Was the S.B. 324 fee charged by a local recording insurance agent for services outside the insurer-paid commission subject to Texas sales or use tax?

Plain-English summary

S.B. 324 authorized local recording agents to charge clients for services not covered by the commissions insurance companies paid them. The letter listed possible costs such as special-delivery postage, printing and reproduction, electronic mail, telephone transmission, and similar client-related expenses.

The Comptroller said the authorized fee itself was not subject to sales or use tax. But if an underlying cost was a taxable purchase of property or services, the agent had to pay that tax to the seller or service provider. The tax paid was then another cost recovered through the fee.

What this means for you

The letter distinguished the agent's nontaxable client fee from the agent's own taxable inputs. Recovering a taxed input through the fee did not erase the tax the agent owed to its vendor.

Common questions

Was the S.B. 324 fee taxable? No. Could items acquired for the client still be taxable? Yes. Who paid tax on those taxable costs? The local recording agent paid the seller or service provider and recovered that amount as part of its fee.

Citations and references

• Texas S.B. 324 (the authorization discussed in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1138F09

Original ruling text

October 25, 1991

Dear *****:

Thank you for your inquiry concerning S.B.324, which authorizes local
recording agents to charge fees for services rendered that are not
contemplated in commissions paid to them by insurance companies. Sales
Tax Specialist Eddie Washington researched your question at my request
and provided the following information.

The bill states that, "Those services may include special delivery
postal charges, printing and reproduction costs, electronic mail costs,
telephone transmission costs, or similar costs that the local recording
agent may incur on behalf of the client."

Please be advised that the fee allowed by the bill is not subject to
sales or use tax. You should also beware that certain of the costs
incurred "on behalf of the client" may be purchases of tangible personal
property or services that are subject to tax. The local recording agent
should pay the tax to the seller or service provider. The tax so paid
is then just another cost recovered via the fee.

If I can be of further help, please let me know. If you need help with
the taxability of specific costs, please feel free to contact Eddie at
463-4683.

Sincerely,

Michael D. Doyle
Director
Tax Administration Division