Mold remediation typically requires a variety of services. Some of those services are taxable, while others may qualify for exemption. Taxability is dependent upon the actual services being provided, who is purchasing the services, and what type of property the services are being performed on. The taxability may also be affected by whether the services are done in a declared disaster area.
The following information explains the taxability of many of the services provided by mold remediation companies.
Testing - The charge to test air samples for mold is not taxable unless the test is used to determine the need for, or effectiveness of, mold remediation covered under an insurance policy. In that case, the service is a taxable insurance investigation. See Rule 3.355, Insurance Services.
If testing is used by an insurance company, it is taxable, even if done in a declared disaster area. Insurance services are not exempt from tax when provided in disaster areas.
Containment Barriers - Setting up a containment barrier is not taxable. The service provider must pay tax on the materials and equipment used.
Protective Equipment - A charge for protective equipment used by a mold remediation service provider is not taxable. The service provider owes tax to suppliers on the purchase of this equipment.
Packing and Storage - A charge for packing services, removing, and boxing all contents for storage and cleaning is not taxable. A charge for storing clothing and furniture is not taxable. The service provider owes tax on materials and equipment used to provide these services.
Fur storage is taxable. The service provider should separately state charges for storing fur garments from charges for storing other items. See Rule 3.310, Laundry, Cleaning, and Garment Services.
Cleaning Tangible Personal Property - A charge for cleaning tangible personal property, such as furniture, clothing, and drapes, during mold remediation is taxable.
In a declared disaster area, a purchaser may claim an exemption on separately stated charges for labor related to cleaning personal property.
The service provider must pay sales tax on supplies, materials, and equipment used to perform the cleaning. Chemicals used as part of a clean-up service are not considered resold by the service provider.
Service providers may issue a resale certificate, however, when buying materials and chemicals (such as deodorizers or Scotchgard) that remain on the cleaned items and thus are transferred to the customer. Service providers must collect tax from the customer on charges for those materials.
Water Extraction - Water extraction services done after plumbing problems, a flood, or similar event to restore a residence to its original condition are not taxable.
No tax is due on charges for these services related to water extraction jobs when performed on residential realty:
For nonresidential property, water extraction services are taxable as nonresidential real property repairs or restoration. See Rule 3.357. When the President or the Governor declare an area a disaster area, then purchasers may claim an exemption from tax on separately stated charges for labor for these services to repair or restore property damaged in the disaster.
Scotchgarding, Deodorizing, Treating with Antimicrobials - Treating carpets, furniture, drapes, and similar items with Scotchgard, deodorizers, or antimicrobials to retard bacterial growth is a taxable service, whether performed on residential or nonresidential property. See Rule 3.310.
Purchasers may claim an exemption on separately stated charges for labor for these services when performed on property damaged in a declared disaster area.
The service provider must collect tax from the customer on the separately stated charges for the chemicals or other materials used for Scotchgarding, deodorizing, or antimicrobial treatment. The service provider can issue a resale certificate when buying these items but owes tax on all other equipment and supplies used to provide the service.
Real Property Cleaning - Examples of building cleaning services performed during mold remediation include duct cleaning; removal of mold from walls, ceilings, and floors using bleach or another chemical solution; and carpet cleaning. These are taxable real property services whether performed on residential or nonresidential property.
In a disaster area, purchasers can claim an exemption on labor charges for cleaning services that are specifically related to repairing damage caused by the disaster, including real property cleaning services performed as part of a mold remediation service.
The service provider must pay tax on all consumables, equipment, and supplies needed to perform these services.
Decontamination - Decontamination (i.e., HEPA vacuum all framing and structural surfaces and cleaning with a bleaching solution) is a taxable real property service.
Purchasers may claim an exemption from tax on separately stated charges for labor for services performed in a disaster area.
Demolition Services - A charge to tear out mold-infected areas in residences is not taxable. Partial demolition services performed on non-residential structures are taxable real property repair and remodeling services.
Purchasers may claim an exemption on separately stated charges for labor for partial demolition services performed on nonresidential buildings in a declared disaster area.
Tax is due on all supplies, materials, and equipment used to provide this service.
Waste Removal - A charge to haul away debris is a taxable real property service. Waste removal services are also taxable when provided in a disaster area.
If more than 5 percent of a lump-sum charge for mold remediation services is for taxable services, tax is due on the total. To avoid or overcome this presumption of taxability, the service provider can separately state the taxable and nontaxable services that are performed. See subsection (i) of Rule 3.356.
The Texas Tax Code does not place a limit on how long a purchaser has to claim an exemption on labor charges related to a declared disaster. For the exemption to be valid, however, the charges for labor must be separately stated and directly related to repairing damage caused by a declared disaster. For example, decontamination services in a building that was damaged by a disaster qualify for exemption from tax, even if the labor is done several months or years after the disaster occurred, but charges for decontaminating services not directly related to damage caused by a disaster are taxable. To claim the exemption, the buyer must provide an exemption certificate to the service provider and specifically indicate the disaster that caused the damage and the type of damage sustained.
Note: There is a four year statute of limitation for claims for refunds of tax paid in error. See Sales Tax Refunds for additional information.