Do contractors charge sales tax in Texas?
In Texas it depends on how the contract is written. Under a lump-sum contract the contractor is the CONSUMER of the materials and charges the customer no sales tax. Under a separated or time-and-materials contract the contractor is a RETAILER of the materials and must charge the customer sales tax on them. Texas also has county, city or special-district rates on top of the state rate, so the rate depends on where the job site is, not where the contractor is based. Source: 34 Tex. Admin. Code §3.291 (Contractors) and §3.357 (Nonresidential real property repair, remodeling and restoration).
| What | Texas |
|---|---|
| Contractor’s default role | Depends on the contract |
| What the charge is called | Sales Tax |
| Local rates on top | Yes — sourced to the job site |
| Capital improvement exempt to the customer | Yes |
Notes
Two independent axes. RESIDENTIAL repair, remodel and restoration is not taxable, and neither is new construction of any kind. NONRESIDENTIAL repair, remodel and restoration is fully taxable on labor and materials together — and for that work the lump-sum/separated distinction no longer changes the answer. The contract-type rule still governs new construction and residential work: lump-sum makes the contractor the consumer, separated makes them the retailer of the incorporated materials. Separated INVOICES do not create a separated contract unless the contract itself requires them.
Source
34 Tex. Admin. Code §3.291 (Contractors) and §3.357 (Nonresidential real property repair, remodeling and restoration).
Read the statute in the Texas Statutes (Texas Legislature): statutes.capitol.texas.gov.
This is a summary of a state’s published guidance, not tax or legal advice. Rates and rules change, local jurisdictions add their own, and the treatment of a specific job depends on the contract and the work. Check the citation and speak to a CPA or a state tax adviser before relying on it.
How Seayora uses this rule
Seayora resolves this rule on every invoice a contractor raises — per line, from the job site’s own address — and prints the rate, the jurisdiction and this citation on the document itself, so the estimate a customer accepts is the invoice they are billed. Where the rule is more nuanced than a single answer, Seayora refuses to guess a total rather than quoting a confident wrong one.
Guides on this rule
- Sales Tax Basics for Contractors and Service Businesses — When contractors charge sales tax: how states treat repairs, capital improvements and materials, what nexus means, and the exemption certificates to keep.
Compare this rule in every state
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The same question in other states
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii