Texas Register, Volume 10, Number 28, Pages 1169-1196, April 9, 1985 Page: 1,177
1169-1196 p. ; 28 cm.View a full description of this periodical.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
,that the inclusion of this requirement is
well within the scope of the statute.
The amendments are adopted under the
Texas Tax Code 111.002, which pro-
vides that the comptroller may prescribe,
adopt, and enforce rules relating to the
administration and enforcement of the
sales tax.
*3.291. Contractors.
(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 mate-
rials-The price specified in the contract for
the materials, plus any additional charges
directly attributable to the materials. For ex-
ample, profit calculated as a percentage of
the cost of materials, cost of transporting
the materials, mark up, or handling charges
related directly to the materials charge are
includable in the agreed contract price. A
charge calculated as a percentage of the to-
tal contract cost will not be considered a
part of the material's selling price. The
agreed contract price of materials cannot be
less than the price the contractor paid for
the materials.
(2) Contractor-Any person who
improves real estate and who, in making the
improvement, incorporates tangible per-
sonal property belonging to him into the
property being improved. The term includes
subcontractors but does not include materi-
al men and suppliers.
(3) Improvements to realty-See
3.347 of this title (relating to Improve-
ments to Realty) for this definition.
(4) Lump-sum contract-A con-
tract in which the agreed price is one lump-
sum amount and in which the charges for
materials are not separate from the charges
for skill and labor. Separated invoices is-
sued to the customer will not change a
lump-sum contract into a separated contract
unless the terms of the contract require
separated invoices.
(5) (No change.)
(b) Tax responsibilities of contractors
improving real property belonging to non-
exempt customers.
(1) Consumable supplies and
equipment. Tax must be paid by a contrac-
tor at the time of purchase of those supplies,
tools, and equipment used to perform a
contract but which are not physically incor-
porated into the property of a customer.
The contractor may not collect tax from the
customer on the charges for consumables.
(2) Lump-sum contracts.
(A)-(C) (No change.)
(D) Contractors performing
lump-sum contracts for persons having
direct payment permits may not accept a
direct payment exemption certificate from
those persons. When performing lump-sum
contracts for a direct payment permit
holder, the contractor must pay sales tax to
the supplier or accrne and remit sales taxon materials removed from a tax-free inven-
tory for incorporation into the direct pay-
ment permit holder's realty. Direct payment
permit holders cannot authorize the con-
tractor or any other person to purchase alny
taxable item using their permit. See $3.288
of this title (relating to Direct Payment
Procedures and Qualifications).
(3)-(6) (No change.)
(c) Tax responsibilities of contractors
improving real property for exempt cus-
tomers.
(1) Exempt customers are those
listed in the Texas Tax Code, 151.039 and
151.310. Contractors improving realty for
an organization claiming an exemption
from tax under 151.309 and 151.310
should obtain a properly completed exemp-
tion certificate to substantiate the exemp-
tion. (An exemption certificate is not
required for contracts with federal or state
agencies.) If the validity of the exemption
is not clear, a contractor cannot accept the
exemption certificate in good faith and
should request additional evidence of the
exempt status of the organization. A sales
tax letter of exemption from the comptroller
addressed to the organization is evidence of
its exempt status and will relieve a contrac-
tor from further inquiry, except under the
circumstances set out in paragraph (2) of
this subsection If a contractor claims an ex-
emption in lieu of paying tax on a purchase
by reason of performing a contract with an
exempt organization and the comptroller
subsequently determines the organization is
not exempt, the contractor will be liable for
all taxes, penalties, and interest accruing
upon such purchase unless the contractor
accepted in good faith a properly complet-
ed exemption certificate.
(2) (No change.)
(3) Materials furnished by exempt
customers. A contract may specify that a
customer which is an organization is exempt
from tax under 151.309 and 151.310 will
furnish the materials and the contractor will
furnish the skill and labor necessary to per-
form the contract. Under this type of con-
tract, the contractor will not incur tax
liability on materials. The customer may is-
sue an exemption certificate to suppliers in
lieu of tax when purchasing the materials,
unless the contract for improvements is of
the type outlined in paragraph (2) of this
subsection or for improvements that are un-
related to the activity which qualifies the
customer for exemption. In either of the last
two cases, the exempt customers must pay
tax to suppliers at the time the materials are
purchased. See also 3.322 of tlis title
(relating to Organizations Exempted from
Sales/Use Tax).
(4) Transactions exempt from sales
and use taxes include:
(A) the purchase by a contractor
of all materials, supplies, equipment, and
other tangible personal property incorpo-
rated into the property being improved for
the exempt customer including the UnitedStates, its agencies, and instrumentalities.
(B) the purchase, rental, or lease
by a contractor of all materials, supplies,
equipment, and other tangible personal
property used in the performance of the
contract with a customer exempt under
151.309(4) or (5) or 151.310. The pur-
chase, rental, or lease by a contractor of all
materials, supplies, equipment, and other
tangible personal property used in the per-
formance of a contract with the United
States, its agencies, and instrumentalities is
taxable if the item is not incorporated into
the property being improved.
(5) An exemption certificate may
be issued to suppliers for the purchase, ren-
tal, or lease by a contractor of those items
identified in paragraph (4) of this subsec-
tion and must identify the exempt entity and
the project for which the equipmerY
materials, and supplies are being purchased,
leased, or rented. see 3.287 of this title
(relating to Exemption Certificates).
(d) Uses of equipment; tax due;
method of computation.
(1) Purchase of equipment. Con-
tractors improving realty for both exempt
and nonexempt entities may purchase
equipment from suppliers tax free by issu-
ing an exemption certificate in lieu of sales
tax. When equipment is used on a job other
than as described in subsection (c)(4) of this
section, sales tax should be computed as
outlined in paragraphs (5) and (6) of this
subsection.
(2) Refund or credit for tax paid.
If sales tax was paid to a supplier at the time
of purchase and at a later date equipment
is used on a job as described in subsection
(c)(4) of this section, the contractor may ob-
tain a refund or credit for sales tax directly
from the state only by obtaining a written
assignment of the right to the refund from
the supplier to whom the tax was paid.
(3) Computation of credit. If an
assignment is received and if the contrac-
tor's records are accurate and complete as
required by paragraph (6) of this subsection,
credit will be allowed for equipment pur-
chased for use on a taxable job and subse-
quently used on an exempt job for the peri-
od of exempt use.
(A) (No change.)
(B) The total amount of credit
due from the exempt use of machinery or
equipment initially purchased tax paid will
not exceed the total amount paid at the time
of purchase.
(4) Consumable materials and sup-
plies. If a contractor purchases, rents, or
leases materials or supplies tax free for use
in performing a contract with an exempt or-
ganization under 151.309(4) or (5) or
151.310 and uses the items in some man-
ner or for some purpose other than as de-
scribed in subsection (c)(4) of this section,
the contractor is, at the time of the nonex-
empt use, liable for tax based upon the pur-
chase price of the items. The tax should be
reported and remitted to the comptroller for4 Adopted Rides April9, 1985 10 TexReg 1177
April 9, 1985 10 TcxRf 1177
4 Adopted Rules
Upcoming Pages
Here’s what’s next.
Search Inside
This issue can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Periodical.
Texas. Secretary of State. Texas Register, Volume 10, Number 28, Pages 1169-1196, April 9, 1985, periodical, April 9, 1985; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth243680/m1/11/: accessed May 13, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.