The Tax Code exempts labor to repair real or tangible personal property located in a disaster area.  A disaster area is an area declared a disaster by the Governor of Texas under Government Code, chpater 418 or the President of the United States 42 U.S.C. Section 5141.  In order for the repair service to be exempt, the property must have been damaged by the condition or event (e.g., the flood, hurricane or tornado) that caused the area to be declared a disaster area.

         The exemption applies only to the labor.  The materials are still taxable.  In order for the exemption to apply, the amount of the charge for labor must be separately itemized.  The service provider must collect tax from the customer on the separately agreed contract price for incorporated materials.  The service provider may accept an exemption certificate from the customer instead of collecting tax on the labor portion of the contract.  If the repair contract is a lump-sum contract, the entire contract price is taxable (unless the customer is an exempt entity and the repair relates to the exempt purpose of the organization).