If a contractor doing repair or remodeling work on commercial property fails to charge or remit sales tax, can the Comptroller come after the customer (property owner) for the unpaid tax instead of or in addition to the contractor?

Plain-English summary

A corporation asked the Comptroller whether it could be held responsible for sales tax on nonresidential repair, remodeling, or new-construction work if its general contractor failed to collect and remit the tax — the corporation's understanding was that collecting and remitting tax was solely the contractor's job. The Comptroller's answer: the property owner is not off the hook. Under Texas law, sales and use tax is ultimately the purchaser's liability — a seller's failure to charge and collect the correct tax doesn't relieve the purchaser of its own duty to pay it. If a contractor doesn't collect and remit the tax due, the Comptroller can pursue either the contractor or the property owner (or both) for the unpaid tax, plus any accrued penalty and interest, though penalty and interest tied to the seller's own audit failures stay with the seller.

All persons who repair, restore, or remodel nonresidential real property perform a taxable service and must charge tax on the full sales price (materials and labor combined). Once added to the price, the tax becomes a debt the purchaser owes the seller, collectible the same way as the underlying charge. In an audit, the state won't tax the same transaction twice — but the burden is on whichever party (buyer or seller) claims the tax was already paid to prove it with a bill, invoice, or receipt.

What this means for you

Commercial property owners hiring contractors for repair/remodeling work

Don't assume you're insulated from sales tax exposure just because your contract puts tax collection on the contractor. If the contractor doesn't collect or remit the tax, the Comptroller can come after you directly for the unpaid amount. Keep invoices and receipts showing tax was charged and paid — that's your proof if you're ever audited.

Contractors performing nonresidential real property repair services

You're required to add sales tax to the full price of labor and materials on nonresidential repair/remodeling jobs (per § 151.052(a)), and that tax debt is enforceable against the customer like any other part of the price. Failing to collect it doesn't just risk your own liability — it exposes your customer too, which is worth flagging in your contracts.

Accountants and tax professionals

This letter is a clean statement of joint-and-several-style exposure under § 151.515 and Rule 3.286(e)(1), backed by Bullock v. Foley Bros. Dry Goods Corp. — useful when advising clients on due diligence for construction contracts (e.g., confirming tax was actually charged and retaining proof) rather than relying solely on contract language allocating collection duties.

Common questions

Q: If my contractor doesn't collect sales tax on a remodeling job, am I still liable?
A: Yes, according to this letter. Sales and use tax is the purchaser's liability under Texas law, and the Comptroller can pursue the purchaser even if the contractor was supposed to collect the tax and didn't.

Q: Can the state collect the same tax from both the contractor and the property owner?
A: No — the Comptroller says it will not knowingly tax the same transaction twice. But in an audit, whichever party wants to avoid paying has the burden of proving the tax was already paid.

Q: Does this apply to residential property too?
A: This letter specifically addresses nonresidential (commercial) real property repair, restoration, and remodeling contracts under § 151.052(a) and Rule 3.286(e)(1).

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.052(a) (seller's duty to collect tax on taxable services)
• Tex. Tax Code § 151.515 (liability for unpaid tax)
• 34 Tex. Admin. Code Rule 3.286(e)(1) (nonresidential repair and remodeling services)

Case law:

• Bullock v. Foley Bros. Dry Goods Corp., 802 S.W.2d 835 (Tex. App.—Austin 1990, writ denied)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200008579L

Original ruling text

August 9, 2000

Dear **:

I am writing in response to your letter concerning the sales tax liability of
CORPORATION'S purchases of new construction or repair and remodeling of
nonresidential (commercial) property in the event the contractor does not
collect the sales tax.

You state you would like to determine what responsibility your corporation has
in remitting sales tax when services and assets are created or renovated by a
general contractor. It is your understanding that it is the general
contractor's duty to collect and remit sales tax, not that of the customer.
You would like to know if the state would hold your corporation responsible for
remitting the tax should the contractor fail to charge and or remit the sales
tax.

Under Texas law sales and use tax is ultimately the liability of the purchaser,
and a seller's failure to charge and collect the appropriate amount of tax does
not relieve a purchaser of its liability to pay the tax in a timely fashion.
In the event tax is not collected and remitted to the state by the seller, the
Comptroller is authorized by statute, by Comptroller rule, and by the Texas
courts to proceed against the purchaser, as well as the seller, for the
collection of any unpaid taxes plus any accrued penalty and interest.

All persons who repair, restore, or remodel nonresidential real property are
performing a taxable service and must collect tax from the customer on the
total sales price of the service (both materials and labor) by adding the tax
to the sales price of the service. When the sales tax is added to the sales
price it becomes a part of the sales price of the taxable service and as such,
is a debt of the purchaser to the seller and recoverable at law in the same
manner as the original sales price. This applies only to the tax and not to
any penalty or interest the seller may owe the state as the result of an audit.
See Texas Tax Code Section 151.052(a).

See Texas Tax Code Section 151.515; Comptroller Rule 3.286(e)(1); Bullock v.
Foley Brothers Dry Goods Corp., 802 S.W.2d 835 (Tex. App. - Austin 1990, writ
denied). Thus, if a seller fails to collect and remit the proper amount of
sales or use tax due, both the seller and purchaser may be subject to audit and
assessment of tax, penalty and interest on any transactions on which tax was
due but has not been paid. The State, however, will not knowingly tax a
transaction twice. Therefore, in case of an audit, the taxpayer (whether it be
the seller or the purchaser) has the burden of proving that the tax is not owed
by presenting a bill, invoice or receipt showing that tax was previously paid
or affirmative evidence that a particular transaction was taxed in the audit of
the other party.

If you have Internet access you may view or down load the tax code sections
referred above by going to our web site address at
and scrolling to
the specific code section.

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 submit
inquiries to our tax help Internet address at , call
1-800-531-5441, extension 6-5809 or write to Tax Policy Division, Post Office
Box 13825, Austin, Texas 78711-3825.

Sincerely

Emilio S. Lerma
Tax Policy Division