When a contractor assembles or installs lockers, racks, and similar items, which charges are subject to Texas sales tax?

Plain-English summary

A contractor that assembles and installs items such as school lockers, chalkboards, shelving, wire cages, storage racks, and portable buildings asked the Comptroller to rule on the tax treatment of seven kinds of jobs — most involving items shipped in parts that the contractor bolts, hooks, or welds together and then anchors, in a way that could be removed without damaging the building.

The Comptroller answered by drawing one line: assembly is taxable; pure installation of an item you did not sell is not.

• If you assemble tangible personal property (bolting locker parts together, building a wire cage, hooking together pallet, drive-in, drive-thru, or flow racks), you collect tax on the total charge.
• If you only install or anchor an item — and you did not sell it and do not assemble it — that installation charge is not taxable.
• If you also sell the item you install, the charge becomes taxable.

Applying this to the seven examples: jobs that involve assembling the item (including building the cage and putting together the various racks and the portable building) are taxable on the total charge; simply installing or anchoring pre-assembled items the contractor did not sell is not taxable.

What this means for you

Contractors who assemble products on site

Bolting, welding, hooking, or otherwise putting a product together from parts is treated as taxable work — charge tax on the entire job, not just the parts. This is true even if the finished item can later be removed without damaging the building; portability does not make it a nontaxable real-property improvement here.

Pure installers who didn't sell the item

If your only role is to set in place or anchor an already-assembled item that you did not sell, your labor charge is not taxable. Keep clear which jobs involve assembly and which are install-only, because that distinction — not whether the item is anchored — drives the tax.

Common questions

Q: Is assembling lockers or racks taxable in Texas?
A: Yes. If you assemble the tangible personal property, you collect tax on the total charge.

Q: What if I only anchor or set an item in place?
A: If you did not sell the item and you do not assemble it, the charge to install or anchor it is not taxable.

Q: Does it matter that the item can be removed without damaging the building?
A: Not for these jobs. The Comptroller taxed the assembly work regardless of easy removability; the deciding factor is assembly versus install-only.

Q: What if I sell and install the item?
A: Then the charge is taxable — selling the item you install makes the installation part of a taxable sale.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rules and statutes: The letter applies the Comptroller's assembly-versus-installation distinction to seven job types but does not cite a specific rule or Tax Code section 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/8809L0897F11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK September 26, 1988

Dear ***:

Thank you for your letter with further explanation of your business.
You gave examples of the different types items you assemble and in-
stall. I will refer to each type of job by number, and give you your
tax responsibilities for each.

1. You are assembling tangible personal property, and you should
   collect tax on your total charge.

2. You are installing tangible personal property, and if you did
   not sell the lockers, no tax is due.

3. If you assemble the items, you should collect tax on the total
   charge. If you do not assemble the items, your charge to install
   or anchor the items is not taxable, unless you also sell the item
   installed.

4. Based on your description, it sounds like you are building the
   cage. Your total charge is taxable.

5. In this situation, you are assembling the rack. Your total
   charge is taxable.

6. Same as #5.

7. Same as #5.

This opinion is based on the facts presented. If there are addi-
tional 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, ext 3-4614. The regular
number is 512/463-4614. You may write me at the Legal Services
Division.

Sincerely,
Adina Whittemore
Legal Services Division

August 9, 1988

Adina Whittemore
Comptroller of Public Accounts
State of Texas
Tax Policy Division
Austin, Texas 78774

Dear Ms. Whittemore:

In reviewing your letter, dated June 6, 1988, we install types
of material that can be removed without causing any damage to
the real property or item which is installed. However, in some
to most cases there is assemble of material that is provided by
others.

Examples as follows:

1) school type lockers - material shipped to job site in parts,
we bolt and nut these parts together, set the lockers against the
mall and anchor. It would be a simple process to remove these
lockers and would cause no damage to building or lockers.

2) school type lockers (all welded) - material shipped to job
site prewelded at factory. We simply unpack, set in place and
anchor. It would be a simple process to remove these lockers
and would cause no damage to building or lockers.

3) chalkboards, student desk, library shelving, lunchroom tables,
teachers desk - normally this would be installed in tax exempt job
sites such as schools, government bldg. etc., but not always. This
material is shipped to job site needing little or no assemble and
only chalkboard or shelving would be anchored.

4) wire cage - This is wire mesh panels bolted together to create
a secure area. This type installation is designed to be Portable,
although it is anchored.

5) Pallet Rack (selective) - material shipped to job site by seller.
We hook parts together (rarely using bolts and nuts) and anchor to floor
in most cases.

6) Drive In Rack/Drive Thru Rack/Flow Rack - material shipped to
job site by seller. We hook parts together and bolt and nut parts.
This system also anchors to floor.

7) Portable Building - these area panel type buildings install within
an existing building. Panels lock together and use tapping screws to
hold together. This is also designed to be moved easily.

I am requesting a ruling on each of these type installations. I do feel
like - from reading your letter - we are not improving real property.
My questions really lie in the assembly area (re: your letter dated
June 6, 19889 4th paragraph, 4th sentence).

Thank you for any information on this.

Sincerely