an example.
Bill is installing a new HVAC unit
to replace the previous one
at a business building here in Austin, Texas.
He will be completing the installation for his customer.
Bill decides to invoice his customer a flat price of $50,000
for the HVAC unit and labor.
When Bill goes to a supply vendor,
he gives a resale certificate for the HVAC unit
and other incorporated materials.
He pays sales tax on the equipment and consumables he uses to complete the job.
When Bill invoices his customer,
he must either charge and collect the tax on the entire invoice
or accept a resale certificate
if he is doing work for another taxable service provider.
In this instance, Bill's customer paid
the sales tax amount of $4,125 on a total
$50,000 installation charge.
If Bill had decided to invoice using a separated contract,
his customer would still pay the same sales tax amount
of $4,125 on the total $50,000 installation and charge.
If Bill was doing the work for another taxable service provider,
such as someone who performs non-residential real property
repair, remodel and restoration, he could accept a resale certificate instead of
collecting tax.
In summary, for non-residential repair, remodeling and
restoration work, you must collect sales tax on the total charge or accept a
resale certificate from your customer.
You must give a resale certificate when
you buy incorporated materials or subcontracted services.
You must pay sales tax when you buy equipment or consumables,
and you must get a sales tax permit.
Again when you perform non-residential real property repair,
remodeling and restoration work, you must apply for a sales tax permit.
You can apply online on our website, visit one of our local field offices or print out and
mail an application, which is available on our website.
Thanks for watching our video.
You should now understand your tax responsibilities when you perform your
non-residential or commercial repairs, remodeling and restoration work.
If you need to, you can watch this video again
to review the information presented.
For more information about contractors and Texas sales and use tax,
you may review our tax publications for contractors on our website
or feel free to contact us here.