How to Start an HVAC Business in Texas

Last updated: February 23, 2026

Starting an HVAC business in Texas is a strong opportunity – the state’s extreme summer heat, sprawling new construction, and growing population create year-round demand for air conditioning installation, repair, and maintenance. But Texas requires HVAC contractors to be licensed through the Texas Department of Licensing and Regulation (TDLR) Air Conditioning and Refrigeration (ACR) program, and federal law requires EPA 608 certification for anyone handling refrigerants.

This guide covers every requirement, cost, and step to legally start and operate an HVAC business in Texas, whether you’re launching as a solo service technician or building a full-service installation company.

HVAC Business Requirements in Texas at a Glance

How to Start an HVAC Business in Texas (Step by Step)

Step 1: Meet Experience Requirements (48 Months in HVAC)

Texas requires substantial hands-on experience before you can apply for a contractor license through the TDLR ACR program. There are two qualifying paths:

Option 1 (Standard Path):

• 48 months of practical ACR experience working under a licensed contractor
• Must have been completed within the past 72 months (6 years)

Option 2 (Technician Path):

• Hold a TDLR Certified Technician license for at least 12 months
• Plus 36 months of practical ACR experience within the past 48 months

Start documenting your experience early. TDLR requires detailed verification of your work history, including employer information, dates, and the type of ACR work performed.

Technician licenses (if you’re not yet ready for contractor):

• Registered Technician: $20 initial, $20/year renewal – allows you to work under a licensed contractor
• Certified Technician: $50 initial, $20/year renewal – requires passing a technician exam, allows more independent work under a contractor

Step 2: Pass the TDLR ACR Contractor Exam

You must pass the TDLR ACR contractor exam, which is administered by PSI at testing centers throughout Texas.

Exam coverage:

• Texas ACR laws and regulations – state-specific licensing rules, consumer protection, and compliance
• Technical HVAC knowledge – refrigeration principles, system design, installation, troubleshooting, and safety

Choose your license class before the exam:

• Class A Contractor: No restrictions on system size – can work on any residential, commercial, or industrial system
• Class B Contractor: Limited to systems of 25 tons cooling capacity or 1.5 million BTU/hr heating capacity or less

Both license classes cost $115 initial and $65/year renewal. Most candidates who plan to grow their business choose Class A for the unrestricted capacity.

Step 3: Get EPA Section 608 Certification

Federal law requires EPA Section 608 certification for anyone who purchases, handles, or disposes of refrigerants. This applies to all HVAC technicians and contractors nationwide.

• Type I: Small appliances (5 lbs or less of refrigerant)
• Type II: High-pressure appliances (most residential and commercial AC systems)
• Type III: Low-pressure appliances (large commercial chillers)
• Type IV (Universal): Covers all equipment types – recommended for HVAC contractors
• Exam cost: $25-$150 depending on testing provider
• Duration: Lifetime certification – no renewal required
• 2026 update: Exam questions now include A2L (mildly flammable) refrigerants as the industry transitions away from high-GWP refrigerants

Step 4: Form Your Texas LLC

File your Certificate of Formation online at SOSDirect. Total cost: $300. Processing takes 2-3 business days for online filings.

Your LLC name must include “LLC,” “L.L.C.,” or “Limited Liability Company” and must be distinguishable from existing entities on file. You’ll need a Texas Registered Agent with a physical street address in the state – you can serve as your own registered agent if you have a Texas address.

If you want to operate under a different name (e.g., “Lone Star HVAC” instead of “Lone Star HVAC LLC”), file an Assumed Name Certificate (Form 503) with the Secretary of State ($25) and with the county clerk.

Step 5: Get Your Federal EIN

Apply for a free Employer Identification Number at IRS.gov. You’ll receive it immediately when applying online. You need this to open a business bank account, and it’s required if you plan to hire employees.

Step 6: Get TDLR-Mandated Insurance

Texas is one of the states where the licensing agency sets specific insurance minimums for HVAC contractors. You must have proof of insurance before TDLR will issue your license.

General Liability Insurance (Required by TDLR)

Class A Contractor minimums:

• $300,000 per occurrence / $600,000 aggregate general liability
• $300,000 products and completed operations coverage

Class B Contractor minimums:

• $100,000 per occurrence / $200,000 aggregate general liability
• $100,000 products and completed operations coverage

Many HVAC contractors carry higher limits ($1 million per occurrence / $2 million aggregate) to meet commercial client requirements and provide additional protection. Average cost in Texas: $800-$2,500/year depending on coverage level and revenue.

Commercial Auto Insurance

Essential for HVAC businesses – you’ll be driving to job sites daily with tools and equipment.

• Average cost in Texas: $1,500-$2,500/year
• Covers service vans/trucks, tools in transit, and third-party liability

Workers’ Compensation Insurance

Texas is one of the few states where workers’ comp is optional for private employers. However, if you choose not to carry it (becoming a “non-subscriber”), you must:

• File DWC Form 005 with the Texas Department of Insurance annually (between February 1 and April 30)
• Notify each employee in writing that you don’t carry workers’ comp
• Post a notice at the workplace
• Warning: Non-subscribers lose key legal defenses in employee injury lawsuits. HVAC work involves significant physical risk – climbing ladders, working on rooftops, handling electrical components, and exposure to refrigerants. We strongly recommend carrying coverage even though it’s not required.

Step 7: Apply for Your TDLR ACR Contractor License

Once you’ve passed the exam and have your insurance in place, submit your application to TDLR.

Application requirements:

• License fee: $115 (Class A or Class B)
• Exam results – passing score on the PSI-administered TDLR ACR exam
• Proof of experience – 48 months under a licensed contractor (or technician alternative path)
• Proof of insurance – certificates meeting TDLR minimums for your license class
• Annual renewal: $65/year

Step 8: Register for Sales Tax and Local Permits

Sales Tax Permit

If you sell equipment, parts, or materials directly to customers, you need a sales tax permit from the Texas Comptroller of Public Accounts (free).

• State sales tax rate: 6.25% plus up to 2% local taxes (max 8.25% combined)
• Taxable: Sale of HVAC equipment, parts, and supplies to customers
• Labor-only service calls (no parts sold) may be structured differently – consult with a Texas tax advisor for your specific situation

Local Business Permits

Texas doesn’t have a statewide business license, but many cities require local permits:

• City business permits: Check with your city clerk or licensing department. Some cities (Houston, Dallas, Austin, San Antonio) have their own permit requirements.
• Mechanical/HVAC permits: Most Texas cities require permits for HVAC installation work – these are pulled per job, not a one-time license
• Home occupation permits: If operating from home, many Texas cities require a home occupation permit ($0-$100)
• Cost: Typically $0-$200 depending on your city

Step 9: Plan for Continuing Education

TDLR requires HVAC contractors to complete 8 hours of continuing education every year before their license renewal date.

• 1 hour must cover Texas ACR law – state-specific regulations and updates
• 7 hours of technical CE – topics like refrigerant management, system design, code updates, and safety
• Cost: $50-$150 depending on provider and format (online or in-person)
• Must be completed through TDLR-approved CE providers
• Keep certificates of completion – TDLR may audit

Cost to Start an HVAC Business in Texas

Solo Contractor (Service and Repair Focus)

Small HVAC Company (Install + Service, 1-5 Employees)

Related Texas Business Guides

• Starting a Business in Texas: Complete Guide

← Back to all Texas business guides

Frequently Asked Questions

What license do I need for HVAC in Texas?

You need a TDLR Air Conditioning and Refrigeration (ACR) contractor license. There are two classes: Class A allows work on any size system with no restrictions, and Class B is limited to systems of 25 tons cooling capacity or 1.5 million BTU/hr heating capacity or less. Both cost $115 initially and $65/year to renew. You must pass the TDLR ACR exam administered by PSI and have at least 48 months of practical experience under a licensed contractor.

Do I need EPA certification to do HVAC work in Texas?

Yes. EPA Section 608 certification is federally required for anyone who purchases, handles, or disposes of refrigerants. Universal certification (Type IV) is recommended because it covers all equipment types. The exam costs $25-$150 and grants a lifetime certification with no renewal required. As of 2026, exam questions include A2L (mildly flammable) refrigerants.

What insurance does TDLR require for HVAC contractors?

TDLR mandates specific insurance minimums based on your license class. Class A contractors must carry $300,000/$600,000 general liability plus $300,000 in products and completed operations coverage. Class B contractors must carry $100,000/$200,000 general liability plus $100,000 products and completed operations. You cannot obtain or renew your license without proof of these coverages.

Is workers’ compensation required for HVAC businesses in Texas?

No. Texas is one of the few states where workers’ comp is optional for private employers. However, non-subscribers must file DWC Form 005 with TDI annually, notify employees in writing, and lose key legal defenses in injury lawsuits. Given the physical risks of HVAC work – ladders, rooftops, electrical components, and refrigerant exposure – we strongly recommend carrying coverage.

How much does it cost to start an HVAC business in Texas?

A solo contractor focused on service and repair can start for approximately $13,000-$26,000, including licensing, a used service van, basic tools, and insurance. A small HVAC company with installation capability and employees typically costs $32,000-$73,000 due to higher insurance requirements, install-grade equipment, inventory, and fleet costs.

How much continuing education do Texas HVAC contractors need?

TDLR requires 8 hours of continuing education every year, including at least 1 hour covering Texas ACR law. The remaining 7 hours cover technical topics like refrigerant management, system design, and code updates. CE must be completed through TDLR-approved providers before your annual license renewal date. Cost ranges from $50-$150 per year.