Are employee travel and living expenses billed to Texas software customers subject to sales or use tax?

Plain-English summary

The Comptroller said a company selling computer software to Texas customers had to collect sales or use tax on charges for its employees' travel and living expenses when those employees went to customer locations to assist with the software.

Tax Code Section 151.007 imposed tax on the total amount for which the taxable item was sold, without deducting labor, services, or other expenses. Billing the customer for the employees' expenses did not remove those charges from the taxable amount.

What this means for you

Passing through or separately describing a seller's travel costs did not make them nontaxable on these facts. They remained part of the amount charged in connection with the taxable software sale.

Common questions

Were employee travel expenses taxable? Yes.

Were employee living expenses taxable? Yes.

Why were those reimbursements included? Section 151.007 included service, labor, and other expenses in the total amount for which a taxable item was sold.

Citations and references

• Tex. Tax Code Section 151.007 — taxable sales price without deductions for labor, service, or other expense

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1133B06

Original ruling text

September 19, 1991

Dear **:

Thank you for your letter concerning charges to your customers for travel and
living expenses incurred by your employees.

You indicated that your company sells computer software to customers in Texas.
Customers are charged for the expenses incurred by your employees that travel
to the customers' locations to assist with the software.

Texas sales or use tax is due on these charges. Section 151.007 of the Texas
tax code imposes tax on the total amount for which a taxable item is sold,
"without a deduction for the cost of... (2) the material used, labor or service
employed, interest, losses or other expense . . . ."

This opinion is based on the facts that 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, ext. 34685, from anywhere in the
United States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Administration Division