Is a charge for disassembling a communications tower — including mileage, travel, per diem, loading, hauling, and unloading of the tower materials — subject to Texas sales tax?

Plain-English summary

A taxpayer asked the Texas Comptroller's Tax Administration Division about the taxability of charges it was billing a customer for disassembling a ROHN communications tower. The charges included a per-foot disassembly charge, labor charges, mileage, travel and per diem, loading, hauling and unloading of the tower materials, and reimbursement for crane rental expenses paid to a third party.

The Comptroller (Al Van Allen, Tax Administration Division) responded that charges related to tower disassembly that are separate and apart from any taxable work are not subject to sales tax. Accordingly, the associated charges for mileage, travel, per diem, loading, hauling, and unloading of the tower materials are not taxable. However, the taxpayer must pay tax on the crane rental it obtains from the third party, and — having paid that tax itself — is not then required to collect sales tax from its own customer on the reimbursement charge for that crane rental.

The letter notes it is based on the facts submitted and that other, similar facts may yield different results.

What this means for you

Businesses that disassemble towers or similar structures

If your disassembly charges are separate and apart from any taxable work, charges like the per-foot disassembly fee, labor, mileage, travel, per diem, and loading/hauling/unloading of materials are not subject to Texas sales tax.

Businesses that rent equipment (like a crane) to perform the work

You owe sales tax yourself on equipment you rent from a third party (such as a crane) to perform disassembly work. Because you've already paid tax on that rental, you are not required to separately collect sales tax from your customer when you pass through (reimburse) that rental cost to them.

Accountants and tax professionals

This letter illustrates the general principle that a service provider's own equipment rental costs are taxed at the point the provider rents the equipment, and that tax does not then "cascade" again when the provider passes the cost through to its customer as a reimbursement — but this outcome is tied to the specific facts presented and may not extend to different fact patterns.

Common questions

Q: Is a tower disassembly charge subject to Texas sales tax?
A: Not if it is separate and apart from any taxable work — the Comptroller found the disassembly charge itself, along with mileage, travel, per diem, loading, hauling, and unloading of tower materials, to be non-taxable.

Q: Do I owe tax on a crane I rent from a third party to do the disassembly work?
A: Yes. The letter states the taxpayer must pay tax on the crane rental.

Q: If I pay tax on the crane rental, do I also have to collect sales tax from my customer when I bill them for that cost?
A: No. The letter states the taxpayer is not required to collect sales tax on the reimbursement charge to its customer for the crane rental, since tax was already paid on the rental itself.

Q: Does this ruling apply to any tower disassembly job regardless of the facts?
A: No. The Comptroller expressly notes the opinion is rendered based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

No statutes, rules, or case law were cited in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9508L1365B04

Original ruling text

August 4, 1995

Dear **:

Thank you for your recent letter which is restated in part
with response below.

I am writing to inquire about the taxability of certain
charges we are billing a customer. These charges relate to
the disassembly of a ROHN tower. They include a per foot
disassembly charge, labor charges, mileage, travel and
per diem, loading, hauling and unloading tower materials, and
reimbursement charges for crane rental expenses to a third
party.

Response: Charges related to tower disassembly separate and
apart from any taxable work are not subject to sales tax.
Accordingly, the associated charges for mileage, travel, per
diem, loading, hauling, and unloading tower materials are
not taxable. You must pay tax on the crane rental and are
then not required to collect sales tax on the reimbursement
charge to your customer.

This opinion is rendered 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. 3-4680.
The direct line is 512/463-4680. You may also write to Tax
Administration, Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9508402L