Is renting a university recording studio, including a technician's time, subject to Texas sales tax, and what about the tapes used during the session?

Subject

Recording Studio — Owned By State University — Used By Private Individual For Hourly Charge (Includes Technician) Plus Cost Of Materials (Tapes)

Plain-English summary

A university asked the Comptroller about the sales tax treatment of fees it charges to let a person use the recording studio in its Performing Arts Center. Under the arrangement described, a person pays an hourly charge to use the studio, that hourly charge includes the services of a studio technician, and the person also pays for materials such as tapes used during the session.

The Comptroller's answer splits the transaction into three pieces:

• The charge for use of the recording studio itself: not taxable.
• The charge for the technician's time (bundled into the hourly rate): not taxable.
• The charge for materials, such as tapes: taxable.

The letter notes this opinion is based on the facts presented and could change if the facts are different.

What this means for you

Universities and other studio/facility owners

If you rent out a recording studio (or similar space) on an hourly basis and include staff/technician time in that hourly rate, the rental and labor portions are not subject to Texas sales tax under this ruling. But any tangible personal property you provide as part of the session -- tapes, media, or similar supplies -- is taxable and sales tax should be collected on that portion.

Accountants and tax professionals

This letter illustrates the general principle of separating a facility-rental/labor charge (not taxable) from a charge for tangible personal property furnished with the service (taxable), even when billed together as part of one hourly rate. Keep in mind this ruling can only be relied upon by the taxpayer who requested it, and it turns entirely on the specific facts described (hourly studio charge including technician, plus separately identifiable materials cost).

Musicians and other private individuals using university studios

Expect that the studio time and technician's help won't carry sales tax, but any tapes or similar materials you take home from the session will.

Common questions

Q: Is the hourly fee to rent a university recording studio subject to Texas sales tax?
A: No, per this letter, the charge for use of the recording studio is not taxable.

Q: Does it matter that a technician's time is included in the hourly rate?
A: No -- this letter states the charge for the technician's time is also not taxable.

Q: Are the tapes provided during a recording session taxable?
A: Yes, the letter states the charge for materials (tapes, etc.) is taxable.

Citations and references

No specific statutes or administrative rules are cited in the body of 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/9605L1408F09

Original ruling text

May 8, 1996

VIA E-MAIL

Dear **:

I am responding to your email asking about charges for use of the recording
studio that is a part of the university's Performing Arts Center. You
explained that a person can use the recording studio for an hourly charge plus
the cost of materials (tapes, etc.). The hourly charge includes the services
of a technician.

The charge for use of the recording studio is not taxable. The charge for the
technician's time is not taxable. The charge for the materials (tapes, etc.)
is taxable.

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

Sincerely,

Tax Policy Division

NOTE: Previous Accession Number 9605154L