Texas – Exemption for Labor When Mandated by Law

SALT Report 1290 – The Texas Comptroller’s newsletter discusses sales tax exemptions for certain repair services pursuant to the Radiation Control Program. Under Texas Tax Code Section 151.338, a sales tax exemption is allowed for repair, remodeling, maintenance, or restoration services that are mandated by state or federal law to protect the environment or to conserve energy.

This exemption applies to charges for labor performed on diagnostic imaging and therapeutic equipment subject to oversight by the Department of State Health Services when the services are performed to keep or bring the machinery within manufacturer specifications due to environmental concerns.

Qualifying equipment includes, but is not limited to:

  • X-ray equipment
  • Computed tomography equipment
  • Cardiac catheterization equipment
  • Mammography equipment
  • Nuclear medicine equipment
  • Ultrasound equipment, and
  • Lithotripsy equipment

The exemption also covers services performed on a component part of an integrated unit of qualifying equipment, such as X-ray tubes, filters, detectors, power supplies, operator workstations, viewing equipment, printers, patient tables, and networking equipment or associated computer software.

The exemption does not apply to services performed on magnetic resonance imaging (MR or MRI) equipment because neither the DSHS nor any other regulatory body mandates the repair, remodeling, maintenance, or restoration of such equipment. And, the exemption does not apply to charges for cosmetic repairs or for parts used or consumed during the service.

Labor charges for qualifying services must be separately stated from any charges for non-qualifying services and materials. If charges for services are billed to consumers as a lump sum, then the entire charge is presumed taxable.

For Further Information:

Texas Comptroller of Public Accounts – Tax Policy News