Did federal tax-exempt status make a homeowners association exempt from Texas sales tax, and how were landscaping charges treated when billed to members?

Plain-English summary

The homeowners association was exempt from federal tax, but the Comptroller said that did not generally make a homeowners association exempt from Texas sales tax. It needed to have requested and received exempt status from the Comptroller.

For landscaping, the result depended on how the association billed members:

• If it separately billed members for landscaping, it needed a sales-tax permit, could give the landscaping company a resale certificate, and had to collect and remit tax on the member charges.
• If members paid one lump-sum charge covering all services, including items such as sewer, water, and membership, the association paid tax to the landscaping company and no tax was due from members on that lump-sum billing.

The STAR caption mentions cable television and garbage or trash pickup, but the published letter body does not analyze or decide those services.

What this means for you

The historical letter distinguished federal tax status from a Texas sales-tax exemption and made the landscaping result turn on whether members were billed separately or through a single combined charge.

Common questions

Was federal tax exemption enough? No. The association needed exempt status from the Texas Comptroller.

What happened when landscaping was separately billed? The association needed a permit, could buy the landscaping for resale, and collected tax from members.

What happened under one lump-sum member charge? The association paid tax to the landscaping company, and no tax was due from members under the facts stated.

Does the letter decide cable or garbage charges? No. Those subjects appear only in the STAR caption, not in the operative body.

Citations and references

• 34 Tex. Admin. Code Rule 3.356 (real property services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0845E14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller November 5, 1987

Dear ***:

Thank you for your telephone call of October 30, 1987 concerning taxable
services.

You stated your company is a homeowners association and exempt from
federal
tax. You asked the following questions:

1) Are we exempt from sales tax?

2) When we pay for landscaping is that taxable? What if we charge
the association member for that charge?

Answer:
1) Generally homeowners association do not qualify for sales tax
exemption. Unless you have requested and received exempt status from
the Comptroller of Public Accounts you are not exempt ;for sales tax
purposes.

2) If you bill your association members separately for the landscaping,
you will need to be permitted for sales tax. You may then issue a
resale certificate in lieu of the tax and collect and remit tax on the
amounts charged the members.

However, if your billing to your members is lump sum (including all
services afforded them, i.e. sewer, water membership fee), you should
pay tax to the landscaping company and no tax will be due from your
members. Rule 3.356 enclosed.

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

If you have any questions 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