Does a billboard company have to collect Texas sales tax on charges for repainting existing billboards?

Subject

Billboards — Painting/Repainting

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9403L1288B12

Plain-English Summary

The Comptroller addressed three billboard-repainting scenarios described by the requester: (a) a straight repaint with no new colors or new copy, (b) a repaint that also changes the colors, and (c) a repaint with a partial copy change. The ruling holds that the repair, restoration, or remodeling of nonresidential improvements to real property is a taxable service, and billboards fall into that category.

Situations (b) and (c) — repainting combined with a color change or a partial copy change — are treated as taxable repair, restoration, and remodeling. Situation (a) — a plain repaint — is also presumed taxable as repair and restoration under 34 Tex. Admin. Code § 3.357(b)(8), unless it meets the rule's definition of "maintenance" in § 3.357(a)(3). To qualify as nontaxable maintenance, the repainting must be done on a scheduled and periodic basis specifically to prevent the billboard from declining or deteriorating. If the customer simply waits until the paint has already deteriorated and then schedules a repaint, that is still taxable repair and restoration, not maintenance.

The seller must collect sales tax on the total charge for repainting in situations (b) and (c) in every case. For situation (a), the seller must also collect tax on the total charge unless the customer provides a properly completed exemption certificate or other written documentation stating that the repainting qualifies as maintenance, per 34 Tex. Admin. Code § 3.357(c)(2).

What This Means For You

If you are a billboard painting/repainting contractor: Charge and collect Texas sales tax on the full amount for any repaint job that changes colors or includes a partial copy change — there is no maintenance exception for those. For a plain repaint with no color or copy change, you can treat the charge as nontaxable maintenance only if the customer's repainting schedule is genuinely preventive (regular, periodic) and the customer gives you a properly completed exemption certificate or other written documentation confirming that. Without that documentation, collect the tax.

If you are a billboard owner/advertiser: A repaint you order only after the paint has visibly deteriorated will be taxed as repair, even if you're now setting up a recurring schedule going forward. To support a maintenance exemption, keep your repainting on a preventive schedule and give your painting contractor a signed exemption certificate or written statement describing the maintenance basis.

Q&A

Q: Is repainting a billboard always taxable in Texas?
A: Not always, but it is presumed taxable. Repainting that also involves a color change or a partial copy change is always taxable repair, restoration, and remodeling. A plain repaint with no color or copy change can be nontaxable maintenance, but only if it's done on a scheduled, periodic basis to prevent deterioration and the customer supplies a proper exemption certificate or written documentation to that effect.

Q: My customer only repaints the billboard once the paint has started to peel — does that count as maintenance?
A: No. According to the ruling, it is still taxable repair and restoration if the customer simply chooses to schedule the repainting at the time the paint deteriorates, rather than repainting on a genuinely scheduled, preventive basis.

Q: What do I need from my customer to avoid charging tax on a plain repaint?
A: A properly completed exemption certificate or other written documentation stating that the repainting qualifies as maintenance, as referenced in 34 Tex. Admin. Code § 3.357(c)(2). Without it, tax must be collected on the total charge even for a plain, unchanged repaint.

Citations

• 34 Tex. Admin. Code § 3.357(a)(3) (definition of "maintenance")
• 34 Tex. Admin. Code § 3.357(b)(8) (taxable repair, restoration, and remodeling of real property)
• 34 Tex. Admin. Code § 3.357(c)(2) (exemption certificate/documentation requirement for maintenance)

Original ruling text

March 3, 1994

Dear *:

Thank you for your letter of February 20, 1994, concerning the taxability
of repainting existing billboards.

You stated there are three distinct situations in the repainting of
billboards. There is a straight repaint without new colors or new copy (a).
You also sometimes repaint and change the colors (b),or repaint with a
partial copy change (c).

The repair, restoration, or remodeling of nonresidential improvements to
real property is a taxable service. Situations (b) and (c) involve the
taxable repair, restoration and remodeling of billboards. Situation (a) is
the taxable repair and restoration of billboards. Please refer to
subsection (b)(8) of Rule 3.357. Repainting is presumed to be taxable
unless it meets the definition of maintenance found in subsection (a)(3)
of Rule 3.357.

In order for the repainting in situation (a) to be maintenance, the
customer must have the billboards repainted on a "scheduled" and "periodic"
basis in order to prevent the decline or deterioration of the billboard.
It is still taxable repair and restoration if the customer simply chooses
to schedule the repainting at the time the paint deteriorates. You must
collect sales tax on the total charge for the repainting in situations (b)
and (c). You also must collect sales tax on the total charge for the
repainting in situation (a), unless your customer provides a properly
completed exemption certificate or other written documentation that states
the repainting qualities as maintenance. Please refer to subsection (c)(2)
of Rule 3.357.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line
is 512/475-0030. You may also write to Tax Administration, Comptroller of
Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9403089L