Texas Sales Tax Treatment & Resale Certificate Options – HUD-Code, Modular, Oilfield, “No-Code,” and Data Center Housing

Several years ago, the Texas manufactured housing industry experienced a major increase in production and sales tied to oilfield housing demand. With energy prices increasing again, that market is returning. At the same time, another major demand driver has emerged — temporary housing and office units for the large construction labor forces building data centers throughout Texas.

We continue receiving frequent questions on this topic, and some of our older guidance articles are again seeing increased traffic. For additional background, see the prior TMHA Member Guide:

Sales Tax and Business Decisions when Using Manufactured Housing in Oilfields

This is a brief refresher and quick reference guide on Texas sales tax treatment for HUD-code manufactured homes, residential modular (“industrialized”) housing, oilfield housing, and “no-code” temporary units.

Quick Summary of Applicable Texas Sales Tax Treatment

• HUD-Code manufactured homes – 3.25% of invoice

Generally subject to the manufactured housing tax under Chapter 158 of the Texas Tax Code, which results in an effective 3.25% tax rate based on the factory invoice or sales price, excluding separately stated shipping, freight, or delivery charges.

• Residential modular (“industrialized”) housing – 3.25% of invoice

Residential industrialized housing generally receives similar Chapter 158 tax treatment as HUD-code manufactured housing, resulting in an effective 3.25% tax rate.

• “No-code” units used outside the oilfield (such as temporary data center labor housing) – up to 8.25% of sales price

No-code units are generally treated as “tangible personal property” (“TPP”) for Texas sales tax purposes and are generally subject to 6.25% state sales tax, plus up to an additional 2% in local sales tax, for a possible combined rate of 8.25%.

• “No-code” units used in oil field operations and classified as Oilfield Portable Units (“OPUs”) - up to 8.25% of sales price

OPUs are generally subject to 6.25% state sales tax, plus up to an additional 2% in local sales tax, for a possible combined rate of 8.25%. See Texas Tax Code definitions relating to OPUs.

• HUD-Code manufactured homes or modular/industrialized housing used for oilfield housing

There has historically been ambiguity regarding whether HUD-code manufactured homes or modular housing used in oil field applications may be treated as OPUs. The conservative compliance approach has often been to assume OPU treatment applies, resulting in 6.25% state sales tax plus up to an additional 2% local sales tax. 

However, these units should not also be subject to an additional 3.25% Chapter 158 manufactured housing tax on top of the OPU treatment.

Resale Certificate / “Pass-Through” Treatment (Optional)

“No-code” TPP units and OPUs are generally eligible for resale certificate treatment when sold to a buyer who will either:

1. Resell the units; or
2. Lease the units in the ordinary course of business.

Under this structure, the manufacturer may sell the units tax-free to the buyer if the buyer provides a valid Texas Sales and Use Tax Resale Certificate and agrees to collect and remit applicable sales tax later “downstream” from the end customer or tenant.

For both TPP units and OPUs, the downstream tax rate is generally 6.25% state sales tax plus up to 2% local sales tax.

To utilize this option, manufacturers should ensure:

• The arrangement is clearly addressed in the purchase contract; and
• The buyer properly executes the Texas Comptroller’s resale certificate form.

Texas Comptroller resale certificate form: Texas Sales and Use Tax Resale Certificate (Form 01-339)

HUD-code manufactured homes and residential industrialized housing generally do not qualify for the same resale certificate/pass-through treatment commonly utilized for TPP or OPU transactions because Chapter 158 manufactured housing tax treatment operates differently than ordinary Chapter 151 TPP taxation.

Quick Summary – Resale Certificate Eligibility (Optional)

NOTE: The following is generally how the tax treatment will apply in the context of temporary workforce housing, but there might be some special circumstances for inventory or dealer transfers.

• No-code / TPP units: Yes
• OPUs: Yes
• HUD-Code manufactured homes: No
• Residential modular / industrialized housing: No

Other Considerations

When evaluating temporary housing projects — including data center labor housing — there can be meaningful advantages to utilizing HUD-code manufactured housing.

Advantages

• Built to a recognized federal construction and safety code

HUD-code homes are constructed to a nationally recognized federal construction and safety standard and may have stronger long-term resale or repurposing value once the temporary housing need has ended.

• Lower effective sales tax rate

HUD-code homes generally qualify for the lower effective 3.25% Chapter 158 manufactured housing tax treatment.

Limitations

• Limited resale certificate/pass-through flexibility

Unlike TPP units or OPUs, HUD-code homes generally do not qualify for the same resale certificate/pass-through structures commonly used in TPP transactions, which means the 3.25% sales tax must be paid at the initial purchase and remitted by the manufacturer.

• HUD-code design limitations

Even under the newer multifamily HUD-code provisions, certain design requirements remain. The most common practical design constraints are generally related to minimum living area concepts (around 150 square feet) and the requirement for a food preparation area.

There may still be some design flexibility available. In many configurations, the living area and food preparation area can overlap or share portions of the same space. The food preparation area generally requires space and utility connections for a small cooktop or stove, a sink, limited work/prep space, and small cabinetry/shelves.

Important Disclaimer

Because Texas sales tax treatment can vary depending on unit design, installation method, end use, lease structure, and evolving Comptroller interpretations, companies should consult their own tax counsel or accounting professionals regarding specific transactions and business structures.