Under this internal Texas Comptroller staff memo, is buying, installing, repairing, or renting Christmas decorations for a customer taxable?

Plain-English summary

This is an internal October 26, 1995 memo from Texas Comptroller staffer Al Van Allen to Ron Watkins, titled "Decorating Homes at Christmas." It is not a letter responding to any outside taxpayer's own facts — it reads as an internal analysis walking through six hypothetical scenarios about buying, installing, repairing, or renting Christmas decorations for customers, and states the Department's taxability position on each.

The memo's preface sets the general framework: each transaction involving a sale and/or installation of tangible personal property is taxed as such, unless it also involves a taxable service such as landscaping. The six scenarios and answers are:

1. Seller buys decorations and sets them up, billing one total price. The whole charge is taxable as a sale and installation. (But charges only for storing or setting up decorations the customer already owns are not taxable.)
2. Seller buys decorations and sets them up, billing a separate price for the decorations and for the set-up. Still taxable in total as a sale and installation — itemizing the price doesn't change the result.
3. Seller buys decorations, pays tax on them, and passes that cost through to the customer as a separately stated "reimbursement," plus a set-up charge. Still taxable in total as a sale and installation, but the seller may take credit on its own sales tax return for the tax it already paid on decorations it then sold to customers.
4. Seller returns each year to set up decorations and charge for set-up. (a) If the customer has the seller buy replacement decorations and set them up, the replacement decorations and their initial set-up are taxable, but a separately stated charge for setting up decorations the customer already owns is not. (b) If the seller repairs decorations in later years, the repair charge is taxable and should be stated separately from the non-taxable installation charge — if repair and installation are billed as one lump sum, the whole thing is taxable.
5. Does location matter (yard, home exterior, or inside the home)? No — the answer is the same regardless of where the decorations are installed.
6. Seller provides and sets up decorations but keeps them afterward — ownership never passes to the customer. These charges are taxable instead as a rental of tangible personal property.

What this means for you

Businesses that buy and install decorations (or similar property) for customers

If you purchase decorations, ornaments, or similar tangible property and install it for a customer, expect the full charge — materials plus installation — to be taxable, even if you break out the decoration cost and the labor cost as separate line items, or try to pass through the tax you already paid as a "reimbursement." The Department treats these as, in substance, one taxable sale-and-installation transaction, though you can take credit for tax you already paid on decorations you then resell to customers.

Businesses that only install or store a customer's own property

If the customer already owns the decorations and you're only being paid to store them or set them up, that labor-only charge is not taxable under this memo's reasoning. Keep that distinction clear on invoices, especially in multi-year arrangements where you might sell replacement decorations one year and merely reinstall existing ones another year.

Businesses that repair decorations

Repair charges are taxable and should be separately stated from non-taxable installation charges. If you bill repair and installation together as a single price, the memo says the entire combined charge becomes taxable — so itemizing matters here, unlike in the pure sale-and-installation scenarios above.

Businesses that rent out decorations without transferring ownership

If you install decorations but always take them back and never transfer ownership to the customer, the memo treats your charges as a taxable rental of tangible personal property, not as a sale-and-installation transaction.

Common questions

Q: Is this an official ruling I can rely on?
A: No. This is an internal Comptroller staff memo, not a response to any specific taxpayer's letter ruling request, and it carries no detrimental-reliance protection under 34 Tex. Admin. Code Rules 3.1 or 3.10. It shows the Department's own stated policy positions on these six scenarios at the time, but it isn't binding for any particular taxpayer's situation.

Q: Does it matter if I itemize the decoration cost separately from the installation charge?
A: For a straightforward purchase-and-install job, no — the memo says the total charge is taxable as a sale and installation whether billed as one price or itemized, and even if the "decoration cost" is labeled as a tax reimbursement.

Q: What if I'm only setting up decorations the customer already owns?
A: The memo says charges for storing or setting up customer-owned decorations are not taxable.

Q: How should I bill for repairs versus installation?
A: Separately. The memo says repair charges are taxable and should be stated separately from non-taxable installation charges; a single combined charge for both is taxable in total.

Q: Does it matter whether the decorations go in the yard, on the house, or inside the home?
A: No — the memo states the location makes no difference to the analysis.

Q: What if I never transfer ownership of the decorations to the customer?
A: Then the memo treats the charges as a taxable rental of tangible personal property, rather than a sale and installation.

Citations and references

No statutes or rules are cited in this document.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9510663L

Original ruling text

October 26, 1995

To: Ron Watkins

From: Al Van Allen

Re: Decorating Homes at Christmas

Preface: We will look at each transaction involving a sale and/or installation
of tangible property as such unless the transaction also involves the provision
of a taxable service such as landscaping.

1) The seller will buy Christmas decorations and set them up for the customer.
He will bill one price for the total job.

Response 1: The total charge is taxable as a sale and installation. Charges for
storing and setting up customer-owned decorations are not subject to sales tax.

2) The seller will buy Christmas decorations and set them up for the customer.
He will bill a separate price for the cost of the decorations and the cost of
set up.

Response 2: The total charge is taxable as a sale and installation.

3) The seller will buy Christmas decorations and set them up for the customer.
He will pay tax on the decorations and show them separately as reimbursement
for the purchase price, and charge for the set up.

Response 3: The total charge is taxable as a sale and installation. The
taxpayer may take credit on his sales tax return for taxes paid on the purchase
of decorations sold to customers.

4) Each year the seller will go back and set the decorations up and charge for
the set up.

a) Some years the customer may have the seller buy replacement decorations and
set them up.

Response 4a: The charges for replacement decorations and their initial set up
are taxable. Separately stated charges for set up of customer-owned decorations
are not taxable.

b) The seller may have to do repairs to decorations in subsequent years. He may
bill the repairs separately or may just include the repairs in the set price.

Response 4b: Charges for repair of tangible property are taxable and should be
separately stated from charges for non-taxable installation. A single charge
for repair and installation of tangible property is taxable in total.

5) Will it make any difference if the decorations are bought for and set up in
the yard, on the home, or in the home.

Response 5: No.

6) The seller provides the decorations and does the set up. When the seller
takes down the decorations, he keeps them. The decorations do not pass to the
customer.

Response 6: The charges are taxable as rentals of tangible property as rentals.