Is an apartment locating service taxable, where the locator gets paid a referral fee by the apartment complex (not the renter) for each successful referral?

Plain-English summary

Someone considering starting an apartment locating business asked the Comptroller whether the service is taxable, specifically whether sales/use tax should be charged to the apartment complexes that pay for referrals. The Comptroller answered that apartment locating services are not a taxable service where the locator's fee is paid by the apartment complex for every successful referral.

What this means for you

People starting or running an apartment locating business

If your business model is a referral fee paid by the apartment complex for each successful placement, you don't need to collect Texas sales tax on that fee. Keep in mind the letter is fact-specific to this exact fee structure (paid by the complex, per referral) -- a different fee arrangement (e.g., charged to the renter, or bundled with other taxable services) could come out differently.

Apartment complexes paying locator fees

Expect not to be charged Texas sales tax on referral fees paid to an apartment locating service structured this way.

Common questions

Q: Is an apartment locating service taxable in Texas?
A: No, per this letter, when the fee is paid by the apartment complex for each referral.

Q: Does this apply no matter who pays the fee?
A: The letter only addresses the specific fee structure asked about -- paid by the apartment complex per referral. A different payment structure isn't addressed.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9704348L

Original ruling text

April 11, 1997

Dear ***:

This is in response to your Internet request for a ruling on the taxability of
an apartment locating service. Your specific question is as follows:

Is apartment locating a taxable service, where sales/use tax should be charged
to apartment complexes? Your answer would be appreciated for a friend who is
contemplating beginning an apartment locating business. Thank you.

Response: Apartment locating services where a fee is received from an
apartment complex for every referral is not a taxable service.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please
call me toll-free at 1-800-531-5441, extension 3-4502. The direct line is
512/463-4502. You may also write to Tax Policy Division, Comptroller of Public
Accounts. My Internet address is: [email protected].

Sincerely,
Gilbert Zamora
Tax Policy Division