Is repairing a central air conditioning system taxed the same as repairing a window AC unit, and does it matter whether the building is residential or commercial?

Plain-English summary

An HVAC company with both commercial and residential customers asked the Comptroller to sort out the tax treatment of different types of air conditioning work. The Comptroller gave four distinct rules:

1. Central AC repair, nonresidential (commercial) building: taxable, effective January 1, 1988.
2. Central AC repair, residential building: not taxable.
3. Window AC unit repairs/maintenance: taxable in both residential and nonresidential buildings, because a window unit is tangible personal property rather than part of the building itself — this rule has applied since October 2, 1984. Installing a window unit is likewise taxable regardless of building type.
4. Central AC installation as part of building a brand-new structure: not taxable, whether the new structure is residential or nonresidential.

The distinction driving rules 1-2 versus rule 3 is that a central system becomes part of the real property (so its tax treatment follows the residential/nonresidential real-property-repair rules), while a window unit stays personal property that simply sits in a window (so it's taxed under the ordinary tangible-personal-property repair rules regardless of building type).

What this means for you

HVAC contractors and repair companies

Track whether you're repairing a central system (tax depends on residential vs. commercial) or a window unit (always taxable, regardless of building type) — these are genuinely different tax categories, not variations on the same rule.

Commercial property owners and managers

Central AC repairs on your building are taxable; if you're also comparing quotes that include window units, expect those to be taxed the same way regardless of what type of building they're in.

Homeowners and residential landlords

Central AC repairs at a residence are not taxable, but if a contractor repairs or installs a window unit at that same residence, that specific charge is taxable.

Accountants and tax professionals

This letter is a clean four-way matrix (central vs. window unit × repair vs. new-construction installation × residential vs. nonresidential) worth keeping as a reference for HVAC-related engagements.

Common questions

Q: Is central air conditioning repair taxable?
A: Only in nonresidential (commercial) buildings, effective January 1, 1988. Central AC repair in a residence is not taxable.

Q: Is window air conditioning unit repair taxable?
A: Yes, in both residential and nonresidential buildings, since October 2, 1984, because window units are tangible personal property rather than part of the realty.

Q: Is installing central air conditioning as part of new construction taxable?
A: No, whether the new structure is residential or nonresidential.

Q: Can any HVAC business rely on this exact four-way breakdown?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10), though the underlying rules it describes (3.291, 3.292, 3.357) are generally applicable.

Citations and references

Rules:

• 34 Tex. Admin. Code § 3.291 (Contractors)
• 34 Tex. Admin. Code § 3.292 (Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property)
• 34 Tex. Admin. Code § 3.357 (Labor Relating to Nonresidential Real Property Repair, Remodeling, Restoration, Maintenance, New Construction, and Residential Property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200010825L

Original ruling text

October 19, 2000

Dear **:

Thank you for your recent fax regarding your company and Texas sales tax.

You stated that your company deals in both commercial and residential accounts.

A charge to repair a central air conditioning system in a non-residential
(commercial) building is taxable as of January 1, 1988.

A charge to repair central air conditioning systems in residences is not
taxable.

Charges for repairs and maintenance to window air conditioning units are
taxable whether they are in a non-residential or residential structure. Window
units are personal property and repairs and maintenance of personal property
have been taxable since October 2, 1984. A charge to install a window unit is
taxable for both residential and non-residential purposes.

A charge for installation of central air conditioning units as a part of a
contract to build a new structure (residential and nonresidential) is not
taxable.

I enclosed a copy of Rule 3.291 "Contractors," Rule 3.292 "Repair, Remodeling,
Maintenance, and Restoration of Tangible Personal Property" and Rule 3.357
"Labor Relating to Nonresidential Real Property Repair, Remodeling,
Restoration, Maintenance, New Construction, and Residential Property" for your
review.

This opinion is based on the facts presented. Additional or different facts
may yield different results.

You may call me toll free 1-800-531-5441, extension 5-9787, if you have any
questions or need more information. The direct line is 512/305-9787. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Philip Knisely
Tax Policy Division