Could a Texas telephone-system seller revise a completed turnkey invoice after the transaction to separate nontaxable labor from materials?

Plain-English summary

The Texas Comptroller said sales tax applied to the entire charge for a completed turnkey telephone-system sale and installation. The original written contract and billing at the time of the transaction controlled.

The seller could not revise the invoice after completion to separate labor as a nontaxable charge. The Comptroller viewed the modified invoice as an after-the-fact attempt to alter the tax result.

What this means for you

The letter focuses on contemporaneous documentation. It did not say separately stated labor is always taxable; it said the parties could not restructure the billing after the transaction had concluded to reduce tax due under the original turnkey arrangement.

Common questions

Could the seller separate labor after completing the transaction? No.

What documents controlled? The written contract and billing that existed when the transaction occurred.

Was tax due on the whole turnkey charge? Yes.

Citations and references

• The letter cited no numbered statute or Comptroller rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0803A03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller March 26, 1987

Dear *:

Thank you for your recent letter which is restated with response below.

I have contracted with a company to install a complete new telephone
system in my business. They gave me a $10,000.00 turnkey bid for the
system. There was no mention of state sales tax. The old telephone
wiring and equipment was removed and new wiring and equipment installed.

The contractor has requested payment for $10,300.00 plus tax. I
requested a ruling by the telephone to your office and was
informed that no tax is due on the labor, if billed separately.
The contractor refused to do this, because he claims he was just
charged $4,000.00 in a recent audit for not charging tax on the
labor. He will bill me labor and materials separately and not
charge tax on the labor if I can get a written ruling from you on
this matter. Please advise.

Response: The sale and installation was performed pursuant to a written
contract which has now been completed. A seller may not modify invoices
to
separately state nontaxable charges after the conclusion of a
transaction.
The modified invoices are only acquired to alter a tax result. The
nature of
the contract and the billing which occurred at the time of the
transaction
control, and a seller cannot be permitted to create an after-the-fact
billing
in order to reduce the taxes due. Therefore, sales tax is due on the
total
charge.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Al Van Allen
Tax Policy Section
Tax Administration Division