Did Texas decide whether attorneys had to collect sales tax on debt-collection services before a pending Attorney General opinion was issued?

Plain-English summary

The Comptroller did not decide whether attorneys' debt-collection charges were taxable. An Attorney General opinion was still pending, the existing rule did not specifically address attorneys, and the office said it would not require attorneys to collect tax until that opinion was issued.

The letter observed that attorney work identical to a non-attorney debt collector's service might logically be taxable, but immediately cautioned that the Attorney General could reach the opposite result. It also said there was no policy for the period after October 1 and before the opinion, although Executive Counsel would be surprised if the office tried to collect tax for that period if the later opinion found fees taxable.

What this means for you

This is a record of uncertainty and interim enforcement, not a holding that attorney debt collection was taxable or exempt.

Common questions

Did Texas say attorney debt collection was taxable? No.

Did Texas say it was exempt? No.

Were attorneys required to collect tax while the opinion was pending? The letter said no attempt would be made to require collection until the Attorney General opinion issued.

Did the letter promise no retroactive collection? No. It said there was no policy and expressed only an expectation.

Citations and references

• No opinion number, statute, or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0832G13

Original ruling text

BOB BULLOCK
COMPTROLLER OF PUBLIC ACCOUNTS
AUSTIN, TEXAS 78774

October 15, 1987

Dear ***:

In your letter of October 14, 1987, you have asked for clarification of
our rule on debt collection as it applies to attorneys.

To refer to conversations with Mrs. Mona Shoemate concerning our present
interpretation and ask that I confirm her statements.

As you know, we are awaiting the Attorney General's opinion as to whether
certain services performed by attorneys are subject to tax. We have
advised attorneys calling this office that our rule does not specifically
address attorneys and no attempt will be made to require attorneys to
collect tax on their services until an opinion is issued by the Attorney
General.

Since we do not know how the opinion will be written, it is impossible
for us to advise attorneys what if any charges they make to clients are
taxable. Common sense would seem to dictate that if an attorney was
doing what a non-attorney debt collector does, the charges would be
taxable. However, the Attorney General could issue an opinion which
found this was not subject to tax. It would seem prudent for an attorney
to collect tax if the services rendered were the same as those provided
by debt collectors.

You were particularly concerned about the collection of tax on trans-
actions occurring after October 1 but before the Attorney General opinion
is issued. There is no policy on this since we have not seer the
opinion.
I can tell you that Mr. Bullock has generally not tried to collect tax
from taxpayers where they could not know what tax to collect. If the
Attorney General was of the opinion certain fees were taxable, I would be
very surprised if our office would attempt to collect taxes before the
ruling was issued.

I regret I cannot be more definitive in my answers. Let's hope the
opinion is issued in the near future.

Sincerely,
Wade Anderson
Executive Counsel