Was a water district's charge for measuring and reporting landowners' water depletion taxable as an information service?

Plain-English summary

Water-district staff measured water on a landowner's property, compared the result with the prior year's measurement, and calculated a depletion amount that the landowner could use for federal income-tax purposes.

The Comptroller said the described information was not taxable as an information service under Rule 3.342(d)(2).

Common questions

Was the depletion report taxable? No.

What work produced it? Field measurement, year-over-year comparison, and calculation of a dollar depletion amount.

Did the letter rely on the district's governmental status? It did not say so; the answer cited the information-services rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8811L0913B13

Original ruling text

November 15, 1988

Dear **:

Thank you for your letter of November 7, 1988, concerning the taxability of
water depletion information provided to landowners.

The information you provide is not taxable as an information service. See
section (d)(2) of the enclosed rule 3.342 - Information Services.

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, you may call toll-free
number 1-800-252-5555, ext. 3-4683. The regular number is 512/463-4600. You may
write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Correspondence

November 7, 1988

Sales Tax Information
P.O. Box 13528
Austin, TX 78711

Dear Sirs:

We are a political subdivision of the State of Texas and we are supported by
and ad valorem tax. One of our functions is to provide water depletion
information to the people in the area that we service. They use this
information to received a credit for the amount of depletion on their land on
the federal income taxes.

To do this service, some of the water district staff goes out and measures the
water on landowner's land. We then compare that figure to last year's
measurement and arrive at a dollar amount of depletion which we then send to
the landowner at their request.

We were wondering if this service would be subject to sales tax.

If you have any further question, please feel free to contact me at the water
district at **.

Thank you.

Sincerely,

Bookkeeper/Cost Accountant