Could a Texas remodeler exclude separately stated engineering, drafting, architectural, and related postage charges from its taxable remodeling price?

Plain-English summary

The Comptroller treated a building remodeler as a taxable-service provider rather than a contractor. The provider could separately state charges for electrical engineering, drafting, and architectural services and exclude those charges from sales tax. Postage connected to those professional services could also be excluded.

Costs directly related to the actual remodeling remained in the tax base. The letter's examples were an out-of-state call about a special materials shipment, equipment bought or rented for the project, and extra copies of architectural drawings for plumbers and electricians.

The March 31 response followed an earlier internal consultation and said the rule, when adopted, would be amended to reflect this position.

What this means for you

Under the 1988 guidance, separately stating unrelated professional services mattered. Merely itemizing a cost did not make it nontaxable if the cost directly supported the remodeling work.

Common questions

Were separately stated engineering and architectural charges taxable? No.

Was postage tied to those services taxable? No.

Were equipment costs for the remodeling project taxable? Yes, as part of the tax base.

What about extra plan copies for trades? Taxable when charged to the customer as a direct remodeling cost.

Citations and references

The letter did not identify the pending remodeling rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8803L0875D11

Original ruling text

March 31, 1988

Dear *:

Thank you for your letter of March 10, 1988 regarding charges by a contractor
for electrical engineering, drafting, architectural services and postage.

A person remodeling a building is not considered to be a contractor. A person
remodeling a building is a service provider.

A provider of taxable services may separately state labor charges for
electrical engineering, drafting, and architectural services and not collect
sales tax on these charges. Any charges for postage connected to these
engineering, drafting and architectural services may also be excluded from the
tax base.

Charges which may not be excluded from the tax base are those charges directly
related to the actual remodeling. Say, for example, that the service provider
had to telephone out of state regarding when a special shipment of building
materials would arrive. The charge for the telephone call would be part of the
tax base. If the service provider had to buy or rent equipment to use in the
remodeling project, these charges would be part of the tax base. If the service
provider had to have additional copies of the architect's drawings made for the
plumbers and electricians, the charge to the customer for the additional
drawings would be part of the tax base.

The rule, when adopted, will be amended to reflect the position outlined in
this letter.

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 512/463-4633.

Sincerely,

(Mrs.) Wanda Hutcheson
Tax Policy Division

March 15, 1988

Dear *:

I sent your letter and my proposed response to members of the Policy Committee
to be sure they wanted to exclude engineering, drafting, and architectural
services from the tax base for those who provide remodeling services. I know we
have allowed a separation of these charges for services such as surveying.

I'll let you know of their decision as soon as I have it.

Thanks.

Sincerely,

(Mrs.) Wanda Hutcheson
Tax Policy Division

Policy Committee Members:
What do you think?
Exclude from Tax Base X
Don't Exclude
Wanda
3-4633
3/14/88