Were fax charges by lawyers, architects, and other professionals taxable?

Plain-English summary

Standalone fax transmission sold for a fee was a taxable telecommunications service. A commercial fax provider could buy transferred paper, a dedicated phone line, and similar items tax-free for resale and had to collect tax on its fax charges.

When a lawyer, architect, or other professional faxed a document prepared as part of an exempt professional-service engagement, the fax was treated as part of that nontaxable professional service. Client reimbursement for the fax was not taxable.

The professional remained the consumer of the fax machine, paper, telephone line, and other items used generally by the firm and had to pay tax on them.

Common questions

Was standalone commercial faxing taxable? Yes.

Was a lawyer's client-document fax charge taxable? No, when part of the exempt professional-service transaction described.

Who paid tax on the professional firm's fax equipment and supplies? The professional firm.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8905L0932F05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

May 4, 1989

To: Dan Pearson
From: Martin Cherry
Subject: Fax charges by professionals

The attached article appeared in a local legal newsletter, as well
as across the state. It's based on a press release we (Taxability/
Legal) reviewed for Tax Info last week.

The circled part deals with lawyers faxing documents for clients.

It's clear that fax transmissions are telecommunications services.
But law firms aren't competing in the commercial fax business.

This is like copies provided by professionals. A few months ago
we said we wouldn't expect lawyers, architects, etc., to get
permits and collect tax on amounts they charge for copies of
documents produced for their clients.

By the same token, when a law firm faxes a document for its
client, the better view is to treat this as part of the overall
professional service transaction and not taxable.

The following SYSM message was sent today to establish this point.
Maybe this will head off a lot of questions and confusion on this
issue.

Re: fax services provided by architects, lawyers and other
professionals to their clients.

Fax transmissions fall within the definition of
"telecommunications service." When provided as a "stand-
alone" independent service for a fee, sales tax applies.

For example, many hotels have fax machines available for
their guests, and commercial fax services are springing up.
In such cases, the paper, dedicated telephone line, and any
other items transferred to the customer can be bought tax-
free since they are for resale, and tax should be collected
and remitted on fax charges.

However, when a lawyer, architect, or other professional
person uses the firm's fax machine to transmit a document
prepared as part of an exempt professional service trans-
action, the fax service will be considered to be part of
the professional service transaction and not taxable. Tax
is not due on reimbursement charges. This is comparable to
the professional providing additional copies of documents.

In this situation, the professional should pay tax on the
machine, paper, telephone line, etc., since those items are
intended for general use by the firm.