Are environmental site-assessment and safety-consulting services performed by a professionally certified consultant subject to Texas sales tax?

Subject

Environmental Site Assessments, SPCC Plans, and TWCC Extra-Hazardous Safety Consulting — Nontaxable Professional 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/9310266L

Plain-English Summary

A Texas safety consultant asked the Comptroller whether fees for his environmental and workplace-safety consulting business were subject to sales tax. The Comptroller's office reviewed the facts presented in the taxpayer's letter and a follow-up conversation with a Comptroller staff member, and concluded the services were not subject to sales tax.

The letter describes the taxpayer's business as a professional service in the area of environmental concerns, noting the consultant belonged to several professional organizations and was approved by certain governmental agencies — including the Texas Workers' Compensation Commission (TWCC) — as having the expertise required by law to perform environmental services. The specific services listed were: (1) site assessments, usually performed in two stages and including on-site inspection and testing and gathering of site information; (2) spill prevention control and counter-measure (SPCC) plans; (3) Texas Workers' Compensation Extra-Hazardous Employer Program work; (4) safety programs and training; and (5) soil sampling.

The Comptroller's reasoning turned on three points drawn directly from the facts: the services were performed to meet legal requirements of state and federal agencies; professional certification was often required by those agencies before a person could perform the services; and, because of that, the services were provided for a purpose other than insurance and involved professional judgment rather than merely providing information. On that basis, the letter concluded the taxpayer did not need to obtain a sales tax permit or collect tax on fees for these services, while still needing to pay tax on any taxable items purchased to perform the work.

The file includes the underlying correspondence: an October 14, 1993 letter from the taxpayer to a Comptroller staff member enclosing a resume and client list, and the taxpayer's resume showing approval as a "Professional Safety Source" under TWCC guidelines, certification as a Fire & Explosion Investigator, memberships in the American Society of Safety Engineers, Texas Safety Association, and National Association of Fire Investigators, and decades of experience in safety/environmental compliance work across construction, petroleum, agriculture, and fleet safety fields.

What This Means For You

If you provide environmental or safety consulting services in Texas: This letter supports treating site assessments, SPCC plan preparation, TWCC Extra-Hazardous Employer Program compliance work, safety training, and soil sampling as nontaxable professional services — provided your work, like the taxpayer's here, is performed to satisfy legal requirements imposed by state or federal agencies and requires professional certification or approval (such as TWCC approval) to perform.

Professional judgment matters. The Comptroller distinguished these services from merely "providing information," emphasizing that the consultant exercised professional judgment and held credentials required by regulators. Consultants relying on this reasoning should be prepared to show similar certification/approval status and a similar legal-compliance purpose for their own services.

You still owe tax on your own taxable purchases. Even though the consultant's fees were ruled nontaxable, the letter is explicit that the consultant should "continue paying tax on taxable items purchased to perform your service" — the exemption applies to the service fee charged to the client, not to the consultant's own purchases of equipment or supplies.

Reliance is taxpayer-specific. As with all STAR letters, this ruling was based on the specific facts, credentials, and services described by this particular taxpayer; other consultants should confirm their own facts (certifications, the legal-compliance purpose of their services, and the specific service mix) align before relying on this outcome.

Q&A

Q: Is this environmental consultant's fee income subject to Texas sales tax?
A: No. The letter states plainly: "the services you provide are not subject to sales tax."

Q: What services did the Comptroller find nontaxable?
A: Site assessments (two-stage, with on-site inspection/testing and information gathering), spill prevention control and counter-measure plans, Texas Workers' Compensation Extra-Hazardous Employer Program work, safety programs and training, and soil sampling.

Q: Why were these services treated as nontaxable?
A: Because they were performed to meet legal requirements of state and federal agencies, professional certification was often required by those agencies to perform the services, and the services involved professional judgment rather than merely providing information.

Q: Does the consultant need a sales tax permit for these services?
A: No. The letter states the taxpayer does "not need to obtain a sales tax permit and collect tax on your fees" for these services.

Q: Does the consultant owe any sales tax at all?
A: Yes, on a different item — the letter instructs the taxpayer to "continue paying tax on taxable items purchased to perform your service," meaning tax on the consultant's own taxable purchases, not on the service fees charged to clients.

Original ruling text

October 26, 1993

Dear **:

Thank you for contacting my office. The facts presented in your letter and your
conversation with Tom Duffy helped us decide that the services you provide are
not subject to sales tax.

To summarize the facts given, your business is classified as a professional
service in the area of environmental concerns. You are a member of several
professional organizations and are approved by certain governmental agencies,
including the Texas Workers' Compensation Commission as having the expertise
required by law to perform environmental services. Your services include the
following:

1. Site assessments, usually performed in two stages and including on-site
   inspection and testing, gathering of information relating to the site among
   other activities;

2. Spill prevention control and counter-measure plans;

3. Texas Workers Compensation Extra-Hazardous Employer Program;

4. Safety programs and training; and

5. Soil sampling.

The facts show that your services are performed to meet legal requirements of
state and federal agencies. Additionally, professional certification is often
required by those agencies for a person to be able to perform the services, so
your services are clearly provided for a purpose other than insurance and
involve professional judgement rather than merely providing information. You do
not need to obtain a sales tax permit and collect tax on your fees. You should
just continue paying tax on taxable items purchased to perform your service.

I will instruct my tax research specialists to attach your letter and
accompanying information to this letter and add it to the Comptroller's
research database. This will ensure consistent policy-making decisions in the
future.

If you have any further questions, please feel free to contact Tom Poole, my
Assistant Manager in charge of the tax research specialists. Tom can be reached
toll-free at 1-800-531-5441, extension 3-3939.

Sincerely,

JOHN SHARP
Comptroller of Public Accounts

cc: Tom Duffy, Chief of Staff
Tom Poole, Tax Administration Division

October 14, 1993

Mr. Tom Duffy
Comptroller of Public Accounts
LBJ State Office Building
111 East 17th Street
Austin, Texas 78774

Dear Tom:

Enclosed please find information and data we discussed over the phone this
afternoon, in reference to professional services performed by me (**)
for clients all over Texas.

Along with my resume, which pretty well covers my duties and responsibilities
as a Safety Consultant, I have included a list of clients that I worked with
under TWCC Guidelines of Rejected Risk and Extra Hazardous Employers.

Should you require additional information, please advise. If this information
will suffice, I would appreciate a letter from John similar to **'s
with ****.

Appreciate your help.

Sincerely,

President

RESUME

Date of Birth- August 31, 1926

PROFESSIONAL CERTIFICATIONS AND MEMBERSHIPS

APPROVED - Professional Safety Source - TWCC No. **
(Texas Workers' Compensation Commission - Austin, Texas)

CERTIFIED - Fire & Explosion Investigator #**
(NAFI - National Fire & Explosion Investigators Certification Committee)

CERTIFIED- Fire Investigator Instructor #**

MEMBER - American Society of Safety Engineers

MEMBER - Texas Safety Association

MEMBER - National Association of Fire Investigators

PROFESSIONAL TRAINING AND SEMINARS

"Job Safety"
"EPA & SPCC"
"Loss Control Management"
"OSHA - Oil Patch"
"TSCA- Toxic Substance Control Act"
Risk Mgt. in the Oil Industry
CPR & First Aid Instructor Course
Risk Mgt. - Drilling Fundamentals
Supervisors Basic Safety for Middle Mgt.
"Civil Defense" Director's Workshop
DDC - Defense Driving Course
Substance Abuse in the Work Place
Hydrogen Sulfide in Drilling & Production
OCS (Offshore Safety)
NAFI Training Course
Gulf Coast Safety Seminar
OSHA & EPA Review Seminar
Drug Abuse in the Work Place
Fire, Explosion, & Arson Investigation
Professional Safety Source Seminar

PROFESSIONAL EXPERIENCE

July 1986 to Present President - **

Duties and responsibilities included development of Hazard
Identification/Safety and Health Programs. Assisting in their implementation
and monitoring for compliance with Federal and State Governmental Standards,
Guidelines and Regulations. Investigation of accidents and related incidents.
Auditing of existing Health and Safety Programs. Employee Training,
development, implementation of Hazard Communication Programs and Field
Inspections. These areas are primarily in the field of Construction, Petroleum,
Agriculture (Farming and Ranching) and Fleet Health and Safety. Environmental
concerns are also addressed, during Field Inspections. Forensic activities
include incident evaluations and analysis, expert testimony.
Approved Professional Safety Source (#**) for Texas Workers'
Compensation Extra-Hazardous Employer Program.

PRIOR EXPERIENCE

July 1946 to July 1986 Employee of **

Duties included the following:

Personnel Training
Contract Safety Provisions
Personal Protective Equipment
Zero Mechanical State Procedures
Disaster Response
Hurricane Preparedness Procedures
Risk Management/Hazard Control Library
Accident Reporting Procedures
Accident Investigation
Confined Space Entry
Cadweld Procedures
Hot Tap Procedures
Toxic and Hazardous Substances
SPCC Planning
Lease Inspections
Excavating and Buried Pipelines
Production Activities
Drilling Activities
Workover Activities
Field Maintenance
Permitting Procedures
Production Department Safety Director
Texas District Risk Management/Hazard Control
Coordinator
Member of Corporate RM/HC Committee