Was applying a protective sealcoat to deteriorating asphalt taxable restoration or nontaxable scheduled maintenance, and could a signed exemption certificate protect the contractor?

Plain-English summary

Applying the protective asphalt sealcoat was taxable restoration rather than nontaxable maintenance.

The manufacturer described stages of asphalt deterioration and steps needed to restore it, which led the Comptroller to the restoration classification. Merely labeling the proposal “parking lot maintenance” did not make the work exempt, and the letter viewed scheduling as carrying a sense of regularity.

The submitted exemption-certificate wording could be sufficient when completed and signed by the purchaser, provided the contractor did not know that the actual work was restoration. The contractor was directed to resolve existing assessment and penalty issues with the auditor and Audit Division.

Common questions

Sealcoating classified as maintenance? No.

Did the proposal label control? No.

Could the exemption certificate be accepted? Its wording could be sufficient if properly completed and the contractor lacked knowledge that the work was restoration.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9006L1026G06

Original ruling text

June 6, 1990

Dear **:

In your letter of May 1st, you asked why this agency would consider the
application of protective coatings such as the coal tax sealant "Sealmaster" to
be taxable. It was a close call.

After I talked to you, I called the manufacturer of your product. They sent
me an excerpt from their training manual detailing the various stages of
asphalt deterioration and the steps necessary to restore it. With these facts,
my superiors were of the opinion that the sealcoating process more nearly
resembled restoration than maintenance.

You also comment that the definition of maintenance does not require regular
scheduling. I agree that the word "regular" is not in the definition.
However, the word "schedule" itself has the connotation of regularity.

The term "parking lot maintenance" in your sample proposal is not sufficient
to exempt the work from sales tax. But, the wording on the exemption
certificate you submitted will be sufficient if completed and signed by the
purchaser, assuming you don't have knowledge that the work to be done is
restoration.

You should deal directly with your auditor and the Audit Division in resolving
any tax or penalty assessments arising from the current examination of your
records.

If you have questions or need more information, please call our toll-free
number 1-800-531-5441. My direct line number is 463-4680 [FAX (512) 475-0900].
You may write to me in care of Taxability Section.

Sincerely,

Al Van Allen
Taxability Section
Legal Services Division