Texas Administrative Code › Title 34 - PUBLIC FINANCE › Part 1 - COMPTROLLER OF PUBLIC ACCOUNTS › Chapter 3 - TAX ADMINISTRATION › Subchapter O - STATE AND LOCAL SALES AND USE TAXES › Section 3.291 - Contractors

Current through Reg. 49, No. 28; July 12, 2024
(a) Definitions. The following words and
				  terms, when used in this section, shall have the following meanings, unless the
				  context clearly indicates otherwise.
(1)
				  Agreed contract price of materials incorporated into the realty--The price
				  specified in the contract for the incorporated materials, i.e., tangible
				  personal property that becomes a part of the real property, plus any additional
				  charges directly attributable to the incorporated materials. For example,
				  profit that is calculated as a percentage of the cost of materials, cost of
				  transportation of the materials, and markup or handling charges that relate
				  directly to the materials charge are included in the agreed contract price. A
				  charge that is calculated as a percentage of the total contract cost is not
				  considered a part of the agreed contract price of materials incorporated into
				  realty. The agreed contract price of incorporated materials cannot be less than
				  the price that the contractor paid for the materials.
(2) Consumable item--Nondurable tangible
				  personal property that is used to improve realty and, after being used once for
				  its intended purpose, is completely used up or destroyed. Examples of
				  consumable items are nonreusable concrete forms, nonreusable drop cloths,
				  barricade tape, natural gas, and electricity. The term "consumable item" does
				  not include machinery, equipment, accessories to machinery or equipment, repair
				  or replacement parts for machinery or equipment, or any rented or leased
				  item.
(3) Contractor--Any person
				  who builds new improvements to residential or nonresidential real property,
				  completes any part of an uncompleted new structure that is an improvement to
				  residential or nonresidential real property, makes improvements to real
				  property as part of periodic and scheduled maintenance of nonresidential real
				  property, or repairs, restores, maintains, or remodels residential real
				  property, and who, in making the improvement, incorporates tangible personal
				  property into the real property that is improved. The term includes
				  subcontractors but does not include material men, suppliers, or persons who
				  provide taxable real property services. Persons who provide real property
				  services should refer to §
											3.356 of
				  this title (relating to Real Property Service). Persons who repair, restore, or
				  remodel nonresidential real property are providing taxable services and should
				  refer to §
											3.357
				  of this title (relating to Nonresidential Real Property Repair, Remodeling, and
				  Restoration; Real Property Maintenance). Persons who repair, restore, or
				  remodel chemical plants or petrochemical refineries should refer to §
											3.362
				  of this title (relating to Labor Relating to Increasing Capacity in a
				  Production Unit in a Petrochemical Refinery or Chemical Plant).
(4) Equipment--Tangible personal property
				  that a contractor uses that is not a consumable item or an incorporated
				  material. Examples include tools, machinery, implements, and accessories and
				  repair or replacement parts for the equipment.
(5) Exempt contract--A contract for the
				  improvement of real property with an entity that is exempted under Tax Code,
				  §
											151.309 or
				  §
											151.310.
				  An example of an exempt contract is a contract with a nonexempt entity to
				  improve real property for the primary use and benefit of an organization
				  exempted under Tax Code, §
											151.309 or
				  §
											151.310,
				  provided that the improvements relate to the exempt purpose of an organization
				  that is exempted under Tax Code, §
											151.310(a)(1)
				  or (a)(2). Another example is a contract for
				  development work covered under subsection (d) of this section. See §
											3.322 of
				  this title (relating to Exempt Organizations).
(6) Improvements to realty--See §
											3.347 of
				  this title (relating to Improvements to Realty).
(7) Incorporated materials--Tangible personal
				  property that becomes a part of any building or other structure, project,
				  development, or other permanent improvement on or to such real property
				  including tangible personal property that, after installation, becomes real
				  property by virtue of being embedded in or permanently affixed to the land or
				  structure constituting realty and which property after installation is
				  necessary to the intended usefulness of the building or other
				  structure.
(8) Lump-sum contract--A
				  contract in which the agreed contract price is one lump-sum amount and in which
				  the charges for incorporated materials are not separate from any charges for
				  skill and labor, including fabrication, installation, and other labor that the
				  contractor performs. For example, guaranteed-maximum contracts are considered
				  lump-sum contracts when the charges for incorporated materials and the charges
				  for skill and all labor are not separately stated. Contracts to improve realty
				  that do not break out all charges for labor, including fabrication labor, are
				  considered lump-sum contracts. For example, a contractor who fabricates and
				  incorporates cabinets into realty under a contract that includes the
				  fabrication labor in the agreed contract price of materials is a lump-sum
				  contractor. Contracts to improve realty that have a zero charge for materials
				  or for labor are considered lump-sum contracts. Separated invoices issued to
				  the customer will not change a lump-sum contract into a separated contract
				  unless the terms of the contract require separated invoices.
(9) New construction--All new improvements to
				  real property, including initial finish-out work to the interior or exterior of
				  the improvement. An example is a multiple story building that has had only its
				  first floor finished and occupied. The initial finish-out of each additional
				  floor before initial occupancy or use is new construction. New construction
				  also includes the addition of new usable square footage to an existing
				  building. Examples include the addition of a new wing onto an existing
				  building. Reallocation of existing square footage inside a building is
				  remodeling and does not constitute the addition of new square footage. For
				  example, the removal or relocation of interior walls to expand the size of a
				  room or the finish out of an office space that was previously used for storage
				  is remodeling. Raising the ceiling of a room or the roof of a building is not
				  new construction if new usable square footage is not created.
(10) Ready mix concrete contractor--A
				  contractor who manufactures or produces concrete for construction purposes and
				  incorporates the concrete into the property improved.
(11) Sale and installation of tangible
				  personal property--Includes a contract to furnish and install machinery,
				  equipment, or other tangible property that is not essential to the building or
				  structure, nor adapted or intended to become a part of the realty, but which
				  incidentally may, on account of its nature, be temporarily attached to the
				  realty without loss of its identity as a particular piece of machinery,
				  equipment, or property and, if attached, is readily removable without
				  substantial damage to the unit or realty or without destruction of the intended
				  usefulness of the realty.
(12)
				  Residence or residential property--Property that is used as a family dwelling,
				  a multifamily apartment or housing complex, nursing home, condominium, or
				  retirement home. The term includes homeowners association-owned and
				  apartment-owned swimming pools that are for the use of the homeowners or
				  tenants, laundry rooms for tenants' use, and other common areas for tenants'
				  use. The term does not include hotels or any other facilities that are subject
				  to the hotel occupancy tax.
(13)
				  Separated contract--A contract in which the agreed contract price is divided
				  into a separately stated agreed contract price for incorporated materials and a
				  separately stated amount for all skill and labor that includes fabrication,
				  installation, and other labor that is performed by the contractor. If prices of
				  incorporated materials and labor are separately stated in any part of the
				  contract or in a document that becomes part of the contract according to the
				  terms of the contract, adding the charges together to give a sum total does not
				  change the contract into a lump-sum contract. For example, a contract that
				  requires separated invoices is a separated contract. Cost-plus contracts are
				  considered separated contracts if the cost of labor is separately stated from
				  the cost for incorporated materials.