When were Texas computer consulting, resulting reports, software support, and data-processing services taxable?

Plain-English summary

Stand-alone computer consulting was nontaxable, and reports produced from that consulting were also nontaxable.

If the consultant recommended computer hardware or software and then sold it to the client, the consulting became part of the taxable sale and the entire charge was taxable. On-site or telephone technical support for software sold by the same provider was taxable maintenance.

Data-processing services were taxable. When a provider performed consulting and data processing together, it needed to separately identify and document the nontaxable consulting work; otherwise the entire amount could be taxed.

The requester supplied no specific client facts, so the letter expressly gave only general information.

Common questions

Was stand-alone computer consulting taxable? No.

Were consulting reports taxable? No.

What if the consultant also sold the recommended hardware or software? The entire charge was taxable.

Was support for software sold by the provider taxable? Yes, as maintenance.

Were data-processing services taxable? Yes.

Citations and references

• Comptroller Rule 3.308.
• Comptroller Rule 3.330.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1022G03

Original ruling text

May 29, 1990

Dear **:

I am responding to your letter of May 22, 1990, regarding the taxability
of consulting services on a data processing system. Because I have no specific
facts for your client, I can only respond to your inquiry with general
information about computer consulting.

Charges for computer consulting services are not taxable provided such
services are not in connection with the sale of taxable items. For example,
if a consultant recommended that a client purchase certain computer hardware
and/or software, and then sold that equipment to the client, the entire
charge would be taxable. That is, the consulting charges would be considered
charges related to the sale of taxable items.

A consultant providing stand alone consulting services is not required to
charge tax for these services. Reports produced as a result of these services
also would not be taxable.

If your client were providing on-site or telephone technical support on
software that he or she sold to a customer, such services would be taxable as
maintenance services.

Data processing services are taxable. If consulting services and data
processing services are being provided at the same time, it is important that
your client separate and document the nontaxable services. Failure to do
this may result in the entire amount being taxable.

I have enclosed a copy of rule 3.308 regarding computer hardware and
software sales and services, and rule 3.330 regarding data processing services.

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