Is scanning paper documents onto CDs a taxable service in Texas?

Plain-English Summary

The Texas Comptroller ruled that an electronic imaging company's service of scanning customers' paper documents onto CDs is a taxable data processing service. The company scans paper documents (including plans and blueprints), delivers the resulting CDs to the customer, and collects payment for the job. Because that scanning/imaging work falls within the Comptroller's definition of "data processing" under Rule 3.330, sales tax must be collected on the entire charge billed to the customer for the service — there is no exemption for the scanning or conversion portion of the job.

What This Means For You

Document scanning and imaging businesses

If your business converts paper records, plans, or blueprints into electronic files or images (for example, onto CDs, DVDs, or other digital media), that service is taxable as data processing in Texas. You need to collect and remit Texas sales tax on your full invoice amount for the job, not just on any tangible media you hand over.

Customers of scanning/imaging services

Expect to see sales tax charged on the entire invoice for a document-scanning or electronic-imaging project, since the Comptroller treats this as a taxable service rather than a nontaxable sale of a CD or similar storage media.

Accountants and tax professionals

This ruling is a straightforward application of Rule 3.330's data processing category to document/image conversion services. It confirms that "data processing" sweeps in scanning and imaging work performed on a customer's paper records, and that the tax base is the total charge for the service, not merely the value of any physical media transferred.

Q&A

Q: Is scanning paper documents onto CDs taxable in Texas?
A: Yes. The Comptroller classified this as a data processing service, which is taxable under Rule 3.330.

Q: Do I charge tax on the whole invoice, or just part of it?
A: Sales tax applies to the total charge to the customer for the service — the ruling does not carve out any portion of the fee as nontaxable.

Q: Does it matter whether the documents are plans, blueprints, or other paper records?
A: No. The ruling covers scanning/electronic imaging of paper documents generally, including plans and blueprints, as a data processing service.

Citations

• 34 Tex. Admin. Code Rule 3.330 (data processing services)

Subject

Scanning Services/Electronic Imaging Services — Documents/Plans/Blueprints

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9409L1328A09

Original ruling text

September 9, 1994

Dear ****:

Thank you for your September 3, 1994, letter concerning the taxability of
the services provided by your electronic imaging company.

Your electronic imaging company scans paper documents into CDs. When the
process is complete, your customer gets the CDs and you collect payment.

The electronic imaging service is taxable as a data processing service.
Sales tax must be collected on the total charge to your customer for the
service. The enclosed Rule 3.330 has information on data processing services.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct
line is 512/475-0030. You may also write to Tax Administration, Comptroller
of Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9409775L