Ezel / Tax Rulings / TX
TX 8812L0922C03 Sales and/or Use Tax (State,Local,MTA) 1988-12-12

Was a property manager's fee for overseeing an owner's commercial remodeling contract taxable?

Short answer: No. The manager acted as the owner's eyes and ears and did not perform the remodeling or daily construction supervision, so the 5% fee was not taxable.

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This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The property owner hired the remodeler directly. A separate property management company charged 5% of direct construction costs to oversee the contract and confirm that the work satisfied the owner, but it did not supervise daily construction.

The Comptroller treated the manager as the owner's “eyes and ears.” Because it did not perform the remodeling service, its oversight fee was not taxable.

Common questions

Was the 5% supervision fee taxable? No.

Did the property manager perform the remodeling? No.

What role did it perform? It monitored contract fulfillment for the owner.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

December 12, 1988

Dear **:

Thank you for your letter concerning sales tax on a "supervision fee"
charged by a property management company .

I understand the property owner hired the contractor to remodel a
commercial building. The property management company does not supervise daily
construction. The property management company oversees the entire contract to
ensure fulfillment of the owner's contract. The fee is 5% of the cost of the
direct costs of the construction, and is payable monthly.

The property management company is acting as the eyes and ears of the
property owner to ensure that the remodeling job is completed to the property
owner's satisfaction. This service, not performed by the remodeler, is not a
taxable service. The property management company is not required to collect
tax on this fee.

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 512/463-4614. You may write me at
the Taxability Section, Legal Services Division.

Sincerely,
Adina Whittemore
Taxability Section
Legal Services Division

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