Is a service, estimate, or trip charge taxable if a customer gets an estimate to repair an appliance but decides not to have the repair done?

Plain-English summary

This 1995 letter from the Texas Comptroller's Tax Policy Division (signed by Kevin Koller) responds to a question about whether service, estimate, or trip charges for repairing small appliances are taxable.

The general rule: a service, estimate, or trip charge made in connection with the repair of tangible personal property is taxable, under Rule 3.292(b)(1) (repair, remodeling, maintenance, and restoration of tangible personal property). But there's an exception — there is no taxable charge if an estimate is rendered for a fee and the customer declines to have the appliance repaired. Tangible personal property here includes free-standing appliances such as refrigerators, washers/dryers, and portable dishwashers.

The letter also distinguishes built-in appliances:

• Built-in appliances in commercial property (the letter's example is a dishwasher in an office lunchroom) are covered by Rule 3.357, and all charges connected with those repairs — service, estimate, trip charges included — are taxable.
• Built-in appliances in residential property are treated differently: separately stated charges for materials are taxed; separately stated charges for estimates, labor, service, or trip fees are not taxed; and a lump-sum bill (materials and labor combined into one price) is not taxable to the customer — but in that case the repair firm itself becomes responsible for tax on the parts or materials it used in the job.

The Comptroller notes the opinion is based on the facts presented and could change if the facts are different.

What this means for you

Appliance repair businesses

If you charge a customer a fee just to come out and give an estimate, and the customer decides not to go ahead with the repair, that estimate/trip fee is not taxable — as long as the estimate itself was rendered for a fee. If the customer does have the free-standing appliance repaired, the service, estimate, or trip charge connected to that repair is taxable.

Businesses repairing built-in appliances in commercial settings

Don't rely on the "declined estimate" exception here in the same way — repairs to built-in appliances in commercial property (like an office break-room dishwasher) fall under Rule 3.357, and all associated charges are taxable.

Businesses repairing built-in appliances in homes

How you bill matters. Separately stating materials, and separately stating labor/service/estimate/trip charges, means only the materials portion is taxed to the customer. If you instead bill a single lump sum for materials and labor together, the customer isn't taxed on that charge — but you, as the repair firm, owe the tax on the materials/parts you used in the job.

Accountants and tax professionals

When advising clients in the appliance repair business, confirm (1) whether the appliance is free-standing or built-in, and (2) whether the built-in appliance is in a commercial or residential setting — each combination has a different taxability outcome for service, estimate, and trip charges.

Common questions

Q: If I charge a customer for an estimate and they decide not to have their refrigerator repaired, do I owe tax on that estimate fee?
A: No. There is no taxable charge if an estimate is rendered for a fee and the customer declines to have the appliance repaired.

Q: Are service and trip charges taxable in general when repairing tangible personal property?
A: Yes, as a general rule, a service, estimate, or trip charge made in connection with the repair of tangible personal property is taxable under Rule 3.292(b)(1).

Q: Does it matter whether the appliance is free-standing or built-in?
A: Yes. The letter's rules for estimate/service/trip charges relate to free-standing appliances (refrigerators, washers/dryers, portable dishwashers). Built-in appliances are treated under separate rules depending on whether the property is commercial or residential.

Q: What about repairing a built-in dishwasher in an office lunchroom?
A: That's a built-in appliance in commercial property, covered by Rule 3.357, and all charges connected with the repair — not just materials — are taxable.

Q: What about repairing a built-in appliance in a home?
A: Separately stated material charges are taxed; separately stated estimate, labor, service, or trip charges are not taxed. If billed as a single lump sum for materials and labor together, the customer's charge is not taxable, but the repair firm then owes tax on the materials/parts used in the job.

Citations and references

Regulations:

• 34 Tex. Admin. Code Rule 3.292 (repair, remodeling, maintenance, and restoration of tangible personal property)
• 34 Tex. Admin. Code Rule 3.357 (repairs to built-in appliances in commercial 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/9508L1366C01

Original ruling text

August 17, 1995

Dear **:

Thank you for your letter of August 11, 1995, concerning the
taxability of service charges in connection with the repair of
small appliances.

A service, estimate, or trip charge made in connection with the
repair of tangible personal property is taxable. See enclosed
Rule 3.292 Section (b)(l) concerning the repair, remodeling,
maintenance and restoration of tangible personal property.
Thereis no taxable charge if an estimate is rendered for a fee
and the customer declines to have their appliance repaired.
Tangible personal property includes free standing appliances such
as refrigerators, washers/dryers, portable dishwashers, etc..

Repairs to built-in appliances in commercial property (for example
a dishwasher in an office lunchroom) are covered under enclosed
Rule 3.357. All of the aforementioned charges in connection with
these repairs are also taxable.

Repairs to built-in appliances in residential property are handled
differently. Separately stated charges for materials would be
taxed. Separately stated charges for estimates, labor, service
charges, or trip fees would not be taxable. A lump-sum billing
(materials and labor together for a single sum) would not be
taxable. However, your firm would then be responsible for the
taxes for parts or materials used in the job.

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 1-800-531-5441, 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 Policy Division

NOTE: Previous Accession Number 9508418L