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Ezel / Tax Rulings / TX
TX 9709772L Sales and/or Use Tax (State,Local,MTA) 1997-09-05

Does replacing an old golf course sprinkler/irrigation system with a completely new one, laid in new trenches, count as nontaxable new construction?

Short answer: Yes. A golf course, per TR 1263, is not as a whole an improvement to realty — rather, it's made up of a number of separate improvements to realty, each analyzed on its own. Installing a brand-new in-ground sprinkler/irrigation system laid in NEW trenches — completely replacing an old system being abandoned, with none of the old pipe, valves, or sprinkler heads reused — qualifies as nontaxable new construction.

Apply this to your situation

This page answers the general question as of 1997. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1997
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A country club asked about the taxability of work at its golf course, referencing Taxability Response (TR) 1263, which establishes that a golf course as a whole is NOT necessarily an improvement to realty — instead, a golf course is made up of a number of separate improvements to realty, each evaluated individually. The specific fact pattern: an existing golf course was having a new sprinkler/irrigation system installed to replace an old one being fully abandoned. None of the old system's components (pipe, valves, sprinkler heads) would be reused in the new system.

The Comptroller held that installing this new in-ground sprinkler/irrigation system, laid in brand-new trenches, qualifies as new construction — meaning the labor for that installation is nontaxable, consistent with Texas's general rule that new construction labor is exempt while repair/remodeling labor on existing improvements is taxable.

What this means for you

Golf courses and country clubs

Not every piece of work at a golf course is automatically taxed the same way — TR 1263 breaks the course down into its individual improvements (irrigation, greens, cart paths, clubhouse, etc.), each analyzed separately. A full irrigation system replacement, in new trenches and abandoning the old system entirely, is treated as new construction rather than a taxable repair/remodel.

Irrigation and golf course contractors

The key facts that made this new construction were: (1) new trenches, not reuse of the old trench/pipe path, and (2) complete abandonment of the old system with no components reused. A partial upgrade or repair reusing existing trenches or components would likely be analyzed differently as repair/remodeling.

Common questions

Q: Is a golf course as a whole treated as one improvement to realty for tax purposes?
A: No — per TR 1263, a golf course is a collection of separate improvements, each evaluated on its own facts.

Q: Does fully replacing an old irrigation system with a new one count as new construction?
A: Yes, when the new system is laid in new trenches and none of the old system's components are reused.

Q: Can another golf course rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Source

Original ruling text

September 5, 1997

Dear *****:

This is in response to your request for a ruling in determining the taxability
of charges for work performed at a country club golf course. Your fact
situation and question are restated below followed by my response:

TR 1263 (fiche # 9109T1137G11) states that a golf course as a whole is not
necessarily and improvement to realty. The response goes on to indicate that
the golf course is made up of a number of improvements to realty. An existing
golf course is having a new sprinkler/irrigation system installed to replace an
old system which is being abandoned. None of the old system (pipe, valves,
sprinkler heads) will be used in the new system.

Does the new sprinkler/irrigation system qualify as new construction?

Response: The installation of a new inground sprinkler/irrigation system laid
in new trenches qualifies as new construction.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please
call me toll-free at 1-800-531-5441, extension 3-4502. The direct line is
512/463-4502. You may also write to Tax Policy Division, Comptroller of Public
Accounts. My e-mail address is: [email protected].

Sincerely,

Gilbert Zamora
Tax Policy Division

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