Texas Sales and Use Tax for Repairing and Remodelling Existing Real Property

As a contractor, it's crucial to track sales tax when purchasing construction materials. The type of contract and materials used can impact your tax responsibilities. In Texas, sales tax rules for repairing and remodeling real property differ for residential and non-residential properties.

Residential Repair and Remodeling

✅ Labor Costs: Nontaxable
✅ Materials: Taxable

Lump Sum Contract

• If you charge customers a lump sum for a residential repair/remodel job, you pay tax on all your supplies and taxable services when you buy them.

• You do not charge sales tax to your customers.

Separated Contract

• If you charge customers separately for labor and materials:

  • Submit a resale certificate to your vendor.

  • Charge sales tax to customers on materials you purchased.

  • You still pay tax for any supplies that you do not resell.

Non-Residential Repair and Remodeling

✅ Both Labor & Material Costs: Taxable

Certain types of work on non-residential property are taxable, including:

• Rebuilding real property.

• Upgrading any part of an existing structure.

• Replacing any part of an existing structure (except minor repairs like replacing a belt on a machine).

• Repairing damaged, broken, or defective structural parts.

Exemptions

You do not need to charge tax when working for:

• Governmental agencies

• Customers providing a resale or exemption certificate

🚨 Natural Disaster Exception: Labor to repair non-residential property in areas declared a natural disaster by the President or Texas Governor is not taxable.

Need Help with Texas Construction Sales Tax?

At Arnold CPA, we provide expert guidance to ensure compliance and minimize your tax burden.

📞 Contact us today for personalized assistance from a trusted Houston CPA!