 Honorable Jack Fields             Opinion No. WW-1258
 county Attorney
 ~~,“tacNnCounts                   Re:   Whether the state E per cent
       iivaca, *eras                     sales tax awlles. to mja$erlal
                                         and suppliee purohaaeu by con-
                                         traotofs to be irmmpwated
                                         in public bulldIngs under a
 Dear Mr. Melds:                         “Lump SUP” contract.
       You have asked this office for an opinion as to whether or
 -not the state ltiited   sales, excise and use tax applies to
  material8 and supplies purchased by contractors from material
  auppliersI such materials and supplies, to be Incorporated into
  a public butldlng, tb-wit     a county hospital. You state that
  Calhoun County has voted $700,000 In tax bonds for an eqlmrion
  OS the hospital.    In response to a telephone inquiry,  you at&t&d
  that all of the bids were in “lump,sum”, that is, one prtee
  wan submftted for all labor and materials.
        This act, commonly known as the Texas Sales Tax Act, wan
   enacted by the 57th Lsgfslature,  FiPst ,$alled Sew3lon, and
,“beDame effective   on September’l; 1961. The act is Article I
   of House Bill No. 20, to be codified In Chapter 20, Title 122&
   Taxatlon-Qeneral, V.C,S., as Articles 20.01 to 20.17,lnoluelve.
       Article   20-02 of the Act reada in part aa followa:
              “There is hereby Imposed upon each separate
           aale at retail of tangible personal property
           shade within this State a limited sales tax
           at the Pate of two per c&t (2$ of the eale
           price of each Item OP a+tiole 0h tMgible
           peraonal property when sold at retail In
           this State,
              “(A) Method oi Colleotion and Rate of
            Limited Sales Tax. The tax hereby lmpoeed
            shall be collected by the retailer from the
            comumr . ”
       Article   26.03.0f   the Aot reads In part as follows:      .
               *An excise tax is hereby imposed on the
            atorage, use or other consumption in this
            state of tangible personal property purchased,
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        ” ‘Honorable Jack Bielde,            Page 2
         ‘. .

                              leased OP rented fmn any retailer   on or
                              after September 1, 3961, for storage, ma
                              or other conevnptlon in thla State at the
                              rate of two per cent (2$) of the .eales
                              prlee of the propsrty.or,  In the case of
                              leases or rentals, of said lease or rental
                              prioee.
                             me~~~~f   U.;;d.::;; for Ihe Tax: Extfnguiah-
                                                     Every person storm&
                             using OP otherwls;?,consuming in this State
                             tangible personal pmpmty purchased from
                             a retailer   or leased or rented Prom ahother
                             'person for such~purpose~is liable      for the
                             tax.   Hi8 liability    is ,pot extinguished until
                             the tax hae. been paid to this State, except
                             that a receipt from a retailer mafntaining
                             a place of bu;sfnese in this State 01”from a
                             mtaller    who is authorfmi by the Comptmller,
                             under such rule8 end regulation8 a6 he may
            ‘.
                                 b~rfb~~~to collect the tax and who Sb,
.                             QP tlm purposes of thfs Chapter relating
                             4”
                             to Wmuae t;ax, regard& ‘aa a retailer mafn-
                                                of bW.nem in this State,
                                                        purbuant to paragraph
                         *                 Artfole fa sufficient     to relieve
                                             ipemafu@hm liabb412ty for the
                             tees $4 which the meerpt mfers.”
        .            .




                                   %~PQ are exempted f%qm the computation
                                of.the 8ztmmt 08 th@ &srs;s Quposed by this
                               ‘oN#-a~~ the reoefpta Ppog the aalec lease
    .                        .‘op m&al 00 say tangibke parson81 property
                              tog OP a?#m ewmge*      um   OT othel, 00lasww1Qs
                              e& ter@lbl~  @WsaU       ppelprptv bvs



                                ‘(4) Any %ountyp sfty, special dZetrict
                              QP.O~~~Ppolltloa1 aub&vidion of this State.


                ’ &rt$ole 20.04 (8 ) (4) of the aet state8 that countlee,
             klttis, apeelal diatrieta-and  other political subdlvlslons of
          .’:.tMa Tote erpd %Xe@pted &ax! the oomputatlon of the amount of
        ‘. . t&a tqes .3apoml by th%a Chapter em Xt ia pleln that under, the

                                                                                  .
        ‘.
         Honorable Jack Fields,         Page 3       Opinion No. WW-1258


         language of the above ofted provleion, a purchase by the oounty
         Itself of materials and supplies to be afterward Incorporated
         into a county public building is exempt from the tax.
                 But what if” the coMPactor buys the material land supplies
         to be Incorporated Into a building for an exempt agency under
         a “lump sum” contract?      What did the Legislature mean by
         Article    20.01 (T) of the act, which read8 86 fol~ow#r

                          “(T) Contractor or Repalpman. ‘Con-
                       tractop’ OP ‘RepaIrman’ shall mean any
                      pez.son who pepSorms any repair. service
                      upon tangible personal property or who
                       perform any improvement upon real estate,
                       and who, as a rieceseary and incidental
                      part of performing such L)ervIces, Incorporates
                       tangible personal property belonging to him
                       into the property being 80 repaired or
                     ,,Improved a Contractor or repairman shall be
                      ‘oonsidered to be the consumer of such tangible
                      personal property Surnished by him and In-
                       eorpomted  into the propsAy of his CuatomeC~
                       POP all OS the purposes of this Chapter.

                        “(1)  The above provislon ahall apply only
                      IS the oontraot between the person PerSorming
                      the aervlcea and the person receivfng them
                      contains a lump sum price covering both the
                      perfomance OS the servicesand    the Surnish-
                      lng of the necessary iX4dental material.”
                   The first sentence in thedefInitIon  quoted in Article
             20.01 (T) shows that the Legislature intends to make no dla-
             tlnction between 8 “cofitractor” and a “repairman. “ The term
             applies to anyone who:
                      (a)   “ierforms    any rspair services   upon
                             tangible    peereon%  property”
                            OP

                      (b)   “g;;z;ps     any improvement upon real

             ana, “as a necessary end Incidental part of performing such
             servloes,  incorporates tangible personal property belonging
             to him into the property being so repaired or improved.
                   Does a construction contractor who undertakes to con-
             atruct a building for his customer under a ‘lump 8um” contract
             fall #ithin this deffnltlon?    We hold that he does, because

    .,   .                                                                    .
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    1._   : ~~8omrable    Jack Fields,   Page 4     Opinion No. WV-1258


            he *pePiorme en improvement upon rdal eatate,” to-uit;. hb..
            construeto a building on the land; and “aa a neoerrmrg and
            inoldental part of pelpiomlng suoh aePvIceI), inoo~porates
            tsngible personal pPoperty belonging to him int+,tha property
            beIn@ 110 repaired or Lawroved,” to-wit,     limpbar, brick or etone,
            plumbing material@, wiring, plaster,     tile, eta.
                   It ha6 been ruggerrted that paragraph (Ti of Article 2O.01
             of the aot, In lta def’inftlon of “Contraotor      or “SiqalPman”
             18 not Pererring to a “eon&Puotlon” oontraetor, who oonstructr
            .bulldiny,   roads. brldger   8nd other rtruoturer   ~B.xed   to the
             land, but should be llmlted to repaIrmen onlyi rdL0 npa9.r
             tangible pepsopal property or who Q&B repaIra to exl#tlng
             structures tiiixed t0 the land. The artatuto, howover, makom
.




             no such dlntlnctlon.    Included In the deflnltion    ir one “who




            slderlng how to claaelcLy an elaborate air conditioning syetem
            which had been installed In Q building extending irom the
            basement and throughout five floors of the building,   and stated
            at page 472:
                            “In fact, OUTTexas oaeee, along with
                          rome otheror take the view that the term
                          ~lmprovemente~ comprehends all addltlons
                         ~to the freehold, except ‘trade fixtures’
                         which can be Pemsved without Injury to
                          the building e‘I
            We cannot give the tePm any narrower meaning.

                   Note that undeP the above derinltfon,    tb aontraator 10
             incorporating tangible personal property “belonging to him,”
             that la, to, the 0ontPactoP.    The definition  qoe8 on to say that
             the oontPa0tor OP PepafPman Is the “ooneumer of’ the tangible
             peraonal property furnished by him. Under Article 20.03 ot
             the act there Is Imposed a u8e tax, and in Section (A) thereot
             16 round the r0il0wilag etatement:
                 1
                           “Every person atoping, using or otherwise
                        consumlrq in this State tangible personal
                       property puP0hased fPom a retailer    or leased
                        op. rented tPom another person for auoh pur-
                       pose is liable fop the tax. ”
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     ,                                         ..




         Honorable Jack Fields,       Page 5              Opinion No. WY-1258


         Section (A) of Article 20.03 further provide6 that the conBUrner’s
         liability  to pay the tax 1s extinguished if he haa a receipt
         from a retailer with a place of bueineaa located In Texas, or
         a retafler who has been Issued a permit by the Comptroller.
               Section (1) of paragraph (T), Article 20.01, states that
         the preliminary statement in paragraph (T) applies when                     “the
         peraon performing the services:’ that la, the contraator or
         repairman, charges the “person receiving them,” that Is, the
         customer, a “lump sum prioe covering both the performance of
         the aervlcea and the furnlehing of the necessary incidental
         material .n Section (1) further provides that the rule laid
         down above applies only to “lump sum” contracts.    The problem
         presented where tha contract providea for separate bill
         for labor and materials Is covered in Seotlone (2) and (3               7
         or Article 20.01, but is not before UB at this time.
               Applylru5 the’foregofng  to the bid, or contract resulting
         therefrom, for the expansion of the county hoapltal, we hold
         that,slnce    the contract between the construotlon company and
         the county provides for lump sum payment, then under the plain
         language of Article 20.01, paragraph (T), including the pre-
     ,, llmlnary      definition,   and Section     (1)    following   thereafter,
         construed with Article 20.03, paragraph (A), the title to the
         materlala and supplies passes from the material supplier to
         the contractor at the time the contractor purchases them.
         The contractor,  therefore, urea “tangible personal property
         belonging ‘to him” In performing “an improvement upon real
         estate” and iti the “consumer” of such materlale.   Since he
         is the ultimate coneumer of such materials, the contractor
         pays the tax to‘hla supplier.   Article 20.01 (T) of the act
         states that thie is the last sale of the material6 as Buch,
         when such materiale are to be used In fu;lfilling  a lump sum
         contract.   Therefore, under a lump .%a contract, there is no
         tax which the contractor can collect from hle customer, on
         the materials furnished; and this would be true with regard
         to any “lump sum” contract, regardless of who the oustomer
         might be.

                                      SUMMARY

                            A construction contractor,  under
         .            a contract to construct an expansion
                      to a county hospital, where the contract
                      price Is in “lump sum” for all labor and
                      material?, la the ultimate ooneumer of
                      all mater’lals used in constructing such
                      project,  as provided in paragraph (T),
                      and Seoflon 1 thereof, of Article   20.01,'
                      Title 122A, Taxation-Qeneral, V.C.S.
                      Such contractor muet pay the sale6 tax
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     RonorableJack Fields,     Page 6         OplnlonNo. WW-1258


                on materiala   and eupplles pumhased
                from his materialsupplier,and tw
                oontractor cannot oollect the tax Prom
                his mratomer. The oountyta exempt status
..              under Section (4), paragraph (F), of
                Artlcle.20.04 of the above aot will not
                Inure to the benefitof:the oontractor
                under a "lump mm" oontract,
                                        Youra very truly,



                                        ;~yy-q.Y*                            .

                                            Riley &gene Bletcher
                                            'Asslbtant


     APPROVED8
     OPINIONCOMMITTEE:
     W. V. asppert,Chairman
     MhriettaMoQregor Payns
     Martin   ruter~0
     Rlmer    McVeg
     Arthur Sandlln
     RRVIRWJ FOR 'PHI3A’i’TGR.WRY
                               QNNERAL
     By: Houghton Brownlee, Jr,
