Was a lump-sum charge combining electronic tax-return transmission and a bank loan fee taxable in Texas?

Plain-English summary

A tax preparer charged the client directly for return preparation, which the parties agreed was not taxable. A separate company prepared the paper return, electronically transmitted data to the IRS when requested, and arranged a bank loan based on the expected refund.

The client was told that part of the expedited-refund charge was for electronic transmission and part was a bank fee, but the invoice showed only one combined amount. Because the charge was billed as a lump sum, the Comptroller said the entire charge was taxable.

The letter applied a historical 7% rate, allocated the local tax to San Antonio, and said MTA tax was not due. The franchise taking the order for the telecommunications service was responsible for reporting the tax.

What this means for you

Under this 1988 guidance, the nontaxable return-preparation fee did not protect a separate bundled charge containing electronic transmission and a bank fee. Invoice separation mattered.

Common questions

Was the return-preparation fee taxable? No, under the facts agreed in the letter.

Was the combined transmission and bank-fee charge taxable? Yes, in full because it was invoiced as one lump sum.

Who had to report the tax? The franchise that took the order for the telecommunications service.

Citations and references

The letter did not cite a rule or statute by number. Its 7% rate and local-tax directions are historical.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8804L0883A06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller April 18,1988

Dear ****:

I have combined the information you gave me on the phone with the details
in
your letter and would like to be sure I have all the facts. As I
understand
the transaction:

• You take tax-related information from your client and give them an
  estimate as to what their refund will be.

• You offer the client the opportunity to get his refund more quickly by
  electronically transmitting the data to the IRS.

• You said that you mail the information to ABC Company in San Antonio
  (not your franchise), they prepare the actual return on paper and mail
  it back to you.

• You said that if the client wants to expedite his refund, the San
  Antonio office electronically transmits the data to the IRS and arranges
  for a loan to be made to the client for the amount of the refund less
  certain fees.

• You said the bank, known as ***, would make a charge of about
  $30.00 on a $450.00 loan and ABC Company would charge $20.00 for the
  transmission. Thus, the client would get $400.00 of the $450.00 refund.

• You said the client paid you directly for the return preparation and we
  agreed that this fee was not subject to sales tax.

• You said that the client would be told that the fee for electronic
  transmission was $20.00 and the bank fee was $30.00, however, the
  invoice to the customer does not make this distinction but simply shows
  a $50.00 charge.

Because the client is billed a lump sum amount, the total charge is
subject
to sales tax. The tax rate is 7% and the local tax is allocated to San
Antonio. MTA tax is not due.

Because your franchise takes the order for the telecommunications
service,
they are responsible for reporting the 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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may write
me
at the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division