Is it taxable to hire a vendor to dismantle manufacturing equipment out of state, move it to Texas, and reinstall it?

Plain-English summary

A company closing an out-of-state manufacturing facility hired a vendor, under a single lump-sum contract, to dismantle equipment, transport it to a Texas facility, and help put it back into service — billed via progress invoices tied to milestones rather than itemized charges. The taxpayer asked the Comptroller four related questions:

1. Are the moving and engineering services for dismantling/relocating the equipment tax exempt? Yes — the charges for dismantling, moving, and re-assembling the equipment are not taxable.
2. Does a lump-sum vendor have to break the invoice into labor, materials, and rental equipment line items? No — as long as the equipment stays tangible personal property after it's installed. But if the installation is done in a way that the equipment loses its identity as personal property and becomes part of the realty, the whole charge flips to taxable nonresidential real property remodeling under Rule 3.357.
3. Is labor to get the equipment operational in Texas taxable? What about rental equipment or materials? Yes, if the work is really repairing, remodeling, restoring, or maintaining tangible personal property (as opposed to simply reinstalling it) — the total charge for that kind of service, including the vendor's rental equipment and materials costs, is taxable under Rule 3.292.
4. Does this count as nontaxable third-party installation of tangible personal property? The Comptroller reframed this: the activities described are a nontaxable moving service, not an "installation" analysis at all — unless the vendor's work crosses into taxable nonresidential real property repair/remodeling or TPP repair/restoration/maintenance, in which case that specific work is taxed per the answers above.

The throughline: moving equipment (dismantle, transport, reassemble) is nontaxable, but the same overall project can generate taxable charges if either (a) the equipment becomes real property upon installation, or (b) part of the vendor's work is genuinely repair/restoration/maintenance rather than just relocation.

What this means for you

Manufacturers relocating equipment between facilities (including across state lines into Texas)

Structure your relocation contract to keep dismantling, transport, and reassembly clearly framed as a moving service. You don't need your vendor to itemize a lump-sum invoice by labor/materials/rental as long as the equipment remains personal property after installation — but be aware that if the installation method causes the equipment to become part of the building (e.g., permanently embedded), the entire charge becomes taxable real property remodeling.

Riggers, movers, and equipment installation vendors

If part of your scope is repairing, restoring, or maintaining the equipment (not just moving and reconnecting it), that portion — plus your rental equipment and materials costs for that portion — is taxable under Rule 3.292, separate from the nontaxable moving/reassembly work.

Accountants and tax professionals

This letter is a useful multi-question reference distinguishing (1) nontaxable moving services, (2) taxable nonresidential real property remodeling (when equipment becomes realty), and (3) taxable TPP repair/restoration/maintenance (Rule 3.292) — three distinct categories that can all appear within one equipment-relocation project.

Common questions

Q: Is moving manufacturing equipment to Texas taxable?
A: No — charges for dismantling, moving, and reassembling equipment are a nontaxable moving service.

Q: Does a lump-sum mover have to itemize labor vs. materials on the invoice?
A: No, as long as the equipment remains tangible personal property after installation. If it becomes part of the realty instead, the whole charge is taxable nonresidential real property remodeling.

Q: Is labor to reinstall and reconnect the equipment taxable?
A: Only if that labor is really repair, remodeling, restoration, or maintenance of the equipment (not just moving/reconnecting) — in which case the total charge, including materials and rental equipment, is taxable.

Q: Does this count as "third party installation," and is that automatically nontaxable?
A: The Comptroller treated it as a moving-service question rather than an installation-exemption question — the charges are nontaxable unless the work is taxable real property repair/remodeling or TPP repair/restoration/maintenance.

Q: Can any company rely on this letter for its own equipment relocation project?
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). Confirm your own installation method and scope of work with a tax professional.

Citations and references

Statutes and rules:

• Comptroller Rule 3.357 (nonresidential real property remodeling)
• Comptroller Rule 3.292 (repair, remodeling, restoration, and maintenance of tangible personal 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/200102040L

Original ruling text

February 12, 2001

Subject: Sales Tax Issue

Dear **:

Thank you for your recent letter concerning your company's Texas sales and use
tax liabilities on the relocation of manufacturing equipment.

Situation: You have a facility out-of-state that has been closed down. You
have decided to re-locate some of the manufacturing equipment from that state
to your CITY facility. You entered into a lump-sum contract with a vendor to
dismantle the equipment, move it to Texas, and help to put it back into
service. The vendor will invoice you with progress bills as the work is
completed. The billings will not be specific as to the charges, but will be
issued as specific milestones are met

Question 1 Are the moving services and engineering services provided in
dismantling and relocating the equipment tax exempt?

Answer: The charges for dismantling, moving and re-assembling the equipment are
not taxable.

Question 2. In a lump sum contract, is it incumbent on the buyer to have the
vendor "break down" his invoice line-item-by-line-item (i.e., labor, materials,
rental equipment, etc.)?

Answer: No, provided the equipment retains its character as tangible personal
property after installation. However, if the equipment is installed in such a
manner that it loses its identity as tangible personal property after it is
installed and becomes realty, the total charge will be taxable as
nonresidential real property remodeling [see Rule 3.357 concerning
nonresidential real property remodeling]..

Question 3. If the vendor is providing labor to help get this manufacturing
equipment operational in Texas, is this labor taxable? Rental equipment?
Material?

Answer: The total charge for services to repair, remodel, restore or maintain
tangible personal property is taxable, including the vendor's costs for
equipment rentals and materials [see Rule 3.292 concerning repair, remodeling,
restoration and maintenance of tangible personal property]. Please note the
definitions in section (a) of this rule.

Question 4. Would this instance qualify as third party installation of
tangible personal property, and be non-taxable?

Answer: The activities described are for a nontaxable moving service. Unless
the vendor is performing taxable nonresidential real property repair or
remodeling or is repairing, restoring, or maintaining tangible personal
property, the charges are for a nontaxable moving service [see the answer to
Question 1].

The referenced Comptroller rules are available at:
. Click on
State Tax Rules and scroll down to the referenced rule(s).

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
email address is .

Sincerely,

Eddie C. Washington
Tax Policy Division