When were maintenance and repair charges on permanently attached fire-alarm systems taxable, and who paid tax on maintenance materials?

Plain-English summary

The letter concerned fire-alarm systems permanently attached to real estate. It distinguished maintenance from repair or remodeling.

Maintenance labor was nontaxable when performed on a regular schedule on a functioning, unbroken system to keep it continuously operating. The maintenance provider paid sales tax on materials used in the work.

Labor to repair or remodel real-property improvements became taxable January 1, 1988. When a nonresidential improvement needed repair, the total charge for materials and labor was taxable.

The letter also noted that services on security systems such as burglar alarms had been taxable as security services since October 1, 1987, but limited its own holding to permanently attached fire alarms.

What this means for you

The historical result depended on whether work was scheduled and preventive on a functioning system or performed because a nonresidential system needed repair.

Common questions

Was scheduled fire-alarm maintenance labor taxable? No.

Who paid tax on maintenance materials? The service provider.

Were nonresidential repair charges taxable? Yes, on total materials and labor.

Citations and references

• 34 Tex. Admin. Code Rule 3.357(c)(2) — historical real-property maintenance provision.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0868G01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
COMPTROLLER January 25, 1988

Dear *:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay
in answering your question involving changes in the sales tax law. This isn't
the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which would
not adversely impact businesses. In many instances, an answer to a question
just wasn't available when the question arrived.

As we discussed, services performed on security systems such as burglar
alarms are taxable as security services effective October 1, 1987. This letter
will be limited to a discussion of the taxability of fire alarm systems which
are so permanently attached to real estate as to become permanent improvements
to real estate.

Labor to repair or remodel improvements to real property became taxable
onJanuary 1. Charges for labor to maintain improvements to real estate are not
taxable.

The essence of maintenance is that the work is performed on a regular
scheduled basis on functioning improvements (not broken) for the purpose of
keeping them in continuous operation. The person performing the maintenance
must pay sales tax on the materials he buys to do the work.

If a non-residential improvement to realty requires repair, the total
charge for materials and labor is subject to tax.

The subjects of repair, remodeling and maintenance to real property are
addressed in the enclosed Rule 3.357. Please pay particular attention to
section (c)(2) of the rule.

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 our
toll-free number
1-800-531-5441. The regular number is 512/463-4600. You may write me at
the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division