For a multistate title-report company, should local sales/use tax on its Texas information services be sourced to the address of the property the report covers, or to the customer's location?

Plain-English summary

A title-services company with offices in California, Pennsylvania, and two Texas cities produces title reports (loan modification title reports, default/pre-foreclosure title reports, and REO title reports) for real estate and mortgage industry customers nationwide, including in Texas. The company asked whether local sales and use tax on these reports should be based on the address of the property each report describes.

Texas said no — local tax is sourced to the customer's location, not the property address. Title reports are taxable "information services" (furnishing gathered/compiled information for consideration), so the question becomes a standard sourcing question, not one tied to the underlying real estate. Sourcing for information services depends first on whether the seller has a Texas "place of business" — defined as a location that receives three or more orders a year. All of the company's orders (Default, Loan Modification, and REO) are received at its out-of-state offices (California or Pennsylvania) and merely transferred to a Texas office for production; because no orders are actually received in Texas, neither Texas office qualifies as a "place of business" for sourcing purposes, even though real work happens there.

Because there's no Texas place of business, the sourcing falls to different statutory rules depending on whether it's a sale or a use: sales tax is sourced to the state under Section 321.203(e)(2) because the seller's out-of-state office is where the order was received, while local use tax on the taxable services performed outside Texas (the Loan Mod reports produced in Pennsylvania) is sourced under Section 321.205(c) to where the customer first receives the product in Texas. Either way, the property's address plays no role — the company must still collect state tax (6.25%) on all Texas-customer orders, and local tax follows the customer, not the property.

What this means for you

Multistate information-service and title-report companies

Where you receive an order — not where you produce it, and not where the subject matter (like a piece of real estate) is located — is usually what drives Texas local tax sourcing. If your intake happens at an out-of-state call center or web portal, routing the work to a Texas production office doesn't automatically create a Texas "place of business" for local tax purposes.

Companies with multiple offices across states

The "three or more orders received per year" threshold in Section 321.002(a)(3)(A) is the bright line for whether a location counts as a place of business. Track where orders are actually received (not just processed or fulfilled) at each location — that's the fact that controls sourcing, and it can differ by product line even within the same company, as it did here across the three title-report types.

Accountants and tax professionals

This ruling is a useful sourcing-mechanics reference: it walks through the full chain from establishing the service is taxable (information service, Rule 3.342(a)(6)(G)), through state tax collection responsibility (having any Texas presence triggers a collection obligation under Rule 3.286(a)(4)), down to the separate and more granular question of local tax sourcing under Chapter 321 based on place-of-business status.

Common questions

Q: Does the location of the real estate described in a title report affect the tax analysis at all?
A: No. The ruling explicitly rejects sourcing to the property address — local tax sourcing for these information services follows the seller's place of business (if any) and the customer's location, not the address the report is about.

Q: If a company has any office in Texas, does that automatically create a Texas "place of business"?
A: No. A location only counts as a place of business for local tax sourcing if it actually receives three or more orders per year. An office that only produces or fulfills work (without receiving orders) doesn't qualify, as shown here for both Texas offices.

Q: Does the company still owe Texas state sales/use tax even without a Texas place of business?
A: Yes. Having any office presence in Texas is enough to create a state tax collection obligation on sales to Texas customers; the place-of-business analysis only affects local (city/county/district) tax sourcing, not the state tax obligation itself.

Q: Does this ruling apply to my multistate service business?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts and order-intake structure. A company that receives three or more orders at a Texas office would reach a different sourcing conclusion.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010 (sales tax imposition; taxable item)
• Tex. Tax Code § 151.0101(a)(10) (information services as a taxable service)
• 34 Tex. Admin. Code § 3.342(a)(6)(G), (f) (Information Services; service benefit location)
• Tex. Tax Code § 151.351 (20% information-service exemption)
• Tex. Tax Code § 151.052, § 151.103; 34 Tex. Admin. Code § 3.286(a)(4), (e)(3)(B) (retailer collection responsibilities)
• Tex. Tax Code § 321.002(a)(3)(A) (place of business of the retailer — three-or-more-orders threshold)
• Tex. Tax Code § 321.203(e)(2) (local sales tax consummation/sourcing)
• Tex. Tax Code § 321.205(c) (local use tax sourcing)
• Comptroller's Decision No. 115,428 (2020) (title-plant information as a taxable information service)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202104044L

Original ruling text

Alert: As of 01/15/2015, a place of business is defined as "an established outlet, office, or location operated by a seller for the purpose of selling taxable items to those other than employees, independent contractors, and individual persons affiliated with the seller."

April 20, 2021

RE: Private Letter Ruling No. PLR20201016101724

**, Taxpayer No. **

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[ENDNOTE: (1)] We are responding to your updated request we received on Oct. 16, 2020, and additional information received by email on Nov. 3, 2020. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on sales and use tax sourcing of information services for three areas of ** (Taxpayer’s) business: loan modification (Loan Mod) title reports, default and pre-foreclosure title (Default) reports, and Real Estate Owned (REO) title reports.

Facts Presented

Taxpayer has office locations in CITY A, California, CITY B, Pennsylvania, CITY C, Texas and CITY D, Texas that provide a range of products and services to the real estate and mortgage industries, including title reports and title searches (Title Products). Taxpayer performs the work for the Title Products from both inside and outside Texas for customers who are also inside and outside Texas.

Default Orders: Taxpayer provides Title Products for nationwide customers who purchase their Default Title Products. All Default orders are received through a web portal in CITY A, California and then transferred to the CITY D, Texas location where the Title Products are produced for Texas and out of state customers. Texas customers can also submit a spreadsheet with orders to the CITY A, California office instead of using the web portal, but the Taxpayer’s employees place the spreadsheet orders into the web portal at that location. No Default orders are received at any location in Texas.

Loan Modification Orders: Taxpayer provides Title Products for nationwide customers who purchase Loan Mod Title Products. All Loan Mod orders are received through a web portal in CITY A, California and then transferred to the CITY B, Pennsylvania office location where Taxpayer’s employees produce the Loan Mod Title Products for Texas and out of state customers.

REO Orders: Taxpayer provides Title Products for nationwide customers who purchase REO Title Products. All REO orders are received in CITY B, Pennsylvania and are then transferred to the CITY C, Texas location where Taxpayer’s employees produce the REO Title Products for Texas and out of state customers.

Question, Ruling, and Analysis

Your question is shown below, followed by our response and analysis.

Question: Should local sales and use taxes due on sales of the Title Products be based on the address of the underlying property to which the Title Products relate?

Ruling: No. Local sales and use taxes due on sales of the Title Products should be sourced to the location of Taxpayer’s customer.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). The term “taxable services” includes only those services listed in Section 151.0101 (“Taxable Services”). Information services are one of the enumerated taxable services. Section 151.0101(a)(10).

Taxpayer’s Title Products are information provided by a title plant and are taxable information services. See Rule 3.342(a)(6)(G) (Information Services) and Comptroller’s Decision 115,428 (2020). Taxpayer is responsible for collecting and remitting tax on 80 percent of the charge for its services. See Section 151.351 (Information Services and Data Processing Services).

Texas State Sales and Use Tax for Texas Customers

Taxpayer has two offices and is engaged in business in Texas. See Rule 3.286(a)(4) (Seller’s and Purchaser’s Responsibilities). Taxpayer is responsible for collecting and remitting Texas sales and use tax on its sales of taxable information services in this state. Sections 151.052 (Collection by Retailer) and 151.103 (Collection by Retailer; Purchaser’s Receipt).

Taxpayer should collect and remit the 6.25 percent Texas sales tax on sales to their Texas customers who purchase Default and REO Orders as they perform the information service in one of their Texas locations for a customer who is also located in Texas. See Section 151.052 and Rule 3.342(f) (Service benefit location).

Taxpayer should collect the 6.25 percent Texas use tax on the Loan Mod services that are performed in Pennsylvania and purchased by a Texas customer. Taxpayer, as a Texas sales tax permit holder, must remit sales and use tax on all receipts from sales or purchases of nonexempt taxable items, less any applicable discounts. See Rule Section 151.103 and 3.286(e)(3)(B).

Local Sales and Use Taxes

To establish where Taxpayer should source their Title Products for local sales and use taxes, it must be determined if they have a Texas place of business. A “place of business of the retailer” means “an established outlet, office, or location operated by the retailer or the retailer’s agent or employee for the purpose of receiving orders for taxable items and includes any location at which three or more orders are received by the retailer during a calendar year.” Section 321.002(a)(3)(A) (Definitions).

Taxpayer has indicated that neither its CITY D, Texas, nor CITY C, Texas office receives any orders because all Default, Loan Mod, and REO orders are received either in their CITY A, California or CITY B, Pennsylvania offices. As Taxpayer does not receive three or more orders in Texas, it does not have a Texas place of business. Local sales tax on orders received outside of Texas and fulfilled from a location that is not a Texas place of business are sourced according to Section 321.203(e)(2) (Consummation of Sale):

A sale of a taxable item is consummated at the location in this state to which the item is shipped or delivered or at which possession is taken by the customer if transfer of possession of the item occurs at, or shipment or delivery of the item originates from, a location in this state other than a place of business of the retailer and if:

...

(2) the retailer's place of business where the purchase order is initially received or from which the retailer's agent or employee who took the order operates is outside this state.

Local use tax on orders received fulfilled from outside Texas are sourced according to Section 321.205(c) (Use Tax: Municipality in Which Use Occurs):

If a taxable item is shipped from outside this state to a customer within this state and the use of the item is consummated within a municipality that has adopted the tax authorized by [Chapter 321], the item is subject to the municipality's use tax and not its sales tax. A use is considered to be consummated at the first point in this state where the item is stored, used, or consumed after the interstate transit has ceased. A taxable item delivered to a point in this state is presumed to be for storage, use, or consumption at that point until the contrary is established.

Taxpayer should source Texas local sales and use taxes to the jurisdiction where their customer receives their Title Products pursuant to Sections 321.203(e)(2) and 321.205(c).

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20201016101724.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

1. Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.