Were tenant credit and rental-history reports taxable when used for Fannie Mae properties?

Plain-English summary

Researching and selling prospective tenants' credit and rental histories was a taxable combination of credit-reporting and information services. The seller generally had to collect tax when it sold those reports to a property-management or mortgage company.

VA- or FHA-backed financing did not make the service exempt. The charge could qualify when the property was government-owned and the management company bought under an agency agreement on the governmental entity's behalf, or when the service was performed directly for the governmental entity.

The seller needed an exemption certificate explaining the claim, with the agency agreement serving as the contract supporting an agent's exempt purchase.

Common questions

Were tenant credit and rental-history reports taxable? Yes.

Did a government-backed loan create an exemption? No.

When could a manager buy the service exempt? When acting for the governmental owner under an agency agreement and providing the required exemption certificate.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8905L0936A12

Original ruling text

May 8, 1989

Dear ***:

I am responding to your letter requesting clarification and information
regarding sales or use taxes due on taxable services that are performed
on properties owned by the Federal National Mortgage Association
(Fannie Mae).

I called your office for clarification on the exact services
your company provides to property management companies. In
my telephone conversation with ***, he stated that
your company researches and provides credit and rental history
information on prospective tenants of these properties. This
information is sold to a management company that may be in-
turn reimbursed for the cost by the actual owner of the pro-
perty: Fannie Mae.

You are providing/selling a possible combination of credit
reporting and information services. These are taxable ser-
vices and taxes should be collected by your company.

The fact that foreclosed properties are government-backed
loans (VA, FHA, etc.) does not make the charges exempt from
tax. If the services are performed for the management com-
pany or mortgage company, sales tax must be collected on all
taxable items. However, if the property is government owned
and the management company has an agency agreement to make
purchases on behalf of the governmental entity, the charge for
taxable items would qualify for exemption from the tax. If the
services are performed for the governmental entity, the charge
for taxable items would qualify for exemption from the tax.

You should obtain an exemption certificate from the management
company detailing their claim to exemption. The "contract"
that qualifies the transactions for exemption is the agency
agreement between the governmental entity and the management
company. I am enclosing several rules relating to these topics
for your information.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

You may also write to Tax Correspondence Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence