Is a fee for producing a microwave path feasibility analysis report subject to Texas sales tax?

Plain-English summary

A taxpayer asked about the tax treatment of producing microwave path feasibility analysis reports. The report data is gathered through personal observation and compiled — on computer disk or in written form — using computer tabulations, terrain profiles, mathematical data, CAD depictions, color photos, description sheets, and feasibility opinions.

The Comptroller held that charges for these reports are not subject to sales tax. But the preparer still owes sales tax on all the materials it uses to produce the reports (paper, supplies, equipment, etc.), since it's the end consumer of those items.

What this means for you

Engineering and telecom feasibility consultants

If your service is genuinely a professional analysis/report — grounded in personal observation and professional judgment, not just mechanical data manipulation — your charge to the client may not be taxable, similar to other professional-opinion services the Comptroller has treated as nontaxable. But you must pay sales tax yourself on the materials and supplies you use to prepare the reports.

Common questions

Q: Is a microwave path feasibility report taxable to the customer?
A: No — the charge for the report itself is not subject to sales tax.

Q: Does the report preparer owe any tax?
A: Yes — sales tax on the materials used to produce the reports.

Q: Can another company rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9710932L

Original ruling text

9710932L

October 6, 1997

Dear ****:

Thank you for your recent letter regarding the tax treatment of producing
microwave path feasibility analysis reports.

You state that the report data is gathered by you using personal observation
and compiled on computer disk or written format using computer tabulations,
terrain profiles, mathematical data, cad depictions, color photos, description
sheets and feasibility opinions.

Charges for these reports are not subject to sales tax. You should pay sales
tax on all materials used to produce the reports.

This opinion is rendered based on 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, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division