Are court reporting services — transcripts, videotapes, or audiotapes of depositions and testimony — taxable when sold to participants in a lawsuit in Texas?

Plain-English summary

The Texas Comptroller's Tax Policy Division responded to a court reporter who asked whether court reporting services provided to participants in a lawsuit are taxable, and also asked about filing sales tax reports given reduced sales tax collections.

The Comptroller explained that a court reporter who prepares transcripts, computer readable formats, audio tapes, video tapes, or films of a deposition, testimony, discovery document, or statement of fact is providing a "court reporting service." Selling that court reporting service to a participant in a civil or criminal suit is a nontaxable service.

Even though the service itself isn't taxable, the court reporter must still pay sales tax on the taxable items used to provide that service — with two exceptions: court reporting services purchased from other court reporters, and video tapes purchased from video photographers. On that second exception, the court reporter can't make any other use of the purchased video tape except to resell it to a participant in the civil or criminal suit.

Finally, on the filing-frequency question, the letter explains that the switch from a monthly filer to a quarterly or yearly filer happens automatically, based on the sales tax reports filed, and that the taxpayer can also write in to request a change because of reduced sales tax receipts, due to legislation effective October 1, 1995.

What this means for you

Court reporters and reporting agencies

If you sell transcripts, computer-readable files, audio tapes, video tapes, or films of depositions, testimony, discovery documents, or statements of fact to a participant in a civil or criminal lawsuit, that sale is a nontaxable court reporting service. You don't need to collect sales tax from the participant on that service.

Buying inputs for your court reporting business

You still owe sales tax as the end consumer on taxable items you buy to run your business. The letter carves out two exceptions: court reporting services you buy from other court reporters, and video tapes you buy from video photographers — but for that video tape exception, you can't use the tape for anything besides reselling it to the lawsuit participant.

Businesses whose sales tax collections have dropped

If your sales tax receipts decreased — including because of legislation effective October 1, 1995 — the letter notes that your filing frequency (monthly vs. quarterly vs. yearly) is normally updated automatically by the Comptroller's system based on the reports you file, but you can also write in and request the change yourself.

Common questions

Q: Is selling a deposition transcript to a lawsuit participant taxable in Texas?
A: No. This letter says selling a court reporting service — transcripts, computer-readable formats, audio tapes, video tapes, or films of a deposition, testimony, discovery document, or statement of fact — to a participant in a civil or criminal suit is nontaxable.

Q: Does a court reporter owe sales tax on anything?
A: Yes, on taxable items used to provide the nontaxable service, except for court reporting services bought from other court reporters and video tapes bought from video photographers.

Q: Can a court reporter use a video tape bought from a video photographer for other purposes?
A: No. Per the letter, the court reporter cannot make any use of that video tape except to resell it to a participant in the civil or criminal suit.

Q: How does a business change from monthly to quarterly or yearly sales tax filing?
A: The letter states the conversion happens automatically based on the sales tax reports filed, but a business can also write in and request a change due to reduced sales tax receipts, including because of legislation effective October 1, 1995.

Citations and references

No statutes or administrative rules are cited by section number 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/9510773L

Original ruling text

October 16, 1995

Dear ** :

In your letter of October 3, 1995, you ask if court reporting services provided
to participants in a lawsuit are taxable. Also, you asked about the filing of
sales tax reports with your reduced collections of sales tax.

Court reporters who prepare transcripts, computer readable formats, audio
tapes, video tapes, or films of a deposition, testimony, discovery document, or
statement of fact are providing a court reporting service. The sale of a court
reporting service to a participant in a civil or criminal suit is a nontaxable
service.

When providing a nontaxable service, a court reporter should pay sale tax on
all taxable items, except for court reporting services purchased from other
court reporters and video tapes purchased from video photographers. The court
reporter cannot make any use of the video tape except to resell it to a
participant in the civil or criminal suit.

The conversion from a monthly filer to a quarterly or yearly filer is made by
the computer based upon the sales tax reports you file. Also, you can write
and request a change due to the change in your sales tax receipts, because of
legislation effective October 1, 1995.

This opinion is based upon the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441 extension 50892. The direct line is
512/475-0892. You may also write to Tax Administration Division, Comptroller
of Public Accounts.

Sincerely,

John J. Fitzgibbons, CPA
Tax Policy