How did Texas tax a property manager's accounting work, installed replacement light bulbs, and tenant charges for nonresidential remodeling including overhead?

Plain-English summary

The property manager could handle sales tax due on real-property services supplied by outside vendors under Rule 3.356(m)(5).

Some accounting work performed for the building owner was taxable data processing. The letter specifically identified preparation of accounts-payable checks and accounts-receivable billings as taxable under Rule 3.330(a).

The total tenant charge for installing a replacement light bulb was taxable. The letter stated that installation charges connected with the sale of a taxable item had been taxable since October 1, 1987.

The total tenant charge for remodeling nonresidential real property was taxable, including the stated $100 overhead fee.

The original text prints the letter date as “May 11, 1190”; the official STAR metadata dates the document May 11, 1990, consistent with its reference to a May 1, 1990 request.

Common questions

Were accounts-payable checks and receivable billings taxable? Yes, as data processing.

Was the installed replacement light bulb taxable? Yes, on the total charge.

Was remodeling overhead excluded from tax? No.

Citations and references

• Comptroller Rule 3.356(m)(5).
• Comptroller Rule 3.330(a).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1022F07

Original ruling text

May 11, 1190

Dear ****:

Thank you for your letter dated May 1, 1990 concerning the taxability of
various services provided by a property management company for THE property
owner.

The taxability of the various transactions is as follows:

Situation #1 You stated that THE property management company deals with
providers of various real property services, collects rents, provides cost
control, handles all accounting (including paying expenses, depositing rents,
preparation and review of financial statements, etc.). You asked, "are any of
these transactions taxable?"

Response:

The property management company may handle the sales taxes due on the
real property services provided by outside vendors as outlined in section
(m)(5) of rule 3.356.

Some of the accounting services that the property manager provides for
the building owner are taxable data processing services. For example,
preparation of accounts payable checks and accounts receivable billings are
taxable. Please review section (a) of Rule 3.330 and the tax Practitioner
Bulletin on data processing services (copies enclosed).

Situation #2 You stated that the tenant pays the property owner for
replacement of a light bulb.

Response:

The total charge to the tenant for installation of a new light bulb is
taxable. Effective October 1, 1987, all installation charges connected
with the sale of a taxable item are taxable also.

Situation #3 You stated that the tenant is billed for taxable remodeling
services. The charge includes a $100.00 overhead fee.

Response:

The total charge to the tenant for remodeling nonresidential real
property is taxable.

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

Please feel free to contact me if you have any additional questions. You
may write me, call toll free 1-800-252-555 (ext. 3-4685) from anywhere in
the United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence