Does a company that only delivers, assembles, and installs greenhouses (bought separately from the manufacturer) have to collect Texas sales tax on its charges?

Plain-English summary

A greenhouse manufacturer ("Corporation A") sells greenhouses and all the materials and supplies needed to set them up, and collects and remits sales tax on those charges. A separate company ("Corporation B"), located next to Corporation A's display yard, contracts directly with greenhouse purchasers to transport the greenhouse from the display yard to the purchaser's property and to assemble and install it there, providing labor only. The two companies share some (but not all) shareholders and officers, but Corporation B is not a subcontractor of Corporation A — the purchaser signs two separate contracts, and Corporation B's charges may exceed Corporation A's sales price. No agricultural exemption applied in this situation.

The Comptroller's office was asked whether Corporation B must collect state and local sales tax on what it charges for delivering, assembling, and installing the greenhouses. The answer turns entirely on what the greenhouse becomes once it is installed — not on the corporate relationship between the two companies.

If the installed greenhouse becomes an improvement to real property (part of the land or building), Corporation B's delivery, assembly, and installation charges are treated as new construction labor and are not taxable. But if the greenhouse keeps its identity as tangible personal property even after installation, the assembly of that property is taxable under Tax Code Section 151.005 regardless of who sold the greenhouse or supplied the materials — and because the delivery and set-up charges are sold together with the assembly, the Comptroller treats the entire charge as taxable in that case.

What this means for you

Greenhouse sellers and installers

Whether your delivery, assembly, and installation charges are taxable depends on whether the greenhouse becomes a permanent improvement to real property or remains movable, freestanding tangible personal property once installed. That characterization — not which company sold the greenhouse or performed the labor — controls the tax result.

Businesses using separate companies for sales and installation

Splitting the sale of a greenhouse (and its materials) from the installation labor into two separate contracts with two separate companies does not, by itself, change the tax treatment. Even if the companies share some owners or officers, the taxability of the installation charge still depends on the real-property-versus-personal-property status of the completed greenhouse.

Accountants and tax professionals

This letter is a useful illustration of the general Texas rule that assembly/installation labor on tangible personal property is taxable under Tax Code Section 151.005 regardless of the seller or provider of the underlying materials, while labor that results in an improvement to realty is treated as nontaxable new construction.

Common questions

Q: Does it matter that the installer (Corporation B) is a different company from the greenhouse seller (Corporation A)?
A: No. The letter states that the fact the corporations have some common shareholders or officers does not change the answer — the taxability turns on whether the greenhouse becomes realty or remains personal property, not on the corporate relationship.

Q: When is the installation labor not taxable?
A: When the greenhouse becomes an improvement to real property once installed; in that case, the labor is classified as new construction and is not taxable.

Q: When is the installation labor taxable?
A: When the greenhouse retains its identity as tangible personal property after installation. In that case, assembly is taxed under Tax Code Section 151.005, and because delivery and set-up are sold along with the assembly, the total charge is taxed.

Q: Does an agricultural exemption change the answer here?
A: No exemption applied in the facts presented — the letter states there were no agricultural exemptions involved.

Citations and references

• Tex. Tax Code § 151.005 (cited in the letter as "Section 151.005 of the tax code," governing taxation of assembly of tangible personal 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/9410L1321B01

Original ruling text

October 7, 1994

Dear ****:

Thank you for your letter of September 26. You asked whether an entity is
required to collect state and local sales taxes on the amount charged for
transportation, assembly, and installation of a green house. Your facts
are restated below.

Corporation "A" manufactures and sells green houses from its display yard.
Corporation "A" also sells all materials and supplies for the set-up of the
green house. Corporation "A" collects and remits sales taxes on its
charges to the purchaser.

Corporation "B" is located next to Corporation "A's" display yard.
Corporation "B" contracts directly with the purchasers of the green houses.
Corporation "B" will transport the green houses from the display yard to
the purchaser's property to assemble and to install the green houses.
Corporation "B" provides labor only.

The purchaser is not required to hire Corporation "B". The purchaser
contracts directly with Corporation "B". Corporation "B" is not a
subcontractor for Corporation "A". There are two separate contracts.
Corporation "B's" charges may be more than Corporation "A's" sales price.
The two corporations have some shareholders and officers in common - but
not all. There are no agricultural exemptions.

Question: Is Corporation "B" required to collect state and local sales
tax on the amount it charges the purchaser for assembly, delivery, and
set up of the green houses?

There are two responses to this question. The fact that the corporations
have some common shareholders, etc., does not change the responses. The
responses are determined by the status of the green house once it is
installed. "Green houses" may remain items of tangible personal property
or become improvements to realty.

First, if the green house becomes an improvement to realty once installed,
the assembly, delivery, and set up of the green house is not taxable. The
labor performed by Corporation "B" is classified as new construction.

Secondly, if the green house retains its identity as tangible personal
property once installed, the assembly, delivery, and set up of the green
house is taxed. Assembly of tangible personal property that remains
tangible personal property is taxed by Section 151.005 of the tax code
regardless of the seller or provider of the materials/supplies involved.
Because the delivery and set up of the green house is sold along with the
assembly, the total charge is taxed.

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

You may also write to Tax Administration Division, Comptroller of Public
Accounts.

Sincerely,

Tax Administration Division

NOTE: Previous Accession Number 9410436L