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Sales, Use and International Tax Articles

Sales, Use and International Tax Activity Update - March 2012

Work on Tangible Personal Property Gets Tax Makeover in Texas

The Texas comptroller of public accounts has issued a notice to explain that separately stated labor charges for the repair or maintenance of tangible personal property are not subject to sales tax if the repair or restoration is required under a statute, rule, or by a government entity in order to conserve energy.

The labor involved in the repair, remodeling, maintenance or restoration of tangible personal property is not taxable if the repair, remodeling, maintenance or restoration is required by statute, ordinance, order, rule or regulation of any commission, agency, court; or political, governmental or quasi-governmental entity in order to protect the environment or to conserve energy.

Under state and federal law, medical service providers operating radiation machines must maintain radiation equipment within manufacturer specifications due to environmental concerns. Therefore the exemption applies to labor charges for repair, remodeling, maintenance or restoration services performed on diagnostic imaging and therapeutic equipment subject to oversight by the Department of State Health Services (DSHS) pursuant to the Radiation Control Program when the services are performed to keep or bring the machinery within required specifications.

The exemption applies only to charges for labor for those services required to keep or bring qualifying machinery within the required specifications. The exemption does not apply charges for "cosmetic repairs" or to tangible personal property, including repair or replacement parts used or consumed during the service.

The labor charges for qualifying services must be separately stated from any charges for non-qualifying services and materials or replacement parts. Under a separated contract, the service provider should collect tax on the separately stated charge for materials and/or cosmetic repairs, but may accept an exemption certificate in lieu of tax on the charge for labor. If the charges for such services are billed to consumers as a lump sum, then the entire charge is presumed taxable.

December 2011 Tax Policy News; Texas Department of Revenue, December 1, 2011

December 2011 Tax Policy News can be viewed at:

http://www.cpa.state.tx.us/taxinfo/taxpnw/tpn2011/tpn1111.html


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