Which industrial design, drafting, and computer-file conversion services were taxable?

Plain-English summary

Industrial design was a nontaxable professional engineering service when the provider developed a working design and comprehensive specifications from the customer's rough sketches or requirements. Delivering the approved drawings on magnetic media or paper, and providing additional copies to the same customer, did not change the result.

Manual and computerized drafting were taxable when the customer supplied the specifications and the provider produced delineations or blueprints. Copies of that drafting product were also taxable.

Converting customer data into a format usable in another computer-aided-design environment, including manual recovery and addition of lost data, was a taxable data-processing service.

Common questions

Was professional engineering design taxable? No.

Was computerized drafting treated differently from manual drafting? No. Both were taxable.

Was software-file conversion taxable? Yes, as data processing.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8904L0933F13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller April 14, 1989

Dear **:

Thank you for your letter concerning industrial design services,
industrial drafting, and computer software conversion services.

I will begin by discussing the taxability of industrial design
services. In your example, the customer may supply rough sketches
or rough specifications for the project. The engineer designer
discusses the project with the customer, and comes up with a
working rough design. Once this design is approved, the engineer
develops comprehensive specifications. The approved drawings are
given to the customer on magnetic storage media, or in hard copy
form. The essence of this transaction is the engineering service.
This is a non-taxable professional service. And additional copies
for the same customer are also not taxable.

Graphic drafting services are different from engineering design
services in that the customer brings in the specifications.
Computerized drafting services are no different from other draft-
ing services. Tax is due on draftsman delineations and blue-
prints. And tax is also due on computerized drafting services.
Copies of the product are also taxable.

The third service offered is computer software conversion ser-
vices. A tape is received from a customer. The data on the tape
is converted to a format usable by a different computer aided
design equipment environment. A design professional must manually
intervene at the end of the conversion process and recover lost
data, add missing data, etc. This service is a data processing
service and is taxable.

This opinion is based on the facts presented. If there are addi-
tional 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
512/4634614. You may write me at the Taxability Section, Legal
Services Division. (FAX (512)475-0900)

Sincerely,
Adina Whittemore
Taxability Section
Legal Services Division