How did Texas tax a contract that removed an old microwave tower and repaired the roof, then designed and installed a new pole and antenna?

Plain-English summary

Project A removed and disposed of an existing microwave tower and antenna and repaired the roof. Disassembly or demolition was nontaxable, while the roof repair and waste removal were taxable. The total Project A charge was taxable if the repair and waste-removal portion exceeded 5% of the total. Separately stating the demolition charge at the time of the transaction preserved its nontaxable treatment.

Project B designed, procured, and installed a new pole and antenna with cabling and supports on another tower. The pole and antenna remained tangible personal property after attachment, so the entire charge—including design, procurement, and installation—was taxable.

What this means for you

One contract contained services with different classifications. Separate project pricing did not by itself protect the demolition amount; the letter emphasized separately stating that nontaxable charge, while the new tangible-property installation was taxable in full.

Common questions

Was old-tower demolition taxable? No. Were roof repair and waste removal taxable? Yes. What happened above the 5% threshold? The full Project A charge was taxable unless demolition was separately stated. Was the new antenna project taxable? Yes, including design and procurement.

Citations and references

• Rule 3.356(i)(4) (real-property services and the mixed-charge treatment)
• Rule 3.357(c)(2) (real-property repair and remodeling)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1135C05

Original ruling text

October 2, 1991

Dear **:

Thank you for your letter of August 7, 1991, concerning your tax
responsibilities.

You state that you have a contract that requires you to perform two
projects for a customer. Project A requires you to remove a
microwave tower and antenna from a building, dispose of the materials,
and repair the roof after the removal. Project B requires you to
design, procure, and install a new pole and antenna with cabling and
supports on another tower located on the same building. The contract
is lump-sum, but the charge for each project is identified.

Project A includes the nontaxable disassembly or demolition of the
tower and antenna, taxable real property repair, and the taxable
removal of waste for a single charge. The total charge for Project A
will be taxable if the portion of the charge relating to repairing
the roof and waste removal is more than 5.0% of the total charge.
However, the disassembly or demolition charge will not be taxable if
the charge is separately stated at the time the transaction occurs.
See section (i) (4) of Rule 3.356 -Real Property Services and section
(c)(2) of Rule 3.357 Real Property Repair and Remodeling.

The total charge for Project B is taxable. The pole and antenna that
are attached to the microwave tower remain tangible personal property
after attachment. The total charge for the sale and installation
of tangible personal property is taxable. This includes the design,
procurement, and installation charges.

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

You may call toll free 1-800-252-5555 if you have any questions or
need more information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division