Is labor to restore residential real property damaged by fire, flood, or explosion tax-exempt in Texas, and how has that answer changed over time (pre-1988, 1988-1993, and after October 1993)?

Plain-English summary

This letter is a follow-up answer (after a June 28, 2001 phone conversation) tracing the history of how Texas has taxed labor to restore residential real property damaged by fire, flood, or explosion — a history that matters because the answer has flipped more than once:

• Effective January 1, 1988: The Texas Legislature (Second Called Session) amended Chapter 151 to define and tax real property repair and remodeling services generally (§§ 151.0047, 151.0101(a)(18)), giving the Comptroller exclusive jurisdiction to interpret what counts (§ 151.0101(b)).
• 1987, via Emergency Rule 3.357 (STAR 8712E0861A07): The Comptroller excluded from taxable "nonresidential real property repair and remodeling" any activity to restore real property lost or damaged by fire, flood, explosion, or natural disaster resulting in a casualty loss — i.e., this restoration labor was nontaxable.
• Effective January 1, 1989: The Comptroller expanded that nontaxable treatment to also cover labor to clean, repair, or restore tangible personal property (not just real property) damaged by the same fire/flood/explosion incident that caused a casualty claim — including carpet cleaning and odor control labor.
• Effective October 1, 1993: The Legislature added § 151.350, which exempted labor to repair property damaged specifically in a declared disaster area by the condition causing that declaration. But this amendment had a flip side: from this point forward, labor to repair or restore real/personal property damaged by fire, flood, explosion, or other casualty-claim-eligible accident became taxable unless it fell within the new disaster-area exemption — the broad pre-1993 nontaxable treatment for any casualty damage was narrowed to only disaster-area-declared incidents.
• Effective October 1, 1995: The Legislature further amended § 151.350 to define and exempt labor to "restore" property damaged in a disaster area, and expanded "restore" to include certain personal services defined in § 151.0045 (laundering, dry cleaning, etc.).

The letter also confirms which STAR rule documents contain the operative text for each era: Rule 3.357 as issued via STAR 9212R1209D08 contains the pre-October 1993 exemption language (section (c)(5)), while the version issued via STAR 9503R1340E06, reflecting the post-October 1993 law, does not exempt ordinary casualty-damage repair labor outside a declared disaster area (also section (c)(5)).

What this means for you

Restoration and repair contractors

The taxability of your casualty-repair labor depends heavily on when the work occurred and whether the damaged property sits in an officially declared disaster area. Pre-October 1993 casualty repair labor was broadly nontaxable; post-October 1993, it's taxable unless the disaster-area exemption specifically applies. Don't assume older guidance about "fire/flood/explosion repair is nontaxable" still holds for work performed after the 1993 change.

Property owners filing casualty insurance claims involving repair labor

If your property was damaged outside a formally declared disaster area after October 1993, don't assume the repair labor is automatically tax-exempt just because you could file (or did file) a casualty claim — the exemption after 1993 is tied to the disaster-area declaration, not merely to having an insurable casualty loss.

Accountants and tax professionals

This letter is useful as a compact legislative/regulatory timeline for Chapter 151 disaster-related exemptions — cite the correct era's rule text (STAR 9212R1209D08 pre-1993 vs. STAR 9503R1340E06 post-1993) depending on when the repair work took place, and note the 1995 refinement adding personal services like laundering/dry cleaning to the definition of "restore."

Common questions

Q: Is labor to repair fire, flood, or explosion damage always tax-exempt in Texas?
A: No — it depends on the timing. Before October 1, 1993, this kind of casualty-damage repair labor was broadly nontaxable. After that date, it's taxable unless it qualifies under the disaster-area exemption in § 151.350, which is tied to a formal disaster-area declaration.

Q: What changed on October 1, 1993?
A: The Legislature added § 151.350, creating a disaster-area-specific exemption but narrowing the previously broad casualty-damage exemption to only cover repairs within declared disaster areas.

Q: Does "restore" include services like laundering or dry cleaning?
A: Yes, as of the October 1, 1995 amendment to § 151.350, which expanded "restore" to include personal services defined in § 151.0045.

Q: Can another taxpayer rely on this letter for their own disaster-repair situation?
A: No. It responds to specific facts and a specific follow-up request for statutory/rule citations; you should confirm which era's rules apply to your own repair work's timing and disaster-declaration status.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.0047, § 151.0101(a)(18), (b)
• Tex. Tax Code § 151.350 (Disaster Area Exemption, added eff. 10/1/1993, amended eff. 10/1/1995)
• Tex. Tax Code § 151.0045 (Personal Services)
• 34 Tex. Admin. Code Rule 3.357 (pre- and post-1993 versions, STAR 8712E0861A07, 9212R1209D08, 9503R1340E06)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200107396L

Original ruling text

July 2, 2001

Dear **:

Thank you for your follow-up letter concerning the taxability of labor to
restore residential real property.

Effective January 1, 1988, the Second Called Session of the Texas Legislature
amended Chapter 151 of the tax code to define and tax real property repair and
remodeling services. See Texas Tax Code Sections 151.0047 and 151.0101(a)(18).
Texas Tax Code Section 151.0101(b) gives the Comptroller the exclusive
jurisdiction to interpret Section 151.0101(a).

When the Comptroller promulgated Emergency Rule 3.357 in 1987 (STAR
8712E0861A07), the Comptroller excluded from the definition of nonresidential
real property repair and remodeling services activities to restore real
property lost or damaged by fire, flood, explosion or natural disasters that
result in casualty losses.

Effective January 1, 1989, the Comptroller expanded this policy to include the
labor to clean, repair, or restore tangible personal property that was damaged
by fire, flooding or explosion along with realty damaged by the same incident
that results in a casualty claim. This included labor for carpet cleaning and
odor control services.

Effective October 1, 1993, the Legislature amended the tax code by adding
Section 151.350. This amendment exempted labor to repair tangible personal
property and real property damaged in a disaster area by the condition that
caused the area to be declared a disaster area. Since this amendment, the labor
to repair or restore real property and tangible personal property lost or
damaged by fire, flood, explosion, or other accident for which a casualty claim
could have been filed if the property was insured is taxable.

Effective October 1, 1995, the Legislature amended Texas Tax Code Section
151.350 to define and exempt labor to restore real and personal property
damaged in a disaster area. The term "restore" was defined to include personal
services defined in Texas Tax Code Section 151.0045 (laundering, dry cleaning,
etc.).

In our June 28, 2001 telephone conversation, you requested a copy of the
statute and rule that states that the labor to restore tangible personal
property and real property damaged by fire, explosion, flood or other accident
for which a casualty claim could be filed. The copy of Rule 3.357 (STAR
9212R1209D08) contains text that exempted these services before the October 1,
1993 change to the law. See section (c)(5) of the rule.

The copy of Rule 3.357 (STAR 9503R1340E06) issued after the October 1, 1993
change in the law does not exempt labor to repair or restore personal or real
property damaged by fire, explosion, flood or other accident that could result
in a casualty claim. See section (c)(5).

You may view or down load the referenced STAR documents at
then click on Document Collection. Enter
the STAR document number (e.g., 9503R1340E06) and click search.

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. My email address is
. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825.

Sincerely,

Eddie C. Washington
Tax Policy Division

cc: Jill Rogers, Manager, ** Audit
David R. Sparkman, ** Audit