Is concrete cutting, coring, drilling, and repouring taxable in Texas, and does it matter whether the job is new construction, residential, or nonresidential repair/remodeling?

Plain-English summary

A new business planning to do concrete cutting, coring, and removal work (with occasional repouring afterward, mostly on commercial property but sometimes residential) asked for a general sales tax determination, since the business would use few materials and typically charge a lump sum.

The Comptroller split the answer along the now-familiar new-construction/remodeling line, with a wrinkle for waste removal:

• Cutting and coring concrete tied to a repair or remodeling job on NONRESIDENTIAL property is taxable in total, and so is any charge to repour concrete after the cutting/coring is done. See Rule 3.357 on remodeling of real property.
• When the same cutting/coring work is done as part of a NEW CONSTRUCTION contract (either residential or nonresidential) or a RESIDENTIAL repair/remodeling contract, the labor charge simply does not meet the definition of a taxable service and is not taxed at all.
• Waste removal (e.g., hauling away the concrete debris generated by the job) is a separately taxable real property service under Rule 3.356, unless it's tied to a contract for residential new construction -- in that one case, the contractor should get an exemption certificate from the client rather than collecting tax.

So the same physical activity (cutting concrete, hauling debris) can be taxable, untaxed, or exempt-with-certificate depending on three variables working together: residential vs. nonresidential, new construction vs. repair/remodeling, and cutting/repouring labor vs. waste removal.

What this means for you

Concrete cutting, coring, and demolition contractors

Before quoting or invoicing a job, nail down two facts: (1) is this residential or nonresidential property, and (2) is this new construction or repair/remodeling? Those two answers determine whether your cutting/coring labor is taxable, and waste removal has its own separate rule layered on top (taxable unless tied to residential new construction).

General contractors hiring concrete subcontractors

If you're doing residential new construction and hiring a concrete-cutting sub for debris removal, issue that sub an exemption certificate rather than paying tax -- this is the one combination where waste removal itself is exempt.

Accountants and tax professionals

A clean three-variable framework (residential/nonresidential × new-construction/remodeling × labor-vs-waste-removal) worth keeping as a quick-reference alongside the many other real-property-service letters in this corpus that turn on the same residential/nonresidential and new-construction/remodeling distinctions.

Common questions

Q: Is concrete cutting and coring always taxable?
A: No -- it's taxable for nonresidential repair/remodeling, but untaxed when part of new construction (residential or nonresidential) or residential repair/remodeling.

Q: What about repouring concrete after cutting/coring?
A: Taxed the same way as the cutting/coring charge itself.

Q: Is hauling away concrete debris taxable?
A: Yes, as a real property service, unless it's tied to a residential new construction contract -- in that case the contractor should get an exemption certificate instead of collecting tax.

Q: Can I rely on this letter for my own concrete business?
A: No. It is based on the specific facts presented and can only be relied on by the taxpayer to whom it was issued.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.357 (nonresidential remodeling/repair of real property)
• 34 Tex. Admin. Code Rule 3.356 (real property services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9905478L

Original ruling text

May 26, 1999

Dear **:

Thank you for your recent letter which is restated in part with response below.

"I have a client engaging in a new business and need a determination regarding
any requirements to charge and collect sales taxes. The client will engage in
concrete cutting and coring; removal of concrete and occasionally repouring
concrete to repair area after cutting or coring has been performed. The work
may sometimes be performed on existing commercial property and could on rare
occasions be done on residential property. The client will use very few
materials in the performance of these activities and will normally charge a
lump sum fee for his services. Please provide me with assistance regarding the
applicability of sales taxes for this type of business activity."

Response: Charges for cutting and coring concrete related to a repair or
remodeling job on non-residential real property are taxable in total as are
repouring charges after the work is performed. When the client's company is
called upon to provide these services to a contractor as part of a new
construction contract (residential or nonresidential) or a residential repair
or remodeling contract, the labor charge does not meet the definition of a
taxable service and is not taxed. Rule 3.357 deals with remodeling of real
property and is available at
.

Charges for waste removal, such as removal of concrete debris, are subject to
sales tax unless related to a contract for residential new construction. The
contractor should issue the client an exemption certificate in lieu of tax in
this instance. Rule 3.356 regarding real property services is at
. The text of Tax Code
Chapter 151 is at
.

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

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division