How did Texas tax engineering and real-property surveying services sold to municipalities, and the supplies used to provide them?

Plain-English summary

The Comptroller treated engineering work such as specifications and blueprints as a nontaxable professional service. The engineering firm owed sales tax on items it used to provide that service, even when the municipal customer was exempt.

Surveying real property under Rule 3.356 was a taxable service. For a taxable survey sold to an exempt customer, the firm could accept an exemption certificate. It could issue a resale certificate for taxable items transferred to the customer, but it owed tax on supplies used in the survey and not transferred. For a survey that was not a taxable service, the firm owed tax on all taxable inputs, including items transferred to the customer.

What this means for you

Customer exemption did not automatically exempt the service provider's own purchases. The result depended first on whether the work was taxable surveying or nontaxable engineering, and then on whether purchased items were transferred to the customer.

Common questions

Were specifications and blueprints taxable services? No.

Was real-property surveying taxable? Yes, under the rule cited in the letter.

Could an exempt municipality avoid tax on a taxable survey? Yes, by providing an exemption certificate.

Did that exempt all of the surveyor's supplies? No. The surveyor still owed tax on taxable items used but not transferred.

Citations and references

• 34 Tex. Admin. Code Rule 3.356(a)(8), (c)(1), and (d) — real-property services
• 34 Tex. Admin. Code Rule 3.285 — resale certificates
• 34 Tex. Admin. Code Rule 3.287 — exemption certificates

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1131G01

Original ruling text

September 24, 1991

Dear ***:

Thank you for your recent letter concerning the taxability of full
service engineering, planning, and surveying services your company
provides for municipalities.

Engineering services such as preparing specifications and blueprints
are nontaxable professional services, and the charge to your customer
is not taxable. Your company must pay sales tax on items used in
providing the nontaxable service. A sales tax exemption cannot be claimed
on these purchases even though your customer may have exempt status
for Texas sales tax purposes.

Surveying of real property, as defined in section (a) (8) of the
enclosed Rule 3.356 relating to real property services, is a taxable
service. If you are performing a taxable survey for an exempt customer,
your company may accept an exemption certificate in lieu of tax. See
section (d) of Rule 3.356. Your company may issue a resale certificate
in lieu of tax on taxable items that will be transferred to the customer.
See section (c) (1) of Rule 3.356. However, your company must pay
sales tax on taxable items used to perform your survey that are not
transferred to the customer. Also enclosed are copies of Rule 3.285
relating to resale certificates and Rule 3.287 relating to exemption
certificates.

If you are performing a survey that is not a taxable service, your
company must pay sales tax on all taxable items purchased to perform your
survey including items that are transferred to the customer.

As you requested, I am enclosing a copy of the preliminary guidelines
for contractors and nonresidential repair or remodeling companies. The
changes caused by HB11 to this industry may or may not affect your
company's operations. Based on the information you provided, these
legislative changes do not appear to alter your company's sales or use
tax responsibilities.

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

You may also write to Tax Administration Division, Comptroller of
Public Accounts.

Sincerely,

Tax Administration Division