How did Texas classify and tax cleaning, repairing, and repainting storage tanks under its 1988 rules?

Plain-English summary

The Comptroller classified storage tanks by capacity. Tanks holding more than 500 barrels were real property, while tanks holding 500 barrels or less were personal property.

Repair, maintenance, remodeling, or restoration of personal property was taxable under the guidance described in the letter. Scheduled periodic cleaning of a tank that qualified as real property was maintenance under Rule 3.357(a)(3), and the letter said repair or maintenance of nonresidential real property had become taxable on January 1, 1988. Repainting was remodeling.

What this means for you

Under this 1988 guidance, a service provider first had to determine whether a tank crossed the 500-barrel threshold. That classification affected whether the work was treated as service to personal property or nonresidential real property, but the letter described the cleaning, repair, maintenance, and repainting work at issue as taxable.

The letter did not separately decide the treatment of every sandblasting activity mentioned in its opening. Its operative explanation classified scheduled cleaning as maintenance and repainting as remodeling.

Common questions

Was a 500-barrel tank real property? No. The letter placed tanks with capacity of 500 barrels or less in the personal-property category; only tanks over 500 barrels were real property.

How was scheduled cleaning of a qualifying real-property tank classified? As maintenance under Rule 3.357(a)(3).

How was repainting classified? As remodeling.

When did the letter say repair or maintenance of nonresidential real property became taxable? January 1, 1988.

Citations and references

• 34 Tex. Admin. Code Rule 3.357(a)(3), cited for scheduled periodic cleaning as maintenance.
• The letter also referred to an enclosed publication titled “Taxable Services as They Relate to the Oil and Gas Industry.”

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8805L0869A05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller April 19, 1988

Dear **:

Thank you for the additional information concerning the taxability of
services involved in cleaning or sandblasting and painting storage tanks.

Storage tanks having a storage capacity of over 500 barrels are
considered
real property. Those having storage capacity of 500 barrels or less are
considered personal property.

Services to repair, maintain (clean), remodel or restore personal
property is
taxable. Repair or maintenance of personal property has been taxable
since
October 2, 1984. Scheduled periodic services to clean storage tanks which
qualify as real property are considered maintenance. Section (a)(3) of
Rule
3.357. Services to repair or render non-residential real property became
taxable January 1, 1988. Repainting is remodeling.

Rule 3.357, Real Property Repair and Remodeling and Taxable Services as
They
Relate to the Oil and Gas Industry are enclosed for reference.

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,
Eddie C. Washington
Tax Policy Division