Were property-tax research, mortgage analysis, tax-return preparation, and electronic filing services taxable in Texas?

Plain-English summary

The Comptroller gave different answers for three proposed services.

Property-tax research was a taxable information service. The provider planned to consult county records, compare a customer's property taxes with neighboring properties, and prepare a report about whether to protest the appraisal. A separately stated charge equal to the actual cost of purchased public records could be excluded from tax, but any markup above that cost was taxable.

The letter did not decide whether the proposed mortgage-analysis service was taxable because the request did not explain what the service involved. It said a more specific ruling would require a detailed description.

A separately stated federal income-tax-return preparation fee was not taxable. A separate charge to electronically file the return with the IRS was taxable as a telecommunications service.

What this means for you

Property-tax consultants

Research and reports based on public property records were taxable information services under this letter. Separately identify the exact cost of purchased public records if claiming the stated exclusion; a markup remained taxable.

Tax preparers

Separate return-preparation and electronic-filing charges. The letter treated preparation as nontaxable but electronic filing as taxable telecommunications.

Mortgage analysts

The letter supplies no holding for mortgage analysis. Its tax treatment depended on facts the requester did not provide.

Common questions

Was property-tax research taxable? Yes.

Could the cost of public records be excluded? Yes, but only the separately stated actual cost; amounts above that cost were taxable.

Did the Comptroller decide mortgage-analysis taxability? No.

Was federal tax-return preparation taxable? No, when separately charged. The separate electronic-filing fee was taxable.

Did local sales tax apply to every electronic-filing charge? The letter said there was no local sales tax on interstate telecommunications, while listed local jurisdictions had enacted tax on intrastate telecommunications.

Citations and references

• 34 Tex. Admin. Code Rule 3.342(d)(3) (information services and public-record costs)
• 34 Tex. Admin. Code Rule 3.344 (telecommunications services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1157C01

Original ruling text

January 30, 1992

Dear *****:

Thank you for your recent letter. As I understand it, you plan to perform
the following services for customers, and wanted to know whether you are
required to collect tax.

1. Property tax research:

You will assist commercial and residential property owners in reducing
their property taxes. You will consult county property records to determine
whether your customers are paying higher taxes than their neighbors, and you
will prepare a report for your customer to determine if he or she should
protest its property tax appraisal.

Answer:

This is a taxable information service, governed by Rule 3.342. You may
separately state and exclude from tax a charge to your customer that represents
the cost of public records that you purchase to provide this service. Rule
3.342 (d)(3). Tax is due on any amount over and above the actual cost of the
public records.

2. Mortgage analysis:

You will perform mortgage analysis for mortgage lenders and property
investors.

Answer:

I do not know what is involved in providing mortgage analysis services.
For your information, I have transmitted under separate cover copies of our
rules governing taxable data processing, insurance, information, credit
reporting, and debt collection services. You are required to collect tax on
charges for these services.

I have enclosed copies of opinions we have issued to mortgage companies
that discuss taxable and nontaxable services they provide. If you need a more
specific opinion regarding the taxability of your mortgage analysis services,
feel free to write back to me and describe the service in detail.

3. Electronic tax return filing:

For a fee you will file a customer's federal income tax return electronically
with the IRS.

Answer:

A separate fee to prepare a federal income tax return is not taxable. You
must separately state and collect tax on a fee to electronically file a
federal income tax return with the Internal Revenue Service. This service
is a taxable telecommunications service.

Rule 3.344 discusses telecommunications services. There is no local
sales tax on interstate telecommunications services. Under separate cover, I
have transmitted a list of the cities, counties, transit authorities, and
special purpose districts have enacted a local sales tax on intrastate
telecommunications services.

This opinion is based on the facts presented. Different facts, though
similar, might lead to different answers. If you have further questions, feel
free to write or call me at 1-800-252-5555, ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration Division