Is cleaning a vacant apartment after a resident moves out taxable, and is painting that same apartment treated the same way?

Plain-English summary

An apartment community contracted for three types of cleaning: (1) cleaning (and painting) a vacant apartment after a resident moves out, (2) cleaning the leasing office, and (3) cleaning the model apartment used to show prospective residents. Believing vacant-apartment cleaning shouldn't be taxable while the leasing office and model should be, the apartment community — which had been paying sales tax on all these services for years — asked the Comptroller to confirm and, if it had overpaid, how to get a refund.

The Comptroller's answer: all three types of cleaning are taxable, with no exception for vacant apartments. Keeping the inside and outside of a residential or nonresidential building clean, orderly, and functional — including minor adjustments and maintenance — is a real property service under Rule 3.356, and tax is due on the total charge (labor and materials combined) for that service. So the community's years of tax payments on cleaning were correct, not an overpayment.

Painting, however, is a different animal: painting an apartment counts as residential real property repair and remodeling under Rule 3.357, where the person doing the work is a contractor and:

• Under a lump-sum contract, the contractor is the consumer of all materials/supplies/equipment used or incorporated into the property, pays tax to suppliers when buying them, and doesn't separately charge the customer tax.
• Under a separated contract, the contractor is a retailer of the materials physically incorporated into the realty, must collect sales tax from the customer on the agreed contract price for those materials, but the separately stated labor charge is not taxable.

What this means for you

Apartment communities and property managers

Don't expect an exemption for cleaning a vacant unit versus your leasing office or model — the Comptroller treats routine cleaning/upkeep of any part of your property (residential or not) as a taxable real property service, full stop. If you've been paying tax on this kind of cleaning, that's correct; there's no refund angle here.

Contractors who both clean and paint vacant units

Split your invoicing carefully: cleaning is a real property service taxed on the full labor+materials charge, while painting is residential repair/remodeling where labor is never taxed and materials tax depends on whether your contract is lump-sum or separated.

Accountants and tax professionals

Useful contrast case between Rule 3.356 (real property services — cleaning, upkeep, minor adjustments; always taxable, no vacant-unit carve-out) and Rule 3.357 (residential repair/remodeling — painting; labor exempt, materials tax turns on contract structure).

Common questions

Q: Is cleaning a vacant apartment after a move-out taxable?
A: Yes. There's no exception for vacant units — it's a taxable real property service under Rule 3.356, same as cleaning a leasing office or model apartment.

Q: We've paid sales tax on this cleaning for years — can we get a refund?
A: Based on this letter's facts, no. The tax was correctly due; there was no overpayment to refund.

Q: Is painting the vacant apartment taxed the same way as cleaning it?
A: No. Painting is treated as residential real property repair/remodeling under Rule 3.357 — labor is never taxable, and whether materials are taxed depends on whether the contract is lump-sum or separated.

Q: What's the difference between a lump-sum and separated painting contract?
A: Under a lump-sum contract, the contractor pays tax on materials as the consumer and doesn't bill the customer tax separately. Under a separated contract, the contractor collects tax from the customer on the stated materials price, but not on the labor charge.

Q: Can I rely on this letter for my own property management contracts?
A: No. This opinion is rendered based on the facts presented; other facts, though similar, may yield different results.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.356 (Real Property Services)
• 34 Tex. Admin. Code Rule 3.357 (residential real property repair, remodeling — lump-sum vs. separated contracts)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200004208L

Original ruling text

April 18, 2000

Dear **:

Thank you for your letter regarding the taxability of maid services performed
for an apartment community.

Facts: There are three types of cleaning you contract for:

1. Cleaning vacant apartments: Resident moves out and the apartment is cleaned
   and painted.

2. Leasing office is cleaned.

3. Model office is cleaned (no one lives there and you use the apartment to
   show prospective residents).

Question: It is your understanding that you should not have to pay taxes on the
cleaning services for vacant apartments but that you should pay sales tax for
the leasing office and the model. You have been paying sales tax on all the
services to the contractor performing the services for a number of years. If
the taxes were paid in error, you would like advice on how to obtain a refund.

Response: Keeping the inside and outside premises of a residential and
nonresidential building clean, orderly, and functional, including performing
minor adjustments, and maintenance is considered a real property service and is
taxable. See rule 3.356 on Real Property Services. Tax is due on the total
charge (labor and materials) for the service. There is no exceptions or
exemptions for cleaning a vacant apartment.

Painting an apartment is considered residential real property repair and
remodeling. See rule 3.357. A person performing residential repair or
remodeling is considered a contractor. A contractor may perform either a
lump-sum or separated contract. The type of contract you execute will determine
the tax liability on the materials incorporated into the realty. Labor to
repair or remodel residential real property is not taxable.

Lump-sum contract - A contractor is are considered the consumer of all
materials, consumable items, and equipment used or incorporated into a
customer's property. As a consumer, a contractor must pay tax to suppliers at
the time the materials are purchased. The contractor or subcontractor will pay
sales and use tax for all equipment bought, leased, or rented for use on the
job.

Separated contract - Contractors performing separated contracts, are considered
retailers of all materials physically incorporated into the realty. As a
retailer, separated contractors must collect sales tax from the customer based
on the agreed upon contract price of the incorporated materials. The separately
stated charge for labor is not taxable.

If you have Internet access you may view rules 3.356 and 3.357, by going to our
web site address at and click on "The Sales Tax" under
the quick links column. Scroll down to "Current Rules", click on "State Sales
Tax" and scroll to the specific rule.

This opinion is rendered based on the facts presented. Other facts though
similar, may yield different results.

If you have any questions or require additional information, you may call
1-800-531-5441, extension 6-5809. You may also submit inquiries to our tax help
Internet address at .

Sincerely

Emilio S. Lerma
Tax Policy Division