Could a retailer treat an installed home satellite system as a lump-sum improvement to realty and avoid collecting Texas sales tax from the consumer?

Plain-English summary

Home satellite systems were tangible personal property, not permanent improvements to realty. The retailer therefore could not pay tax to the distributor as though it were a lump-sum contractor and then sell the installed package without charging the consumer.

Instead, the retailer had to give the distributor a resale certificate and collect sales tax from the final consumer. Effective October 1, 1987, the taxable amount included both the equipment and installation. Before that date, separately stated installation charges could be excluded.

What this means for you

The historical letter assigned collection responsibility to the retailer making the final sale. Calling an installed system a home improvement did not change its personal-property classification.

Common questions

Was the home satellite system an improvement to realty? No.

Who collected tax from the consumer? The retailer selling the installed system.

Did the distributor charge the retailer tax? No. The retailer was to issue a properly completed resale certificate.

Was installation taxable? The letter said yes beginning October 1, 1987.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0833E01

Original ruling text

October 9, 1987

Dear **:

Thank you for your letter concerning the taxability of the situation you
described as follows:

. . . .We are a distributor of electronic equipment and COMPANY wishes to enter
into an agreement with us to supply home satellite equipment to them for
resale. They want us to charge them sales tax on the equipment and installation
price. COMPANY will increase the price to the consumer, selling the system as a
package and not charge sales tax because the system is an installed home
improvement.

Response: Home satellite systems are not permanent improvements to real
property. Rather, home satellite systems are tangible personal property.

COMPANY proposed method of handling the sales tax is not acceptable for the
following reasons. COMPANY is not improving real property and many not act as a
lump-sum contractor, paying sales tax on materials to its suppliers and not
charging tax to its customers.

COMPANY must collect sales tax from the final consumer. Effective October 1,
1987 the installation labor is taxable as well as the equipment. Prior to
October 1, 1987 installation charges could be excluded from the tax, if the
installation was separately stated to the customer.

COMPANY must issue a properly completed resale certificate to you for systems
which you sell and install for them. You will not collect tax from COMPANY;
instead, COMPANY will be responsible for collecting tax on the total charge to
its customers.

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 anywhere in Texas. The regular number is 512-463-4600.
You may write me at the Tax Policy Division.

Sincerely,

Julie Pesl
Tax Policy Division