Is boarding up or tarping a damaged home or business to protect it from vandalism or weather a taxable sale of materials, or a nontaxable improvement to real property?

Subject

Board-Up Or Tarp Damaged Residential Homes/Nonresidential Property To Protect From Vandalism/Weather

Plain-English summary

A taxpayer wrote to the Comptroller asking whether charges to board up or tarp a storm- or vandalism-damaged residence or business (to protect it until permanent repairs can be made) are taxable. The taxpayer had framed the work as an "improvement to realty" under Rule 3.291, which governs contractors.

The Comptroller disagreed with that framing. Under Rule 3.347, a job only counts as a nontaxable improvement to realty if the materials are essential to the building or intended to become a permanent part of it. Temporary boarding-up or tarping does not meet that test: the plywood, boards, and tarps are meant to be removed later without substantial damage to the building, so the work is instead a sale and installation of tangible personal property.

The practical result: the entire charge — materials and labor together — is taxable to the customer, whether the job is on a home or a business, and regardless of whether the contractor bills a single lump sum or itemizes materials and labor separately.

The letter also notes that the contractor can claim a resale credit (under Rule 3.338) for sales tax already paid to suppliers on the wood and nails purchased to do the job. Using the taxpayer's own numbers — $10 of materials used on a $15 job — the contractor collects tax on the full $15 from the customer, and reports/remits tax only on the $5 markup, since tax was already paid upstream on the $10 of materials.

What this means for you

Contractors and board-up/tarping businesses

If you board up or tarp storm- or vandalism-damaged buildings as a temporary protective measure, treat the job as a taxable sale of tangible personal property, not a nontaxable realty improvement. Charge sales tax on your total bill (materials plus labor) for both residential and commercial customers, and do so whether you invoice as one lump sum or as separate material/labor line items.

Managing supplier tax and resale credits

Because the finished job is taxable to your customer, you can buy your boarding materials tax-free from suppliers using a resale certificate, or — if you already paid tax on those materials — claim a credit for that tax paid when you remit tax on the job. Either way, the goal is to avoid taxing the same materials twice.

Property owners and insurance adjusters

If you're paying for emergency board-up or tarping after a storm or break-in, expect sales tax to apply to the full invoice. This is different from a genuine repair or remodeling job that becomes a permanent part of the structure (see Rule 3.357), which can be taxed differently.

Common questions

Q: Why isn't boarding up a damaged building treated as a realty improvement?
A: Rule 3.347 says a job is not an improvement to realty if the materials aren't essential or intended to become a permanent part of the building, and can be removed later without substantial damage. Board-up and tarping materials are temporary by nature, so they fail that test and are instead treated as tangible personal property.

Q: Does it matter if the job is billed as one lump sum instead of separate charges for materials and labor?
A: No. The letter states the total charge is taxable "for both residential and commercial jobs and lump-sum or separated billings or contracts."

Q: Does this apply to both homes and businesses?
A: Yes, the ruling specifically covers both residential and nonresidential (commercial) board-up and tarping work.

Q: Can the contractor avoid paying tax twice on the same materials?
A: Yes. Rule 3.338 lets the contractor take a credit for tax already paid to suppliers on materials that end up resold as part of the taxable job, so tax is effectively only paid once, on the final $15 charge to the customer in the letter's example.

Q: Can I rely on this letter for my own business?
A: Only the original requester can rely on this specific letter as a detrimental-reliance defense. It's useful as an illustration of the Comptroller's reasoning, but it was issued in 1992 on a specific taxpayer's facts and may not reflect current policy. Confirm current treatment with a Texas tax professional or the Comptroller's office.

Citations and references

• 34 Tex. Admin. Code § 3.291 (contractors)
• 34 Tex. Admin. Code § 3.347(b)(1) (improvements to realty — test for temporary/removable property)
• 34 Tex. Admin. Code § 3.338(a)(1) (credit for tax paid to suppliers; resale)
• 34 Tex. Admin. Code § 3.286 (seller's and purchaser's responsibilities)
• 34 Tex. Admin. Code § 3.357 (repair and remodeling of real property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9208L1186A14

Original ruling text

August 7, 1992

Dear **:

Thank you for your letter of June 18, 1992, concerning the taxability of
charges to board-up a residence or place of business to protect against
vandalism or storm damage.

Your letter references Rule 3.291 concerning contractors, so I presume that you
are categorizing your work as "improvements to realty". I have enclosed Rule
3.347 concerning improvements to realty. Section (b) (1) states that a contract
for the sale and installation of tangible personal property does not qualify as
an improvement to realty if it is not essential to a building, nor adapted or
intended to become a part of the realty, but which incidentally may, on account
of its nature, be temporarily attached to the realty without losing its
identity and, if attached, is readily removable without substantial damage to
the realty or without destroying the intended usefulness of the realty. As a
result, the temporary boarding-up of a structure would be considered a sale and
installation of tangible personal property, plywood and boards, and not an
improvement to realty. The total charge for material and labor would be taxable
to your customer for both residential and commercial jobs and lump-sum or
separated billings or contracts.

You may claim a credit for taxes paid to your suppliers on wood and nails
purchased for resale per Section (a) (1) of enclosed Rule 3.338. In your
example you purchased $10 worth of materials to perform a $15 job. If you paid
tax to your * vendors on $10 and collect tax on $15 from your *
customer, you would report tax on the $5 difference. This is considered your
mark-up or charge for installing tangible personal property.

Rule 3.286 concerning seller's and purchaser's responsibilities has been
enclosed per your request. I have also enclosed Rule 3.357 concerning repairs
and remodeling of real property. You had indicated, in our recent phone
conversation, that you also perform this type of work.

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

You may call me toll free at 1-800-252-5555, ext. 5-0613. The direct line is
512/475-0613. You may also write to Tax Administration Division, Comptroller of
Public Accounts.

Sincerely,

Kevin Koller
Tax Administration Division