Starting an air duct cleaning business in Texas, is the service taxable, and can equipment/materials be bought tax-free?

Plain-English summary

Someone planning to start an air duct cleaning business emailed the Comptroller for basic tax information.

The Comptroller explained that cleaning air ducts is taxable as a real property service under Rule 3.356 — the total charge to the customer (trip or service charge, materials, stand-by charges, etc.) is taxable. On the purchasing side, there's a two-way split:

• Equipment used to perform the service: the business must pay sales tax on all equipment it buys for the job, since that equipment isn't resold or transferred to the customer as part of the service.
• Materials transferred to the customer as an integral part of the service: these — the letter names filters and chemicals applied to the ducts to prevent odors or mildew growth — can be bought tax-free under a resale certificate (Rule 3.285), since they end up incorporated into what the customer receives.

The business is also required to apply for a Texas sales tax permit (Rule 3.286 covers recordkeeping and filing responsibilities).

What this means for you

Air duct cleaning and similar real-property-service businesses

Charge your customer sales tax on your entire invoice (labor, materials, trip charges, everything). On the buying side, separate your purchases into two buckets: equipment you keep and use on the job (pay tax when you buy it) versus consumable materials that end up in the customer's ducts, like filters and anti-mold/odor chemicals (buy these tax-free with a resale certificate, since you're passing them through to the customer).

Accountants and tax professionals

This letter is a clean, textbook application of the real-property-services framework (Rule 3.356) combined with the resale-certificate mechanism (Rule 3.285) for materials that get physically transferred to the customer — a useful template for any home-service business with a similar equipment-vs-consumables split.

Common questions

Q: Is air duct cleaning a taxable service in Texas?
A: Yes — it's taxable as a real property service, and the total charge to the customer is taxable.

Q: Do I pay tax on the equipment I buy to clean ducts?
A: Yes, since that equipment isn't transferred to the customer — you pay sales tax on it when you buy it.

Q: Can I buy filters and mildew-prevention chemicals tax-free?
A: Yes, if they're transferred to the customer as an integral part of the service — buy them with a resale certificate under Rule 3.285.

Q: Do I need a sales tax permit to run this business?
A: Yes — you're required to apply for a Texas sales tax permit.

Citations and references

Rules:

• 34 Tex. Admin. Code § 3.356 (real property services)
• 34 Tex. Admin. Code § 3.285 (resale certificates)
• 34 Tex. Admin. Code § 3.286 (sellers' and purchasers' responsibilities)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9909716L

Original ruling text

September 27, 1999

Subject: Opening a Texas Business

Dear **:

Thank you for your recent e-mail requesting information about starting an air
duct cleaning business.

Cleaning air ducts is taxable as a real property service. The total charge
(trip or service charge, materials, stand-by charges, etc.) made to your
customer is taxable. See Rule 3.356 concerning real property services. You must
pay sales tax on all equipment you buy for use in performing the service. These
materials are not resold or transferred to your customer as an integral part of
the service. Materials used to clean the ducts are also taxable.

Materials that are transferred as an integral part of the service may be bought
tax free under a resale certificate. Items such as filters and chemicals
applied to the ducts to prevent odors or the growth of mildew may be bought for
resale. See Rule 3.285 concerning resale certificates.

You are required to apply for a Texas sales tax permit. Rule 3.286 concerning
sellers and purchasers responsibilities. This rule provides information about
record keeping, filing of sales tax returns and tax payments.

You may download the referenced rules at the following website:
http://www.sos.state.tx.us/tac/34/I/3/O/index.html.

You may download a resale/exemption certificate at and
click on the following:

1. Tax Forms
2. Texas Resale/Exemption Certificate

You may view or down load a sales and use tax application at
and then click on the following:

1. Tax Forms
2. Sales & Use Tax
3. AP-201 (Texas Application for Sales and Use Tax Permit)

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

You may call me toll free 1-800-531-5441, extension 3-4683 if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts. My e-mail address is
.

Sincerely,

Eddie C. Washington
Tax Policy Division