Is developing original design specifications for a client's custom home project taxable, even though the designer isn't a licensed architect or engineer -- and how does that compare to drafting services or selling stock house plans?

Plain-English summary

A designer who isn't a licensed architect or engineer, but is contracted to create original planning and specifications for client projects (typically custom homes), asked whether that design work is taxable. The Comptroller confirmed it's a nontaxable service -- developing original specifications and producing an original design for a client counts as a nontaxable service even without an architecture or engineering license, though the designer must still pay sales tax when buying materials/supplies used to do that work. The letter distinguishes two related, TAXABLE activities so the line isn't blurred: drafting services (where a draftsman starts from existing schematic drawings, specifications, and requirements supplied to them, and produces delineations, blueprints, or other graphic drawings) are taxable as a sale of tangible personal property, with tax due on the full charge to the client. And selling "stock" plans -- an already-existing design or blueprint, as opposed to an original design tailored to a client's own specific needs -- is likewise taxable as a sale of tangible personal property.

What this means for you

Independent designers (non-architect, non-engineer) doing custom design work

Creating an original design and specifications from scratch for a client's project is a nontaxable service, whether or not you hold an architecture or engineering license. You do still pay sales tax yourself on the supplies you use to perform the work.

Draftsmen working from existing specifications

If you're supplied with schematic drawings, specifications, and requirements and your job is to produce blueprints or other graphic drawings from them (rather than originating the design yourself), that's a taxable sale of tangible personal property -- collect tax on your total charge to the client.

Businesses selling pre-made "stock" house or building plans

Selling an existing, already-designed plan (rather than creating an original design around a specific client's needs) is a taxable sale of tangible personal property.

Common questions

Q: Is creating an original design and specifications for a client's custom home taxable?
A: No, per this letter -- it's a nontaxable service, even for a non-architect, non-engineer designer.

Q: Does the designer owe any tax at all?
A: Yes, per this letter -- sales tax on items purchased to perform the design work, though not on the service charge itself.

Q: Is drafting a blueprint from client-supplied specifications taxable?
A: Yes, per this letter -- drafting services are taxable as a sale of tangible personal property.

Q: Is selling a pre-existing "stock" house plan taxable?
A: Yes, per this letter -- that's a taxable sale of tangible personal property, distinct from creating an original design.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9704389L

Original ruling text

April 2, 1997

Dear ***:

Thank you for your letter concerning the taxability of your design services.

You are not an architect or an engineer. However, you are contracted to
create, conceive, originate and relate the planning and specifications of a
client's project (usually custom homes).

The service of developing the original specifications and producing an original
design for a client is a nontaxable service even if you are not an architect or
an engineer. You are required to pay sales tax when purchasing items for use
in performing original designing services.

For your information, drafting services are services in which the draftsman is
supplied with schematic drawings, specifications, and requirements in order to
produce delineations, blue prints, and other taxable graphic drawings.
Draftsman are required to collect tax on the total charge to the client because
the drafting service is a sale of tangible personal property.

The sale of "stock" plans are taxable. These are considered the sale of
tangible personal property. The sale of a stock plan is simply the purchase of
an existing design (e.g., blue print) rather than the service of creating an
original design based on the client's specific needs.

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 Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division