Were telecommunications equipment, installation, service-connection, maintenance, and in-wall wiring charges taxable in Texas?

Plain-English summary

Texas imposed sales tax on the sale, lease, or rental of telecommunications equipment, including separately stated installation charges. Before October 1, 1987, separately stated installation charges could be excluded, but the letter said they were taxable under the new rule.

The Comptroller also classified:

• installation of telecommunications service, including a service-connection fee, as taxable under Rule 3.344;
• maintenance of hardware or other tangible personal property as taxable under Rule 3.292; and
• wiring inside walls as real property governed by Rule 3.357, with related labor nontaxable when performed for new construction or residential real property.

What this means for you

The historical letter distinguished taxable equipment and hardware work from certain labor on real-property wiring. It did not separately answer the taxability of deinstallation charges despite STAR's caption.

Common questions

Were separately stated equipment-installation charges taxable? Yes after October 1, 1987, under the letter.

Was a service-connection fee taxable? Yes.

Was hardware maintenance taxable? Yes.

Was labor on in-wall wiring taxable? Not when related to new construction or residential real property.

Citations and references

• 34 Tex. Admin. Code Rule 3.344 — historical telecommunications-services rule.
• 34 Tex. Admin. Code Rule 3.292 — repair and maintenance of tangible personal property.
• 34 Tex. Admin. Code Rule 3.357 — historical real-property repair and remodeling 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/8802L0854G11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 5, 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. 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.

Sales tax is due on the sale, lease, or rental charges for telecommunica-
tions equipment including separately stated installation charges. Prior
to October 1, 1987, installation charges could be excluded from sales tax
if the charges were separately stated to the customer. Sales tax is also
due on the installation of telecommunication services (service connection
fee), Comptroller's Rule 3.344, Telecommunications Services, is enclosed
for your review.

Maintenance performed on the hardware or any other tangible personal
property is taxable. Comptroller's Rule 3.292, Repair, Remodeling,
Maintenance and Restoration of Tangible Personal Property, is enclosed.

Wiring within the walls is considered real property, and is addressed by
Comptroller's Rule 3.357 which defines real property repair and
remodeling,
and explains your responsibilities if your labor is performed in
connection
with these services. This labor is not taxable when it relates to a new
construction project or residential real property.

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

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,
Al Van Allen
Tax Policy Division