Who is responsible for collecting and remitting sales tax on parking garage fees -- the building owner, or the property management company that runs the garage?

Subject

Property Management Company — Manages/Operates Parking Garage — Building Owner Responsible For Collection And Remittance Of Motor Vehicle Parking Services

Plain-English summary

A property owner (John Doe, Inc.) hired a property management company to manage, operate, and maintain its building, including an underground parking garage. The management company collected rent and other money, including parking fees, and deposited it into an operating account held in the owner's name. The question was: which entity -- the owner or the manager -- is responsible for collecting and remitting sales tax on the motor vehicle parking services provided in the garage?

The property owner is responsible. The Comptroller ruled that the property owner, not the property management company, must collect and remit sales tax on the parking garage's motor vehicle parking services. Citing Rule 3.356(n), the letter explains that the management company's personnel who operate the garage are treated as employees of the property owner for this purpose -- meaning the manager is acting as the owner's agent rather than as an independent taxable service provider.

The letter adds two important qualifications. First, if there are separate parking contracts directly between tenants (or other vehicle owners) and either party, the terms of those contracts may determine who is actually the parking services provider. Second, because both the owner and the manager are parties to the parking arrangement, the Comptroller may hold either one -- or both -- liable for any sales tax that is owed but not paid to the state.

Bottom line: taxable, with owner-level responsibility. Motor vehicle parking services are treated as taxable, and the letter is clear about who bears the collection/remittance duty by default (the owner) -- but it does not let the management company off the hook entirely, since both parties can be pursued for unpaid tax.

What this means for you

Property owners

You are the default party responsible for collecting and remitting sales tax on parking garage fees, even if you've hired a management company to run day-to-day operations and even if parking revenue is deposited into your operating account through the manager. Confirm your management contract and any parking contracts reflect this responsibility, and make sure the tax is actually being collected and remitted on your behalf.

Property management companies

Under Rule 3.356(n), your garage-operating personnel are treated as employees of the property owner for parking-tax purposes -- you are not automatically the taxable "provider" of the parking service. However, you are not insulated from liability: because you are a party to the parking arrangement, the Comptroller can pursue you (along with the owner) if the tax goes uncollected or unremitted. Check whether your management agreement assigns you responsibility for actually calculating, collecting, and remitting the tax as a practical matter, even though the owner bears ultimate legal responsibility.

Tenants and other parking contract parties

If you have a direct parking contract with either the owner or the manager, review its terms -- the letter notes that such contracts may independently establish who is the parking services provider for tax purposes, potentially overriding the default owner-responsibility rule described above.

Common questions

Q: Who has to collect and remit sales tax on garage parking fees -- the owner or the property management company?
A: The property owner is responsible, according to this ruling. Rule 3.356(n) treats the management company's garage-operating personnel as employees of the owner.

Q: Does that mean the property management company has no risk if the tax isn't paid?
A: No. Because both the owner and the manager are parties to the motor vehicle parking services, the Comptroller may hold either or both liable for any tax owed but not remitted.

Q: Does it matter that parking revenue passes through the management company before landing in the owner's account?
A: The ruling doesn't treat that as changing who's responsible -- the deposits go into an account in the owner's name under the management contract, and the owner remains the party responsible for collection and remittance.

Q: Can a separate parking contract change who's responsible?
A: Possibly. The letter notes that if tenants or other motor vehicle owners have entered into parking contracts, those contracts' provisions may provide definitive information on who is the parking services provider.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.356(n) (property management company's personnel operating the property owner's parking garage are considered employees of that property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9612058L

Original ruling text

December 10, 1996

Dear ***:

Thank you for your letter of December 5, 1996, concerning which entity has the
responsibility for collecting an remitting sales tax on motor vehicle parking
services.

John Doe, Inc. (property owner or owner) hired Property Management Co. Inc.,
(property manager or manager) to manage, operate and maintain the property.
The property management company collects money for rent and miscellaneous
services and deposits the money into an operating account which is in the
property owner's name. According to the management contract, all monies so
collected shall be deposited to the operating account and if paid by check
shall be payable to the owner, or at the owner's option, to the building name.

The property owner is responsible for the collection and remittance of sales
tax on the motor vehicle parking services provided in its building's
underground parking garage. As set out in Section 3.356(n), the property
management company's personnel operating the property owner's parking garage
are considered employees of that property.

If there are parking contracts that are entered into with tenants or other
motor vehicle owners, the provisions in the contracts may provide definitive
information as to who is the motor vehicle parking services provider.

Because both the property owner and the property manager are parties to the
motor vehicle parking services, the comptroller may hold both parties liable
for any taxes owed to but not paid to the state.

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

You may call me toll free 1-800-531-5441, extension 3-4683. The direct line is
512/463-4683. You
may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Policy Division