News and Insights

Ryan & Company Obtains Decision to Exempt Roof Replacement from Texas Sales Tax

Tax Development Feb 09, 1999

Ryan & Company recently obtained a proposed decision in Comptroller's Hearing No. 36,375 holding that the replacement of a roof in a poultry processing plant was non-taxable new construction, not taxable repair and remodeling work. The taxpayer replaced an old roof over the evisceration section of its poultry processing plant with a new pre-cast concrete roof. The new roof, which was ten to twelve feet higher than the old roof, was constructed over the existing roof and then the old roof was removed. The new roof was raised in order to make space available for a substantial new steel substructure necessary to support process piping and electrical equipment. Because the new roof was ten to twelve feet higher than the old roof, Ryan & Company argued that new cubic footage was created. The Administrative Law Judge held that since new footage was created, the project was considered new construction.

The Tax Division argued in its exceptions that the addition of new "cubic" footage is insufficient to change taxable remodeling into non-taxable new construction. The Tax Division attempted to distinguish Comptroller’s Hearing No. 31,904 (1994) by arguing that although "cubic" footage was created, new square footage was also created. In that case, a 16’ by 16’ concrete pit was dug out 10’ below floor level. Steel grating was placed over the pit. Because of the steel grating, the Tax Division argued that the case should have been decided based upon the creation of new square footage and that the decision should be overturned to the extent it concludes that "cubic" footage constitutes new construction.

The Administrative Law Judge’s decision on exceptions is pending. Please contact a Ryan & Company professional for more information.