Does a mobile home skirting/door/window installer owe sales tax on the charge to the dealer, or on the materials, when installing skirting on mobile homes treated as real property?

Subject

Mobile Home — Repairs And Remodeling (Installing Doors, Windows, Skirting) To Real Property

Plain-English summary

A business asked the Comptroller whether it must collect tax on charges to a dealer for installing skirting on mobile homes. The Comptroller confirmed that, for sales tax purposes, a mobile home is treated as real property -- which means the installer can bill the dealer under either of two contract types, each with different tax consequences:

• Lump-sum contract: The installer is considered the consumer of all materials used in the installation. Tax is owed on the materials at the time of purchase (or accrued if the materials came from a valid tax-free inventory). The lump-sum charge billed to the dealer is not taxable. The letter notes this is the setup to use if the installer continues to pay tax on the skirting kit at the time of purchase.
• Separated contract: The installer is instead considered a retailer reselling the incorporated materials. Under this method, the installer may issue a resale certificate to buy materials tax-free, but must then either collect tax or accept a valid resale certificate from the dealer on the agreed contract price for those incorporated materials. Local taxes are based on the location of the jobsite.

The Comptroller notes the opinion is based on the facts presented and could change with additional or different facts.

What this means for you

Mobile home installers and repair contractors

If you install skirting, doors, windows, or similar items on mobile homes, you have a choice of billing method, and the choice determines who pays tax and when. Under a lump-sum contract, you pay tax on the materials up front (or accrue it from tax-free inventory) and your labor/materials charge to the dealer goes untaxed. Under a separated contract, you buy materials tax-free with a resale certificate but must then collect tax (or get a resale certificate) from the dealer on the materials portion, with local tax based on the jobsite's location.

Mobile home dealers

Expect your installer/contractor to bill you either as a single lump-sum charge (no tax charged to you on that charge, because the installer already paid or accrued tax on the materials) or as a separated charge for materials on which you either pay tax or provide a resale certificate.

Accountants and tax professionals

This ruling is a straightforward application of Texas's lump-sum vs. separated contract framework to real property improvements, applied here to mobile homes because they're treated as real property. Confirm which contract structure a client actually uses before advising on their tax position, since the two structures shift where and when tax is due.

Common questions

Q: Is a mobile home treated as real property or personal property for sales tax purposes?
A: Real property, according to this ruling.

Q: Do I have to collect tax on my charge to the dealer for installing skirting?
A: Under a lump-sum contract, no -- the lump-sum charge to the dealer is not taxable, but you owe tax on the materials yourself. Under a separated contract, yes -- you must collect tax (or accept a resale certificate) on the materials portion of the contract price.

Q: Can I buy the skirting materials tax-free?
A: Only under a separated contract, using a resale certificate, because you're treated as a retailer reselling the incorporated materials. Under a lump-sum contract you are the consumer of the materials and owe tax on them at purchase (or must accrue tax if pulled from tax-free inventory).

Q: Which local tax rate applies under a separated contract?
A: Local taxes are due based on the location of the jobsite.

Q: Could this answer change under different facts?
A: Yes -- the letter states the opinion is based on the facts presented and may change if there are additional or different facts.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610L1436A01

Original ruling text

October 31, 1996

Dear ***:

Thank you for your recent letter. You asked if you are
required to collect tax on charges to install skirting on mobile homes.

For sales tax purposes, the home is treated as real
property. This means that you may use either a lump-sum or separated contract
when billing the dealer.

Lump-sum Contract - Under a lump-sum contract, you are
considered the consumer of all materials used to perform the installation of
the skirting. You owe tax on the materials at the time of purchase or may
accrue tax on materials removed from a valid tax-free inventory. The lump-sum
charge to the dealer is not taxable. This is the type of contract or invoice
you should use if you continue to pay tax on the skirting kit at the time of
purchase.

Separated Contract - Under a separated contract, you
are considered a retailer reselling the incorporated materials. As such, you
may issue a resale certificate to purchase materials that will be incorporated
into the home tax free. You must collect tax or accept a valid resale
certificate from the dealer for the agreed contract price for the incorporated
materials. Local taxes are due based on the location of the jobsite.

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

You may call me toll free at 1-800-531-5441, ext.
5-0037. The direct line is 512/475-0037. You also may write to Sales Tax
Policy Division, Comptroller of Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division

NOTE: Previous Accession Number 9610674L