Is a company that arranges and coordinates real property surveys for its clients, using independent licensed surveyors, purchasing survey services for resale and required to collect tax from its own customers?

Plain-English summary

Note: STAR's own subject heading for this ruling ("Operating Lease — Equipment Returned to Lessor") does not match the letter's actual subject matter, which concerns a company that manages and coordinates real property surveys. The url_slug is kept as scraped for identity purposes; the corrected subject_title above reflects the real content.

A company (the "Coordinator") that manages and arranges real property surveys for its clients asked whether it can treat itself as a nontaxable purchasing agent — buying surveying services on behalf of its clients — rather than as a reseller that must collect sales tax. The Coordinator itself is not a licensed surveyor; it locates independent licensed surveyors, contracts with them, and coordinates delivery of the survey work to its own clients. The Coordinator supplied three contract exhibits: a sample transmittal letter to a potential client, its contract with the client, and its typical contract with a local surveyor.

Based on those documents, the Comptroller concluded the Coordinator is purchasing surveying services for resale and reselling them to its customers — not acting purely as an agent. That means the Coordinator may give the surveyor a resale certificate instead of paying tax on the survey purchase, but it must in turn collect Texas sales tax from its own customers on the taxable surveying charge. The Comptroller specifically noted that although Exhibit 3 (the Coordinator-surveyor contract) contained language suggesting the services were purchased "on behalf of another," the contract between the Coordinator and the property owner (Exhibit 2) read as a straightforward contract to provide surveying services — not an agency agreement or the provision of some other nontaxable service. The fact that surveyors are independent contractors (not employees of the Coordinator), and that any defect cures/revisions must be performed by the surveyor (not the Coordinator) directly, didn't change this resale characterization.

What this means for you

Businesses that coordinate or broker professional/licensed services

Calling yourself a "coordinator" or structuring one leg of your contracts with "on behalf of" language doesn't automatically make you a nontaxable purchasing agent. The Comptroller looks at the actual contract with your end customer: if that contract reads as you providing the service (even though you subcontract the licensed work to an independent professional), you're a reseller who must collect tax from your customer — while you can buy the underlying service tax-free with a resale certificate.

Accountants and tax professionals

This is a useful illustration of how Texas resolves purchasing-agent-vs-reseller disputes: it's the substance of the contract with the ultimate customer that controls, not incidental "on behalf of" language buried in a different contract further down the supply chain.

Common questions

Q: Is a company that arranges professional services through independent contractors automatically a nontaxable purchasing agent?
A: No. If the contract with your own customer reads as you providing the service, you're a reseller — you can buy the underlying service tax-free with a resale certificate, but must collect tax from your customer.

Q: Does it matter that the surveyors are independent contractors, not employees?
A: Not by itself — the Comptroller still found a resale relationship despite the surveyors' independent-contractor status.

Q: Who is responsible for collecting sales tax in this arrangement?
A: The Coordinator, on the taxable surveying charge billed to its own customers — not the individual surveyor, and not exempt as an agency pass-through.

Q: Can another survey-coordination business rely on this letter?
A: Only the taxpayer who requested it can use it for detrimental reliance, and the answer turned on the specific contract language submitted — a coordinator with genuinely different (true agency) contract terms could get a different result.

Citations and references

No specific Tax Code section or Comptroller rule number is quoted in this letter; the resale-vs-agency determination rests on the Comptroller's reading of the submitted contract exhibits.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9911849L

Original ruling text

November 2, 1999

Dear **:

Thank you for your recent letter of October 21, 1999 in regard to the
management and coordination of real property surveys.

You attached three exhibits in response to my request for additional
information in a previous response. The first attachment is Exhibit 1, which
is an example of a transmittal letter by your client, the Coordinator, to a
potential client. The second attachment is Exhibit 2, which is the Contract
between the Coordinator and the Client. The first page of Exhibit 2 is the
Authorization to Proceed, and pages 1-7 are the actual Agreement. The third and
final attachment is Exhibit 3, which is the typical contract between the
Coordinator and the local surveyor.

I had asked whether your client is "acting in the capacity of a purchasing
agent when purchasing surveys." You replied "Generally speaking, the answer to
that question is yes. My client assists by locating surveyors and contracting
with those surveyors for the client. Since the actual survey work can only be
performed by licensed surveyors, my client manages the selection of surveyors
and the ultimate distribution of the surveyors' work. Please see Scope of
Services, page 1 of Agreement for Professional Property Transaction Services of
Exhibit 2, and paragraphs VIII and X of Exhibit 3."

My second inquiry was: "You stated that your client is not a licensed surveyor
and cannot provide these services without a licensed surveyor. Are the
surveyors ever employees or contract laborers?" You replied that the surveyors
are never employees or contract laborers of the coordinator. They are
independent contractors.

My third inquiry was "are the services sold warranted by your client to their
customers or do the customer's clients look to the client for warranties to
cure defects revisions?" You answered that any cure or revision with regard to
defects must be performed by the surveyor, and not your client. Again, since
your client is not a licensed surveyor, it has no capacity to cure or revise a
survey. To the extent any such work would be necessary, your client would
manage and coordinate obtaining the cure or revision on behalf of their client.
Specifically, the surveyor indemnifies your client against liability with
regard to survey deficiencies (per paragraph VIII of Exhibit 3).

Based upon the forgoing, you believe that the proper party for the collection
and remission of the sales tax is the surveyor who actually performs the work.

Response. In view of the documents submitted, I believe your client to be
purchasing surveying services for resale and reselling said services to their
customers. They may issue a resale certificate in lieu of tax when purchasing
these services and should collect tax from their customers for taxable
surveying charges. Although there is a reference in the agreement between your
client and the actual survey firm (Exhibit 3) that the services are being
purchased on behalf of another, the contract between your client and the
property owner (Exhibit II) appears to be for the provision of surveying
services and not an agency agreement or provision of another non taxable
service.

Several publications and other items of interest (including the Texas Tax Code)
are also available on our web page . Sales tax
rules are available on the Internet
.

This opinion is based on the facts presented. Different facts though similar,
may result in different answers. If you have any questions or need more
information, you may call me toll free at 1-800-531-5441, extension 5-0613.
You may also write to Tax Policy Division, Comptroller of Public Accounts, Post
Office Box 13528, Austin, Texas 78711.

Sincerely,

Kevin Koller
Tax Policy Division