Is the sale of a house that a house-moving business removes from one lot and relocates to another taxable, and does it matter how the contract itemizes the house price, moving cost, and foundation work?

Plain-English summary

A house-moving business asked whether the houses it sells -- after removing them from one property and relocating them to another -- are taxable. The Comptroller first corrected some bad information the business had received by phone: while it's true that the sale of a house attached to realty generally isn't taxable, that's not this business's situation.

Once a house is detached from realty and sold without installation, the sale becomes a sale of tangible personal property under Rule 3.306(b)(5), and sales tax is due on both the house price and the delivery/moving charge. But if the business instead contracts to deliver the house already installed on a new foundation, Rule 3.291 offers two paths:

1. Lump-sum contract: no tax is charged to the customer on the lump-sum fee, but the business itself must pay tax (or accrue use tax) on the purchase price of the structure.
2. Separated contract: if the contract separately states charges for the house, the moving cost, materials incorporated into the realty, and installation labor, the business collects tax on the house's selling price, the moving cost, and the incorporated materials -- but the labor to attach the house to the new foundation is NOT taxable.

What this means for you

House-moving and relocation businesses

How you structure your customer contract changes your tax exposure. A lump-sum "all-in" price shifts the tax burden to you (as the purchaser of the structure), while a separated, itemized contract shifts collection to your customer for everything except the foundation-attachment labor.

Customers buying a relocated house

Expect sales tax on the house price and moving charge if the house is detached and sold to you without installation, or on those same items (minus attachment labor) if your contract itemizes them separately from a lump-sum deal.

Accountants and tax professionals

Watch for the specific trigger -- detachment from realty followed by sale without installation converts what would otherwise be a nontaxable real property sale into a taxable tangible-personal-property sale, distinct from ordinary contractor rules for improvements to standing real property.

Common questions

Q: Is selling a house that stays attached to realty taxable?
A: Generally no, per this letter -- that's the baseline nontaxable case.

Q: What changes once the house is detached and sold without installation?
A: Per Rule 3.306(b)(5), it becomes a sale of tangible personal property, so sales tax applies to both the house price and the delivery/moving charge.

Q: Is the labor to reattach the house to a new foundation taxable?
A: No, per this letter -- installation labor to attach the house to the foundation is not taxable, whether under a lump-sum or a properly itemized separated contract.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.306(b)(5) (sale of a house detached from realty and sold without installation)
• 34 Tex. Admin. Code Rule 3.291 (lump-sum and separated contracts)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9708638L

Original ruling text

August 11, 1997

Dear ***:

Thank you for your letter of July 28, 1997. You asked whether the houses you
sell are taxable. As I understand it, you are in the house moving business and
you sell the houses you remove and relocate.

Unfortunately, I'm afraid you may have received some incorrect information in a
telephone conversation with a Comptroller employee. I understand you were told
the sale of the house is not taxable. Generally speaking, the sale of a house
is not taxable. Such is the case when the house remains attached to realty.

However, if a house is detached from realty and is sold without installation,
the sale of the house is the sale of tangible personal property and sales tax
is due on the sale of the house and the delivery or moving charge. This
provision of the law is covered in subsection (b)(5) of Rule 3.306.

If you contract to provide a house on a foundation, you may act as either a
lump-sum or separated contractor under Rule 3.291. If you contract to provide
a house on a foundation for a lump-sum amount you will not be required to
charge tax on the lump-sum fee you bill your customer. However, you will be
required to pay tax to the seller of the structure at the time of purchase or
accrue tax on the purchase price. If the contract you enter into with your
customer separately states charges for the house, moving cost, materials
incorporated into the realty and installation labor, you should collect tax on
the selling price of the house, moving cost, and materials incorporated into
the realty. The labor to attach the house to the foundation is not taxable.

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