34 TAC §3.291
The Comptroller of Public Accounts adopts a new §3.291,
concerning contractors, without changes to the proposed text as published
in the April 27, 2001, issue of the
Texas Register
(26 TexReg 3150).
The new section replaces the existing §3.291, which is being repealed
so that the content may be restructured and updated. The new section incorporates
legislative changes made to Tax Code, §151.0048 and §151.311, and
includes definitions of equipment, exempt contract, incorporated materials,
new construction, and residence or residential property. The change to Tax
Code, §151.0048, excludes real property services purchased by a contractor
as part of the construction of new residential structures from the definition
of real property services. The change to Tax Code, §151.311, exempts
incorporated materials, certain consumable items, and certain taxable services
purchased by a contractor who improves real property for an exempt organization
exempted under Tax Code, §151.309 or §151.310. Other changes provide
specific examples to clarify the tax responsibilities of contractors. The
definition of new construction in subsection (a)(9) reflects the decision
in Administrative Hearing No. 36,375, which holds that raising the roof of
a building is not new construction if new usable square footage is not created.
Comments on the proposed new rule were received from the Texas Association
of Builders. The association appreciated the additional definitions and examples
found in the proposed rule, and that the rule covers the legislative change
to Tax Code, §151.0048. The labor for a real property service purchased
by a homebuilder, developer, or contractor, as part of the construction of
a new residential structure, is not taxable under §151.0048.
The Texas Association of Builders commented that the comptroller should
change rules so that builders may use cost-plus contracts without having to
hold sales tax permits or be burdened with the collection and remittance of
sales tax. Instead, builders would pay the sales tax up front to suppliers.
The comptroller responded that the tax responsibility of a contractor under
a lump sum or separated contract is determined by Tax Code, §151.056.
For this reason, the proposed rule was not changed.
This new section is adopted under Tax Code, §111.002, which
provides the comptroller with the authority to prescribe, adopt, and enforce
rules relating to the administration and enforcement of the provisions of
the Tax Code, Title 2.
The new rule implements Tax Code, §§151.0048, 151.056, 151.311,
and 151.707.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on July 2, 2001.
TRD-200103810
Martin Cherry
Deputy General Counsel for Tax Policy and Agency Affairs
Comptroller of Public Accounts
Effective date: July 22, 2001
Proposal publication date: April 27, 2001
For further information, please call: (512) 463-3699