I'm a fixture contractor installing cash register stations, clothing racks, display cases, and gondolas in a newly built retail store — the store owner supplies all materials and I just assemble and install them. Is my labor taxable?

Plain-English summary

A fixture contractor asked whether the labor to assemble and install interior store fixtures — cash register stations, clothing racks, display cases, and gondola shelving — in a brand-new (never-occupied) retail store is taxable. The store's general contractor built the building itself; this contractor's job was purely to assemble the fixtures and bolt them to the floor, using materials the store owner supplied.

The Comptroller walked through the general framework first: labor to construct new realty (like the store building itself) is NOT taxable. Labor to merely install tangible personal property that's already assembled is also not taxable, unless the installer is also the seller of the item — in which case the whole charge, including installation, is taxed together. But labor to fabricate or process tangible personal property IS taxable, and fabrication includes assembly — the letter gives the example that assembling a bicycle's components is taxable even if the assembler didn't sell the bicycle.

So the key question became: do these bolted-down fixtures count as improvements to realty (not taxable) or as tangible personal property being assembled and installed (taxable)? Under Rule 3.347(b)(1), even though the fixtures are physically bolted to the floor, they don't become improvements to realty because (1) they don't lose their identity as personal property, and (2) removing them wouldn't cause substantial damage to the building. Since these fixtures stayed personal property, the contractor's work was assembly (taxable fabrication) plus installation of that assembled property for the store owner — and the total charge is taxable.

The letter also flagged that the answer can flip: some fixtures DO become permanently affixed improvements to realty in other fact patterns (citing prior Comptroller precedent on custom display fixtures), so this is a facts-and-circumstances test, not a blanket rule for all "fixtures."

What this means for you

Fixture contractors and installers

Bolting an item to the floor doesn't automatically make it a nontaxable real property improvement. The test is whether the item keeps its identity as personal property and whether removing it would substantially damage the building — display cases, register stations, and shelving racks typically stay personal property under that test, making your assembly/installation labor taxable.

Retailers building out new stores

Expect fixture-installation contractors to charge sales tax on their labor if they're assembling components (not just placing pre-assembled items) — assembly is treated as taxable fabrication regardless of who ultimately sells the finished fixture.

Accountants and tax professionals advising retail buildout clients

The controlling distinction is Rule 3.347(b)(1)'s improvement-to-realty test (identity retention + no substantial damage on removal), not simply whether an item is physically attached. Watch for custom, permanently-built-in fixtures, which the letter itself notes can come out the other way in different fact patterns.

Common questions

Q: Does bolting a store fixture to the floor make it part of the realty?
A: Not by itself. If the fixture keeps its identity as personal property and removing it wouldn't substantially damage the building, it stays tangible personal property under Rule 3.347(b)(1).

Q: Is labor to construct a brand-new store building taxable?
A: No — new construction of realty is not taxed.

Q: Is labor to assemble and install fixtures inside that new store taxable?
A: Yes, if the fixtures remain personal property — assembly is taxable fabrication, and the installation of assembled property is taxed as part of the total charge.

Q: Would the answer be different for custom display fixtures built permanently into the store?
A: Possibly — the letter notes that in some cases fixtures do become permanent improvements to realty, citing separate Comptroller precedent on custom display fixtures. That's a different fact pattern from bolted-down but removable racks and cases.

Q: Can I rely on this letter for my own fixture-installation contract?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may yield different results; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.347(b)(1) (Improvements to Realty)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9903277L

Original ruling text

March 12, 1999

Dear Mr. **:

Thank you for your faxed letter and our phone conversation concerning the
taxability of the labor to assemble and install interior fixtures in a ABC
store being constructed.

Situation: You are a fixture contractor. The store is ground-up new
construction (never occupied). Your part of the project is to install all of
the interior fixtures that the store uses to stock and or display the
merchandise they sell. The service you provide is the installation. Your
customer provides all materials.

In our phone conversation, you provided additional facts. Your customer is ABC
rather than the general contractor building the new store for ABC. The
interior fixtures include cash register stations, clothing racks, display
cases, and other store racks called gondolas. Your company assembles the
fixtures and then installs the fixtures in the store. The fixtures are bolted
to the floor.

Question: Does the labor you provide fall under the sales tax laws currently
in place?

Response: First, let me review the current sales tax law. The sales tax law
does not tax the labor to construct new realty such as the new ABC store. The
law does not tax the labor to install tangible personal property unless the
installation is billed by the seller of a taxable item or a taxable service.
In that case, the installation is taxed as part of the total price even if
separately stated by the seller. Installation means to set in place tangible
personal property that is already assembled. The law taxes the labor to
fabricate or process tangible personal property. Fabrication includes the
assembly of tangible personal property. For example, a charge to assemble the
components of a bicycle is taxable even if the person performing the assembly
did not sell the bicycle.

The answer to your question depends on whether you are improving real property
when installing the interior fixtures in the new store or are assembling
tangible personal property and installing the property without improving
realty. Although the interior fixtures are affixed to the floor with bolts,
the fixtures do not become improvements to realty because the fixture does not
lose its identity as personal property and removal of the fixture does not
cause substantial damage to the realty . See subsection (b)(1) of Rule 3.347,
Improvements to Realty.

The labor to assemble and install the internal fixtures in the store for ABC is
taxable. ABC is purchasing the assembly of tangible personal property and the
installation is taxable as part of the sale. Your company should collect sales
tax on the total charge to ABC.

For your information, I will forward edited copies of Comptroller Hearing
11,332 (8707H0420B06) and Taxability Request 1040 (8603T0705E04) that deal with
a similar issue of whether fixtures become improvements to realty. In some
cases, fixtures do become permanently affixed into the realty as in the case of
the custom display fixtures discussed in Taxability Response 0589
(7809T0132C02). A copy of that ruling will also be forwarded.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division