Do engineering and architectural design firms have to charge Texas sales tax on their professional design services?

Plain-English summary

A taxpayer wrote to the Comptroller asking how "engineering" and "architectural" services are taxed under Texas sales and use tax. The Comptroller's answer: these services are generally not taxable. They only become taxable if they are part of the sales price of taxable personal property.

The letter gives a concrete example: a consulting engineering firm and an architectural firm providing design services for a laboratory or an office building. As long as those firms are only designing the layout of the building or lab, their professional fees are not taxable. But if the engineering services are bundled into and sold as part of the price of a piece of laboratory equipment, then those services become taxable along with the equipment.

What this means for you

Architects and engineering firms

If you're providing standalone design or layout services -- for example, designing the layout of an office building or laboratory -- you generally do not need to charge Texas sales tax on those fees. The tax-free treatment depends on the services being independent of any sale of taxable tangible personal property.

Businesses buying equipment that includes design/engineering work

If you're purchasing equipment (such as laboratory equipment) and the seller's engineering services are wrapped into the price of that equipment, expect the whole package -- including the engineering charge -- to be taxable, not just the equipment itself.

Common questions

Q: Are architectural and engineering services taxable in Texas?
A: Generally no. Per this letter, engineering and architectural services are generally not taxable.

Q: When would these services become taxable?
A: When they are part of the sales price of taxable personal property -- for example, when engineering services are bundled into the sale of a piece of laboratory equipment.

Q: Does designing the layout of a building or lab trigger tax?
A: Not by itself. The letter states that a consulting engineering firm and architectural firm designing the layout of a laboratory or office building are not taxable on those services, assuming they only provide layout/design services.

Q: Can I rely on this letter for my own business?
A: This particular letter was issued to one taxpayer whose identifying details have been redacted. Under Texas rules, STAR letters can only be relied upon by the taxpayer to whom they were issued, so you should request your own ruling or consult a tax professional for your specific facts.

Citations and references

No statutes or rules are cited in this 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/9302L1224B08

Original ruling text

February 18, 1993

Dear **:

In your letter of February 15, 1993, you asked for clarification
concerning the taxation of "engineering" and "architectural" services.
Engineering and architectural services are generally not taxable. They
only become taxable if they are part of the sales price of taxable
personal property.

In particular, you asked if a consulting engineering firm and an
architectural firm providing design services for a laboratory or an
office building should charge tax on their professional services.
Assuming they only provide these services in designing the layout of
the laboratory or building, they are not taxable. If the engineering
services are part of the sales price of a piece of laboratory
equipment, the services would be taxable.

I hope this satisfactorily answers your questions.

Sincerely,

Mike Doyle
Director of Tax Administration