Sales tax on invoices in Texas

In Texas, you charge your customer no sales tax on a lump-sum contract for residential repair or remodeling or for new construction, but repair or remodeling of nonresidential property is taxed on the total charge.

Permit and who collects the tax

Sellers collect Texas sales and use tax. To sell tangible personal property or taxable services in Texas, you need a free Texas sales and use tax permit, and you may have to post a security bond.

Residential repair and new construction: labor isn’t taxed

Labor to repair, remodel or restore residential real property isn’t taxable, and neither is construction labor on new construction. Your contract decides how the materials are taxed:

• Lump-sum (one price for the whole job): you pay tax on your supplies and materials when you buy them, and charge your customer no tax.
• Separated (materials and labor charged separately): you buy materials with a resale certificate, then collect state and local tax on your materials charge, which must be at least what you paid. The labor isn’t taxable. On residential repair or remodeling, also collect tax on any surveying, landscaping, final cleanup or built-in security systems you charge for separately.

Nonresidential repair and remodeling: tax on the total

Repairing, remodeling or restoring nonresidential real property is taxable on your total charge, except building permit fees you pay for the customer and state separately. Reroofing and repainting count as repair or remodeling.

• Maintenance: labor for scheduled, periodic maintenance of property that isn’t broken, including repainting that is maintenance, isn’t taxable if a contract or other records show the work is scheduled and periodic. The parts and materials you incorporate stay taxable: on one price for the job, you pay tax on them when you buy them; with separate charges, you collect tax on the materials charge. Janitorial, landscaping and lawn services are still taxable, as below.
• New square footage plus remodeling, one price: if the remodeling is over 5% of the charge, the whole charge is presumed taxable. You can overcome that by stating a reasonable charge for the remodeling separately at the time of the transaction, or you or your customer can later show the Comptroller, with documents, the share that is new construction.
• Declared disasters: labor to repair nonresidential property isn’t taxable if the property was damaged by the condition that led the President or the Governor of Texas to declare the area a natural disaster, and your contract or bill states the labor separately from the materials. The materials stay taxable.
• Subcontractors: if you’re a subcontractor on nonresidential repair or remodeling, the contractor who hired you may give you a resale certificate instead of paying tax on your job, and then collects tax from its customer.
• Exempt customers: you don’t need to charge tax on a job for a federal, State of Texas or Texas local government agency, or for an exempt nonprofit that gives you an exemption certificate. Other nonprofits pay tax.

Taxable services: a listed set

Texas taxes the services listed in Tax Code Section 151.0101. They include janitorial work, landscaping and lawn maintenance, pest control, nonresidential repair and remodeling, and appliance repair.

Charges for manufacturing, assembling, fabricating or processing products are taxable too, even when your customer provides the raw materials, tools or equipment. The Comptroller’s examples of such labor include woodworking, welding and custom sewing.

Tax line on your invoice

When you charge sales tax, state it separately on the bill. The only alternative is to give your customer the written statement “Texas state and local sales and use tax is included in the sales price” and prominently display a sign saying so.

On a lump-sum contract for residential repair or remodeling, or for new construction, leave the tax line off. Separated contracts, nonresidential repair and single-price nonresidential jobs presumed taxable carry tax, as above. A separate credit card processing fee on taxable items is part of their taxable sales price.

Local tax: place of business or job site

Cities, counties, special purpose districts and transit authorities can add up to 2% to the state rate on this page. Local tax is generally based on your place of business, but the job site decides it for nonresidential repair or remodeling and for the materials charge on a separated contract.

Landscaping and lawn care

Landscaping and lawn or plant care, such as mowing, pruning and fertilizing, are taxable on the total charge, state and local.

• These aren’t taxable: mowing cemeteries and pipeline or highway rights-of-way, trimming trees away from power lines, and harvesting, cultivating, mowing and fertilizing farm or forest land.
• Building or repairing decks, retaining walls, fences or pools, and installing underground sprinklers, is construction or repair work, not landscaping. Bill it separately.
• State nontaxable charges separately, or your whole charge is presumed taxable when the taxable part is over 5%.
• Landscaping a new residence for a contractor or homebuilder isn’t taxable, including model and speculative homes to be sold for residential use. Landscaping an office, such as a sales office, is taxable, even inside the residential development. Bill tax until the contractor certifies that the work is part of the new residence.
• The materials for a new residence stay taxable. On one price for materials and labor, you pay tax when you buy them and charge no tax. With separate charges, you collect tax from the contractor or homebuilder on the materials charge.
• If you’re self-employed, work alone with no employees or partners, and took in $5,000 or less from this work in the most recent four calendar quarters, your lawn care and landscaping aren’t taxable, except pest control services that require a license. Past $5,000, collect tax from the first day of the next quarter. Once you’re back to $5,000 or less for the most recent four calendar quarters, the exemption resumes on the first day of the next quarter.

Cleaning and pressure washing

Cleaning a home, office or any other building, or a swimming pool, is taxable. Self-employed housekeeping is tax-free only if you’re an employee of the household, not a subcontractor for a third party such as a maid service. Pressure washing is taxable too, on personal property and on buildings, sidewalks and parking lots.

Building maintenance and groundskeeping that a contractor or homebuilder buys as part of building a new residence aren’t taxable.

Residential or nonresidential: check first

Residential real property means family dwellings, including apartment complexes, nursing homes, condominiums and retirement homes, but not hotels or property rented for periods of less than 30 days. For property with both residential and commercial use, ask the Comptroller for its guidelines.