Was a Texas fee for providing managers who trained and directed a facility's own housekeeping and laundry employees taxable?

Plain-English summary

The company provided a property manager and other supervisory personnel to train, manage, and direct employees at hospitals, educational facilities, and industrial facilities. The workers actually performing housekeeping, laundry, and other services were employees of each facility—not of the management company.

The Comptroller said the fee for those management services was not taxable. As the provider of a nontaxable service, however, the management company owed Texas sales or use tax on all taxable items it used to provide the service.

What this means for you

Under this 1991 letter, the contract supplied management and supervision rather than the underlying housekeeping or laundry workforce. That employee relationship was part of the stated facts supporting the nontaxable management fee.

Common questions

Was the management-services fee taxable? No.

Whose employees performed housekeeping and laundry? The facility's employees.

What did the management company provide? A property manager and other supervisors who trained, managed, and directed those employees.

Did the management company owe tax on its own inputs? Yes, on taxable items used to provide the service.

Citations and references

The letter did not cite a numbered statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9102L1078D09

Original ruling text

February 19, 1991

Dear **:

Thank you for your letter concerning the management services provided by
COMPANY to hospitals, educational facilities and industrial facilities.

Your letter and the sample contract that you submitted indicate that COMPANY
will provide a property manager and other supervisory personnel to "train,
manage, and direct" the employees of a facility. The employees that actually
perform the housekeeping, laundry and other services are employed by a
facility, not by COMPANY.

The fee paid to COMPANY for these management services is not taxable. As the
provider of a nontaxable service, COMPANY will owe Texas sales or use tax on
all taxable items used to provide the service.

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 1-800-252-5555 from anywhere in the United States or
phone 512/463-4600.

Sincerely,

Julie Pesl
Tax Administration Division