When were Texas real-estate appraisals taxable for loans, property sales, tax purposes, insurance coverage, or insurance claims?

Plain-English summary

Real-estate appraisals performed to determine property value for obtaining a loan, selling the property, or tax purposes were not taxable.

Appraisals valuing property for insurance coverage, insurance loss, or damage were taxable as insurance services. But a lender-required appraisal remained nontaxable when its primary purpose was financing the loan, even if the appraisal was also used to establish property insurance that the lender required as a financing condition.

What this means for you

The historical letter classified an appraisal by its primary purpose. Financing, sale, and tax valuations were nontaxable; insurance valuations were taxable unless insurance use was secondary to a lender's financing requirement.

Common questions

Were appraisals for a loan taxable? No.

What about appraisals for selling property or tax purposes? Those were also not taxable.

Were appraisals for insurance coverage, loss, or damage taxable? Yes.

Did a lender-required appraisal become taxable merely because it also supported required insurance? No, when its primary purpose was financing the loan.

Citations and references

• No 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/8710L0843C07

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller October 30, 1987

Dear ***:

Thank you for your recent letter concerning taxability of real estate
appraisals.

You state that you appraise real estate only for lenders, governments,
courts
and individuals. You operate under the Texas Real Estate Law and
Commission.
Each associate is an independent contractor who is a licenses real estate
broker or salesman as required by law. Each associate is self-employed
and
operates by appraisal fees, not commissions.

Real estate appraisals to determine the property value for the purpose of
obtaining a loan, selling the property or tax purposes are not taxable.

Real estate appraisals to value property for insurance coverage or for
insurance loss or damage would be taxable as insurance services.
However, an
insurance service performed in connection with an appraisal required by a
lender as a condition of extending credit is not taxable as an insurance
service because the primary purpose in obtaining the service is financing
the
loan. The fact that the appraisal may also be used in establishing
property
insurance required by the lender as a condition of financing does not
render
the service taxable.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any question or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller September 1987

Dear Prospective Taxpayer:

Starting October 1, the Texas sales tax will apply to many services which
were
previously not taxable.

• Your business may be one of those new taxable services.

If so, you need to get a sales tax permit if you do not already have one.
And you
need to familiarize yourself with your new legal duties under the sales
tax law.

• Remember that in the event of an audit, you are labile for these new
  sales
  taxes whether or not you collected them from your customers.

Then enclosed brochure lists the new services that now come under the
sales tax.
It also tells how to get a sales tax permit and it lists addresses of our
local
offices throughout the state.

I am also enclosing a postpaid card which you can use in asking for more
information.
Please be sure to show your business name, address and telephone number
when return-
ing the card.

Of course you may also call our Tax Assistance Section toll free from
anywhere
in Texas at 1-800-252-5555. Our regular number is 512/463-4600.

If you are a new taxpayer, please let me welcome you among the 1.5
million Texans
and Texan businesses who collect and pay the Texas sales tax and various
other
state taxes. We look forward to working with you in every way possible.

Sincerely,
BOB BULLOCK
COMPTROLLER OF PUBLIC ACCOUNTS