The term “taxable services” is defined in Tax Code Section 151.0101 to include 17 broad categories of services. Each category encompasses a variety of specific services. Listed below are the types of services that are taxable, including examples and references to additional information.
Amusement services and places that offer amusement services include, but are not limited to: live and recorded performances such as movie theaters, circuses and concerts; exhibitions and displays, including antique shows, auto shows and museums; sporting events such as automobile races, horse races, rodeos, football and baseball games, including skybox rentals; participatory sports and games like bowling alleys, skating rinks, paintball fields, go-cart raceways, mudding pits, swimming pools, golf courses, health clubs and fitness centers; as well as carnivals, country clubs, amusement parks and other similar events and venues. Taxable amusement services include sightseeing tours, online games, fortune telling and similar activities.
See Comptroller Rule 3.298, Amusement Services.
Cable television service is the distribution of video programming, with or without the use of wires, to subscribing or paying customers. The term includes direct broadcast satellite service (DBS), subscription television service (STV), satellite master antenna television service (SMATV), master antenna television service (MATV), multipoint distribution service (MDS), and multichannel multipoint distribution service (MMDS), any audio portion of a video program, streaming video programming and video on demand services.
Satellite television service provided directly to a customer’s premises is exempt from local sales and use tax. This applies to both residential and nonresidential customers.
See Comptroller Rule 3.313, Cable Television Service.
Creation or delivery of a credit report (or any part of a credit report) for a fee or any other consideration is a credit reporting service.
Tax is due on credit reporting services if the address of the credit applicant is in Texas at the time of the request for a report, and the person who requested the credit report is in Texas or is doing business in Texas.
Using a computer for word processing, data entry, production, compilation, storage or manipulation is a taxable data processing service.
Twenty percent of the charge for data processing services is exempt from tax.
Examples of data processing include check preparation; accounts payable or receivable preparation; web hosting, web site creation and maintenance; data storage, including offsite backup of electronic files; conversion of data from one type of medium to another (i.e. converting paper documents or videotapes to digital files); and the performance of a totalisator service with the use of computational equipment required by the Texas Racing Act. Data processing services providers include sellers of software as a service and application service providers.
Merely using a computer as a tool to help perform a professional service is not a data processing service. For example, the use of a computer and computer aided design software by an architect during preparation of original building plans is not data processing. Similarly, a bookkeeper or accountant is not performing taxable data processing services when applying knowledge of accounting principles to produce financial reports such as income statements, balance sheets, or profit or loss statements, or to prepare federal income tax, state franchise or sales tax returns, even if such work is performed on a computer.
Data processing also does not include the transcription of medical dictation by a medical transcriptionist or Internet advertising provided through a classified advertisement, banner advertisement, vertical advertisement, or link when the item is displayed on an Internet website owned by another person.
A debt collection service is any activity to collect or adjust a delinquent debt, to collect or adjust a claim, or to repossess property subject to a claim. For example, charges to perform any of the following services are subject to tax:
Tax is due on the total charge for debt collection activities when the last known address of the debtor in the creditor’s records, at the time the account is placed for collection, is in Texas; and the creditor for whom the debt is collected is located in Texas, or is engaged in business in Texas, at the time the debt is referred for collection.
The term “debt collection service” does not include the collection of court-ordered child support or medical child support, or the collection of current credit and real estate accounts, including mortgage payments and rental payments. Charges for these services are not taxable.
Gathering and furnishing general or specialized news or other current information to others, including electronic data research or retrieval and providing access to databases of such information are information services.
Twenty percent of the charge for information services is exempt from tax.
Examples of taxable information services include:
News syndicates, financial reporters and investment researchers must collect tax on their services. These services are not taxable, however, when provided to Federal Communications Commission (FCC)-licensed radio or television stations or to newspapers published daily, weekly or at other short intervals.
Internet access service enables users to connect to the Internet in order to access content, information, electronic mail or other services offered over the Internet.
The first $25 of a charge for Internet access, per account, per month, is exempt from sales tax. Tax is due on any amount over $25 charged for Internet access.
Motor vehicle parking and storage services include charges for parking meters (including private and municipally-owned meters); parking decals and permits; valet parking services; and impound fees.
See Comptroller Rule 3.315, Motor Vehicle Parking and Storage.
All charges for labor and materials to rebuild, replace, alter, modify or upgrade existing nonresidential realty are taxable.
“Nonresidential real property” includes commercial establishments such as manufacturing facilities, restaurants, offices, farms, ranches and hospitals, as well as parking lots, retention ponds and similar improvements, but does not include property used as a family dwelling such as apartment complexes, nursing homes and retirement homes.
The repair, restoration or remodeling of nonresidential real property does not include the addition of new usable square footage or scheduled and periodic maintenance.
Services such as shoe shining or repair, appliance repair, furniture refurbishing or upholstering, jewelry repair or cleaning and dog grooming are taxable.
Services such as laundering, dry cleaning, carpet cleaning, massage services performed by massage parlors, Turkish baths and escort services are taxable personal services.
The term “massage services” does not include massages provided by licensed massage therapists.
Manicures, pedicures, tanning, piercing, tattooing and similar services are not taxable.
Pest control and extermination, garbage and other waste collection or removal, janitorial and custodial services (including parking lot sweeping or cleaning), landscaping and lawn maintenance (including tree surgery and plant leasing) and surveying are taxable real property services.
See Comptroller Rule 3.356, Real Property Service and Publications 94-111, Cleaning and Janitorial Services, 94-112 Landscaping and Lawn Care Services, 94-114, Pest Control Services (PDF) and 94-157, Homebuilders and Real Property Services.
Security services include any service for which a license is required by the Private Security Bureau of the Texas Department of Public Safety under sections 1702.101 or 1702.102 of the Texas Occupations Code.
Examples include locksmith services, private investigation, armored car service, armed courier service, burglar alarm system installation and/or monitoring, guard dog service, vehicle location and tracking and unclaimed property services.
Taxable security services also include computer forensic services that constitute the analysis of computer-based data, particularly hidden, temporary, deleted, protected or encrypted files, for the purpose of discovering information related (generally) to the causes of events or the conduct of persons; as well as computer repair and support services that include reviewing computer data for the purpose of investigating potential criminal or civil matters.
Telecommunications services involve the electronic or electrical transmission, conveyance, routing or reception of sounds, signals, data or information using wires, cable, radio waves, microwaves, satellites, fiber optics or any other method now in existence or that may be devised.
Examples of telecommunications services include long-distance and local telephone service, including mobile or satellite phone service and Voice over Internet Protocol (VoIP), fax service, pager services, texting services and electronic mail (unless sold bundled with Internet access).
Receiving and relaying of telephone messages by a human operator is a taxable telephone answering service. Taxable telephone answering services do not include call center operations such as handling customer complaints and receiving orders.
Services provided by a transmission and distribution utility are taxable if the transmission or delivery is directly to an end-use customer whose consumption of the electricity is subject to sales tax.
See Comptroller Rule 3.295, Natural Gas and Electricity.
In addition to the taxable services noted above, other types of sales that may commonly be considered “services” are taxable as the sale, processing or remodeling of tangible personal property.
For example, tax is due on charges for manufacturing, assembling, fabricating or processing products, even when the customer provides the raw materials, tools or equipment.
Examples of labor that result in the sale of a taxable item include photography and videography; producing artwork; printing; calligraphy; embroidering, custom sewing or tailoring; woodworking; welding; catering; and assembling products such as computer systems, toys, furniture or equipment.
See Comptroller Rules 3.300, Manufacturing; Custom Manufacturing; Fabricating; Processing, 3.293, Food; Food Products; Meals; Food Service and 3.312, Graphic Arts or Related Occupations; Miscellaneous Activities and Publications 94-143, Draftsmen and Designers, 94-187 Mold Remediation Services and 94-176, Photographers and Texas Sales Tax (PDF).
A company engaged in business in Texas that provides a taxable service in this state is required to obtain a sales tax permit and to collect state and local sales and use tax.
Generally, tax is due on the entire amount charged for a taxable service, including items such as labor, materials and mileage charges, even if separately stated.
See Comptroller Rules 3.286, Seller’s and Purchaser’s Responsibilities, including Nexus, Permits, Returns and Reporting Periods, Collection and Exemption Rules, and Criminal Penalties and 3.334, Local Sales and Use Taxes.
In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.