Ezel / Tax Rulings / TX
TX 9004L0998G13 Sales and/or Use Tax (State,Local,MTA) 1990-04-04

Was the total charge taxable when a Texas CAD provider converted customer sketches into enhanced computer drawings and delivered printed hardcopies?

Short answer: Yes. Sales tax applied to the total charge for the computerized drawings. Materials actually transferred to the customer as part of the service, such as the paper used for the final drawings, could be purchased tax-free.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 provider took customer sketches or drawings, entered them into a computer-aided design program, enhanced them to the customer's satisfaction, and delivered hardcopy drawings printed by a printer or plotter.

The Comptroller treated the total customer charge as taxable under the graphic-arts rule. Materials actually transferred to the customer, such as the paper used to print the drawings, could be purchased tax-free.

Common questions

Was only the printed paper taxable? No. Tax applied to the total charge for the computerized drawings.

Could the provider buy any inputs tax-free? Yes, materials actually transferred to the customer as part of the service.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

April 4, 1990

Dear ****:

I am responding to your letter of March 26, 1990, wherein you have
inquired about the taxability of your computer drafting services.

As I understand your service, you take customers sketchesor drawings and
input this information into the computer. Through the use of a computer aided
design program, you enhance the drawings to the customer's satisfaction. The
drawings are then printed in hardcopy using a printer or plotter. You deliver
the finished drawings to the customer.

Sales tax is due on the total charge to your customer for the
computerized drawings. Please refer to the enclosed Rule 3.312 (b)(1) regarding
graphic arts. You may purchase tax free those materials actually transferred to
the customer as part of your service (e.g. paper used to print the report).

This response is based on the facts presented. Changes or additions to
these facts may cause this opinion to change.

If you have any further questions, please contact Tax Correspondence.
You may write to the above address or call toll free 1-800-252-5555.

Sincerely,
Brad Gabbart
Tax Correspondence

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