Is Welding As A Service Taxable? What You Need To Know
TEXAS – Welding may be taxable when it constitutes the performance of a taxable service. It is determined by the specific type of work performed and whether it’s an improvement to realty or tangible personal property.
If after installation the item’s removal from the property would not cause substantial damage to the property or destroy the item’s intended usefulness that it is considered “tangible personal property.”
• Unattached metal furniture
• Portable metal goods
• Items designed to be easily removed without permanent damage to property.
If it is embedded in or permanently affixed to the property after installation and is necessary to the intended usefulness of the building or structure then it is considered an “improvement to real property.”
The following will determine the qualification of real property improvement:
• Items individually created to fit specific locations on the property, which vary in size and shape;
• Items permanently installed by such means as using toggle bolts, glue and welding;
• The removal of the item will cause substantial damage to the structure or to the item installed.
Fabricating, Manufacturing, Selling Tangible Personal Property: Even if the customer supplies the raw material, welding that constitutes custom fabrication, assembling or processing of tangible personal property is taxed as the manufacture of tangible personal property.
A welder may accept a resale certificate if the welding is performed on tangible personal property that will be sold by the purchaser of the welding. Welders may issue a resale certificate to suppliers when purchasing the materials that will become part of the item being fabricated or are otherwise transferred to customers as part of the sale.
A welder may accept an exemption certificate if the item being fabricated qualifies for exemption; or if the purchaser is an exempt entity.
In order to take advantage of the manufacturing sales tax exemption, welders would have to fabricated tangible personal property for sale to their customers but not permanently affix it to realty. If purchasing welding equipment tax free but using in a taxable manner, then the welder owes use tax on the divergent taxable use of equipment.
Nonresidential Real Property Repair and Remodeling Services: Welding performed as a repair or remodel of existing nonresidential real property is fully taxable including the repair or remodeling of stairs, gates, balconies and other items permanently attached to real property. The collection of sales or use tax is required on the entire charge connected to the service. Labor charges are taxable when the work is done to existing nonresidential realty.
New Construction and Residential Real Property Repair and Remodeling: A welder becomes a contractor when he performs new construction or improves residential real property. As a contractor, the sales and use tax responsibility depends upon the type of contract used. They may either be lump-sum or separated.
Oil Field and Well Site Welding: Unless clearly indicated that labor performed is part of new construction of an improvement to realty or third-party installation of customer owned equipment, all welding in an oil field is taxable. In connection with the completion of a new oil or gas well, it is not taxable.
Welding on Motor Vehicles, Aircraft and Commercial Vessels: Labor charges to repair or remodel tangible personal property that was exempt when purchase, motor vehicles, aircraft and commercial vessels are not taxable. Tax on parts and materials is handled the same as new construction or residential repairs performed to real property.
For help with your sales & use tax needs, contact us at www.ddhtax.com.