Do You Pay Sales Tax on a House in Texas?

When considering the purchase or sale of a house in Texas, sales tax generally does not apply to the sale of real property, which includes the house itself. While the house transaction is not subject to sales tax, certain associated items or services might be.

Real Property Versus Tangible Personal Property

Texas tax law differentiates between real property and tangible personal property. Real property encompasses land and anything permanently affixed to it, such as buildings, fences, or built-in fixtures. Sales tax does not apply to the sale or transfer of real property.

Conversely, tangible personal property refers to items that can be moved and are not permanently attached to the real estate. Examples include furniture or detached appliances. Sales tax in Texas is imposed on the retail sale, lease, or rental of most tangible personal property. The state sales tax rate is 6.25%, with local jurisdictions adding up to an additional 2%, resulting in a maximum combined rate of 8.25%.

Specific Taxable Items and Services

While the house itself is exempt from sales tax, certain items and services related to a home transaction or ownership are subject to it. Appliances, if sold separately or not considered permanently built-in fixtures, incur sales tax. Items like window coverings or other furnishings are taxable if they are part of the sale but not permanently affixed to the property.

Various services performed on or for a home can also be subject to sales tax. Non-residential repair and remodeling services are taxable on both labor and materials. Labor for residential repair and remodeling is not taxable, but the materials incorporated into the residential property are.

Landscaping services, such as planting, mowing, or fertilizing, are generally taxable in Texas. Security services, including alarm system monitoring or guard services, are also subject to sales tax. Additionally, pest control and extermination services are taxable, including inspections and treatments for various pests. If a single charge includes both taxable and non-taxable services, and the taxable portion exceeds 5% of the total, the entire charge may be presumed taxable unless separately itemized.

New Home Construction and Sales Tax

Sales tax implications for newly constructed homes differ from existing home sales. When a new home is built, the homebuilder or contractor is considered the consumer of the construction materials. The builder pays sales tax on materials like lumber, bricks, and wiring. This cost is then factored into the overall price of the home.

Upon the sale of the finished new home to a buyer, the transaction is classified as a sale of real property. The buyer does not directly pay sales tax on the final purchase price of the new home. The sales tax on materials has already been accounted for upstream by the builder during the construction phase.