Does a Texas business have to charge sales tax on data recovery services, like retrieving deleted computer files?

Plain-English summary

The Texas Comptroller confirmed in this brief 1992 letter ruling that data recovery is taxable. When a business charges a customer labor or service fees to retrieve or recover deleted computer data, sales tax is due on those charges because the work falls under Texas's data processing services rules (Rule 3.330).

The letter is short and general: it doesn't describe the taxpayer's specific facts beyond "data recovery," and it notes the answer is "based on the facts presented" and that "other facts though similar may provide a different result."

What this means for you

IT services and data recovery businesses

If you charge customers to retrieve or recover deleted files or data, treat that labor/service charge as taxable data processing services and collect Texas sales tax on it.

Businesses that hire data recovery vendors

Expect sales tax to be added to invoices for data recovery work performed on your systems, since the Comptroller treats this service as taxable.

Accountants and tax professionals

This ruling is a short, general confirmation that data recovery services fall within the data processing services category under Rule 3.330, rather than being treated as a nontaxable professional or repair service.

Common questions

Q: Is data recovery treated as a taxable service in Texas?
A: Yes. Per this ruling, charges for labor or services rendered in retrieving computer data are taxable.

Q: What Texas rule governs this?
A: The letter cites Rule 3.330, Data Processing Services, as the relevant Comptroller rule and encloses it for the taxpayer's information.

Q: Does this ruling apply to every data recovery situation?
A: The letter itself cautions that it "is based on the facts presented. Other facts though similar may provide a different result," so businesses with different circumstances should not assume identical treatment without their own analysis.

Citations and references

Rules:

• Rule 3.330, Data Processing 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/9212747L

Original ruling text

December 30, 1992

Dear *****:

Thank you for your recent letter concerning the taxability of data recovery.

Sales tax is due on the charges for labor or services rendered in retrieving
computer data. Therefore, the charges for labor or services rendered when
performing data recovery are taxable. I have enclosed Rule 3.330, Data
Processing Services for your information.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

If you have other questions or need more information, you may call me at
1-800-531-5441, extension 5-0148. The regular number is 512/463-4600. You may
also write to the Tax Administration Division at the above address.

Sincerely,

Anne Blanton
Tax Administration Division