Was a membership fee taxable when it included contracted insurance-claims processing for members, and who taxed discount-card purchases?

Plain-English summary

The organization contracted with a company to provide insurance-claims processing to members as part of their membership fee. The Comptroller said claims processing was an insurance service when performed for an insurance carrier, its insured, or policyholders.

Because insurance services became taxable October 1, the monthly membership fee for Texas residents was taxable from that date.

Members also received a discount card for other vendors' products and services. Members dealt directly with those vendors, and the organization was not involved in the transactions, so the vendor—not the membership organization—charged the appropriate tax.

What this means for you

The historical letter taxed the membership fee because it bundled in contracted claims processing. It separately assigned tax collection on direct vendor purchases to the vendors because the organization did not participate in those sales.

Common questions

Was the monthly Texas membership fee taxable? Yes, effective October 1, 1987.

Why? It included insurance-claims processing under the facts described.

Who collected tax on discount-card purchases? The participating vendors, because members transacted directly with them.

Citations and references

• No statute or administrative rule is cited in the letter 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/8712L0850D01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 10, 1987

Dear ****:

Thank you for your recent letter and brochure on "your organization".

In our conversation, you said you had contracted with a company to
provide
insurance claims processing which you provide to your members as part of
their membership fee. Claims processing is an insurance service when
performed for an insurance carrier, its insured, or policyholders.

Insurance services became taxable effective October 1. Therefore, your
monthly membership fee for Texas residents will be taxable as of October
1.

You said that members get a discount card that entitles them to discounts
on
other products and services but that the members deal directly with those
vendors and "your organization" is not involved in those transactions.
Since you are
not involved in the actual transaction, the vendor and not "your
organization" would
charge the appropriate tax.

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,
Al Van Allen
Tax Policy Division