Texas has some of the most clearly defined contractor tax rules in the United States, but the residential vs. commercial distinction is critical and frequently misunderstood. This guide covers all major trades.

The Core Texas Contractor Rule

Texas uses a "separated contract" model for construction contractors. The key distinction is always:

Residential repair/remodeling labor → Exempt

Commercial (nonresidential) repair/remodeling labor → Taxable

New construction labor (residential or commercial) → Exempt

Materials → Always taxable (either paid by contractor at purchase or collected from customer)

By Trade
Plumbers

Residential: Labor exempt, materials (pipe, fittings, fixtures) taxable at 6.25%+local. Commercial: Both labor and materials taxable. List separately on every invoice. Source: Texas Comptroller Publication 96-1740

Electricians Residential repair: Labor exempt, materials (wire, breakers, panels) taxable. New residential construction: Labor exempt, materials taxable. Commercial repair: Both labor and materials taxable. Permit fees: not taxable — list separately.

HVAC Residential maintenance: Labor exempt. Residential new installation (lump-sum): Contractor pays tax on equipment at purchase. Commercial maintenance/repair: Both labor and materials taxable.

Roofers Residential repair: Labor exempt, materials taxable. Residential new construction: Labor exempt, materials taxable (contractor pays at purchase). Commercial repair: Both labor and materials taxable.

Painters Residential: Labor exempt, paint and supplies taxable. Commercial: Both labor and paint/supplies taxable.

Landscapers *(different rules)* Landscaping is a taxable service in Texas — both labor AND materials (plants, mulch, sod) are taxable regardless of residential or commercial. This differs from construction contractor rules.

Auto Repair *(different rules)* All motor vehicle repair labor AND parts are taxable in Texas. This is fundamentally different from construction — apply tax to the full invoice.

The Local Tax Component

The state rate is 6.25%. Local municipalities can add up to 2%, making the maximum combined rate 8.25%. Always verify the local rate for the specific job-site address at Texas Comptroller's Rate Finder.