Texas General Contractor License: State and Local Rules

Texas does not issue a statewide general contractor license. The state agency that registered residential builders, the Texas Residential Construction Commission, lost its authority on September 1, 2009 and was abolished (Texas Sunset Advisory Commission). You can run a general contracting business in Texas without a state exam or state license — but you'll still deal with state trade licenses for electrical, HVAC, and plumbing work, city contractor registration in many large cities, state sales tax rules, and Texas's construction trust fund law.

For how Texas compares with licensing states, see states that do not require a general contractor license and contractor license cost by state.

What Texas does license: the trades

As a GC you can sell and manage a project that includes electrical, HVAC, or plumbing work, but that work must be done by properly licensed trade contractors.

Sources: TDLR electrical contractor, master electrician, and A/C contractor pages; Texas State Board of Plumbing Examiners responsible master plumber and master plumber pages.

City contractor registration

With no state license, the city where the project sits is usually where the rules are. Requirements vary sharply:

San Antonio (Development Services):

Austin (contractor registration) requires general contractors — including homeowners acting as their own GC — and mechanical, electrical, and plumbing contractors to register before doing permitted work. General contractors register once and update only when their information changes; trade contractors update annually.

Dallas, Houston, Fort Worth, El Paso, and smaller cities each set their own rules for contractor registration, permit accounts, and insurance certificates. Check the building department's contractor page for the city where the project is — not where your office is — before you bid.

Worked example: setting up a remodeling business in San Antonio

The LLC fee is from the Secretary of State's Form 205. Your government fees here total $450 for the first two years; the insurance premium will be the largest launch cost. If you expand into residential new construction, the residential building contractor registration ($170 per two years) adds an ICC certification requirement and higher insurance limits.

Texas sales tax rules for contractors

Texas taxes construction differently depending on the type of job and contract (Comptroller Publication 94-116):

• New construction (residential or commercial): labor isn't taxable.
• Residential repair and remodeling: labor isn't taxable.
• Nonresidential repair and remodeling: the entire charge, labor included, is taxable.

For materials on new construction and residential jobs, the contract type decides who pays:

• Lump-sum contract: you pay sales tax on materials when you buy them and don't charge the customer sales tax.
• Separated contract: you buy materials tax-free with a resale certificate, itemize them on the invoice, and collect sales tax on the materials from the customer.

Example. A $40,000 job with $15,000 of materials, in a city where the combined rate is 8.25% (the 6.25% state rate plus the 2% local maximum):

Price the job differently in each case: on a lump-sum contract the tax is your cost and belongs in your bid.

Construction trust funds and homestead contracts

Texas Property Code chapter 162 treats construction payments and loan proceeds as trust funds held for the subs, suppliers, and workers on that project. Misapplying $500 or more is a Class A misdemeanor, and a third-degree felony with intent to defraud. On a residential homestead contract over $5,000, you must deposit the funds in a dedicated construction account and keep account records; failing to do so is itself a Class A misdemeanor.

Contracts for home improvements that create a lien on a homestead must also include the statutory "IMPORTANT NOTICE" warning required by Property Code section 41.007. Leaving it out is a deceptive trade practices violation.

Workers' compensation

Most private Texas employers can choose not to carry workers' compensation, according to the Texas Department of Insurance; nonsubscribers must notify the state and report qualifying injuries. Two exceptions matter for contractors:

• Public work: under Labor Code section 406.096, a governmental entity's building or construction contract must require the contractor to certify workers' comp coverage for each employee on the project, and subcontractors must provide certificates too.
• Private contracts and trade licenses: many GCs and owners require coverage in the subcontract, and TDLR requires electrical contractors to show coverage, self-insurance, or a filed non-coverage election.

Going without coverage also removes the legal protection workers' comp gives employers against most injury lawsuits, so weigh it carefully once you hire.

Can a handyman work in Texas without a license?

Generally yes, for work that doesn't involve licensed trades and that the city doesn't require registration for. Problems start when a "handyman" job includes replacing a water heater (plumbing), adding a circuit (electrical), or swapping an AC condenser (HVAC). Those require the appropriate state license, and permits for them are issued only to licensed trade contractors.

Working across the state line

Texas contractors near Louisiana or working on out-of-state projects should know that neighboring states do license general contractors. Louisiana's State Licensing Board for Contractors requires a license for commercial projects of $50,000 or more, residential projects over $50,000, and home improvement jobs of $7,500 or more, with lower triggers for mechanical, electrical, and plumbing work (LSLBC license types). A Texas business with no license history can't simply bid those jobs; plan for the exam, financial statements, and lead time before you chase work there.

Common mistakes Texas contractors make

1. Assuming "no state license" means no rules. City registration, permit accounts, and insurance minimums still decide whether you can pull a permit.
2. Letting a helper do trade work. An unlicensed employee wiring a circuit puts you, not just the employee, in violation, and the permit won't be issued or finaled.
3. Pricing lump-sum jobs without sales tax on materials. On a lump-sum residential contract, the tax you pay at the supply house is your cost; leave it out and you've cut your margin by the full local rate.
4. Commingling homestead job funds. Running a residential homestead deposit through your general operating account breaks the chapter 162 construction-account rule on jobs over $5,000.
5. Skipping the homestead notice. A home improvement contract that creates a lien on a homestead without the section 41.007 notice exposes you to deceptive trade practices claims.

Texas startup checklist

1. Form your entity (LLC filing: $300) and get an EIN.
2. Register for a Texas sales and use tax permit and decide on lump-sum or separated contracts.
3. Register with each city where you'll pull permits, and meet that city's insurance minimums.
4. Line up licensed electrical, plumbing, and HVAC subcontractors, and collect their certificates.
5. Set up a separate construction account for residential homestead jobs over $5,000.
6. Decide on workers' compensation before your first hire, and get it for any public project.
7. Budget for bonds only if a city permit or public project requires one; see contractor bond vs insurance.

The full launch budget is in contractor startup costs, and the general contractor license cost calculator flags Texas as a local-only state. Texas has no state income tax, but federal income and self-employment tax still apply to your profit; see the contractor tax deductions guide and the California vs Texas taxes comparison.