Ezel / Tax Rulings / TX
TX 9009L1044D03 Sales and/or Use Tax (State,Local,MTA) 1990-09-18

Were debt-collection services taxable when the creditor was in Texas but the debtor resided outside Texas?

Short answer: No. Texas tax applied only when the debtor's address at placement was in Texas and the creditor was located or doing business in Texas; the debtor here was out of state.

Apply this to your situation

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

Rule 3.354(b)(1) taxed the total debt-collection charge when both conditions were met: the debtor's address was in Texas when the account was placed for collection, and the creditor was located or doing business in Texas when it referred the debt.

Here, the creditor was in Texas but the debtor resided outside Texas. The Comptroller therefore concluded that no Texas tax was due on the collection activity.

What this means for you

The Texas creditor's location alone was not enough. The debtor's address at the time of placement also had to be in Texas under the rule stated in this letter.

Common questions

Was the collection charge taxable? No.

Why not? The debtor was outside Texas when the account was placed for collection.

Would the creditor's Texas location alone trigger tax? No.

Citations and references

  • Comptroller Rule 3.354(b)(1) — debt-collection services

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

September 18, 1990

Dear **:

We received your letter questioning the taxability of debt
collection services when the debtor resides outside Texas.

Tax is due on the total charge for debt collection services
when the address of the debtor at the time the account is
placed for collection is in Texas and the creditor for whom
the debt is collected is located in Texas or is doing busi-
ness in Texas at the time the debt is referred for collec-
tion. See section (b)(1) of the enclosed Rule 3.354 relating
to debt collection services.

In your situation, your client the creditor is located in
Texas but the debtor resides outside Texas; therefore, no
Texas tax is due on your debt collection activities.

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

If you have any questions you may call or write Tax Corres-
pondence. You may call toll free 1-800-252-5555, or our reg-
ular number is 512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence

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