How did Texas tax billboard-face rotation, painting steel billboard structures, other sign repairs, transferred materials, and mowing around signs?

Plain-English summary

Billboards and signs painted on buildings were generally improvements to realty. The letter treated rotating billboard faces and painting steel billboard structures as taxable nonresidential real-property repair or remodeling on the total charge.

Most other signs retained their character as tangible personal property, but their repair and remodeling were also taxable. The letter said “changing out faces on wooden structures” could fall into either category and should be taxed according to the applicable classification.

Materials incorporated into the taxable service and transferred to the customer could be bought with a resale certificate. Materials merely used to perform the service were taxable to the provider.

Mowing and cleaning around sign structures or along existing roads were taxable lawn-maintenance services, except for mowing land formally dedicated to or owned by a governmental entity.

What this means for you

Under the 1988 guidance, both real-property and personal-property classifications led to taxable sign work, though under different rules. The provider also had to distinguish transferred materials from its own consumables.

Common questions

Was rotating billboard faces taxable? Yes, on the total charge.

Was painting a steel billboard structure taxable? Yes.

Could incorporated materials be bought for resale? Yes, when transferred to the customer through the taxable service.

Was mowing around a billboard taxable? Generally yes, subject to the stated governmental-land exception.

Citations and references

• 34 Tex. Admin. Code Rules 3.357, 3.285, and 3.356, applied to real-property work, resale materials, and lawn maintenance.
• Rules 3.287 and 3.322 were also enclosed but not specifically applied in the 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/8803L0866C09

Original ruling text

March 14, 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.

Billboard and signs painted on buildings are generally considered an improvement to realty.
The labor to repair and remodel a nonresidential improvement to realty became taxable
January 1, 1988. Therefore, rotating billboard faces is taxable. You must bill your customer
tax on the total charge, whether or not you bill lump sum or separately state materials and
labor. See Rule 3.357 enclosed.

Most other signs retain their character as tangible personal property. The repair and
remodeling of tangible personal property has been taxable since October 2, 1984.

Our letter did not clearly define "changing out faces on wooden structures." This may fall
into either of the categories above and should be taxed accordingly.

Steel structures used for billboard advertisement are also improvements to real property.
Effective January 1, 1988 the total charge for painting these structures is taxable.

Materials which you transfer to your customer by incorporating them into these taxable
services may be purchased tax-free by issuing a resale certificate to your supplier. See
Rule 3.285 enclosed. Materials you use to provide the service are taxable to you.

Mowing and cleaning around sign structures or along existing roads falls into the category
of real property services, specifically lawn maintenance. These services became taxable
October 1, 1987. An exception to the tax is allowed for mowing land which is formally
dedicated to or belonging to a governmental entity. Usually billboards, etc. are not
allowed to be placed on governmental right of ways. Therefore, the mowing is taxable.
Rule 3.356 is enclosed for your review. See Sections (a)(6) and (d). Rules 3.287 and
3.322 are also enclosed.

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

You may write me at the Tax Policy Division.

Sincerely,

Tax Policy Division