If I pick up a government record (like an accident report) for a client and bill them for the record's cost plus my own labor fee, is my labor fee taxable?

Subject

Govt Document/Record — Obtain From Public Agency — Fee Charged/Billed To Clients Over And Above Cost Of Obtaining Document

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401L1286A13

Plain-English Summary

The taxpayer's business gets requests — in this case from an insurance company — to obtain public records such as accident reports from a police department. The taxpayer picks up the report in person and delivers it to the client, then bills the client in two parts: the cost (what the police department charged to obtain the report) and a fee (the taxpayer's own charge for the labor of picking up and delivering it).

The Comptroller ruled that a governmental agency's charge for providing a record under the open records act, obtained pursuant to a specific request by the client, may be excluded from the price billed to the client if it is separately stated and identified. However, the remainder of the charge — the taxpayer's own pickup/delivery fee — is subject to sales tax.

What This Means For You

If you obtain public records for clients (accident reports, court records, or other government documents) and charge a fee for that service:

• Break your invoice into two clearly separated line items: (1) the government agency's own charge for the record itself, and (2) your service/labor fee for obtaining and delivering it.
• The pass-through government charge is not taxable, as long as it is separately stated and identified on the bill.
• Your own labor/service fee for picking up and delivering the document is taxable.
• If you bundle the government's charge and your fee together as a single lump sum, the separation is lost and the tax treatment described in this ruling would not clearly apply — separate statement is what the ruling turns on.

Q&A

Q: I pay a police department $10 for an accident report and charge my client $25 total ($10 cost + $15 for my time). Is the whole $25 taxable?
A: No. If you separately state the $10 government charge and the $15 fee on your invoice, only the $15 fee is subject to sales tax. The $10 government charge may be excluded from the taxable price.

Q: What if I don't separately state the government's charge and my fee, and just bill one combined amount?
A: The ruling's exclusion applies specifically to charges that "are separately stated and identified." The response does not address what happens to a single, undivided charge, so to rely on this treatment you should itemize the government charge and your fee separately.

Q: Does this ruling apply to any document, or only records obtained under the open records act?
A: The ruling addresses "a charge by a governmental agency for providing records subject to the open records act pursuant to a specific request by your client." It was issued based on the facts presented (an accident report obtained from a police department), and the Comptroller noted that different facts, though similar, might lead to different answers.

Original ruling text

January 26, 1994

Dear **:

This is in response to your letter dated January 6, 1994, written to Sue
McMurray of our Fort Worth Enforcement Office. The letter has been forwarded to
me for response.

A written opinion has been requested regarding sales tax as it applies to
services provided by your business.

FACTS: An insurance company taxes a request for an accident report on John Doe
in Dallas. The next day I go to Dallas and purchase the report and return it to
the insurance company, the bill is broken down into two parts, cost and fee.
The cost is what the police department charge me to obtain the report and the
fee is my charge for labor to pick-up and deliver the report.

RESPONSE: A charge by a governmental agency for providing records subject to
the open records act pursuant to a specific request by your client may be
excluded from your price to your client if they are separately stated and
identified. The remainder of your charge is subject to sales tax.

This opinion is based on the facts presented. Different facts, though similar,
might lead to different answers. If you have any questions or need more
information, please write or call me toll free at 1-800-531-5441, extension
50330, or 512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9401054L