The term "taxable services" is defined in Tax Code Section 151.0101, Taxable Services 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, the following:
Taxable amusement services include sightseeing tours, online games, fortune telling and similar activities.
Cable television service is the distribution of video programming, with or without the use of wires, to subscribing or paying customers. The term includes the following:
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.
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. A credit report is any statement that has a bearing on a person’s credit worthiness.
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 the following:
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 (CAD) 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 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 the following:
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 online.
Beginning July 1, 2020, Texas will no longer impose sales tax on separately stated internet access charges due to the Internet Tax Freedom Act (ITFA) of 2016.
Federal law included a grandfather clause for those state and local governments, including Texas, who imposed a tax on internet services prior to October 1, 1998. This clause expires on June 30, 2020.
From now through June 30, 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.
Effective July 1, 2020, when a service provider bundles the internet access with a taxable service, such as telecommunications service or cable television service, the service provider should not collect tax on the amount allocated to internet access if the service provider can establish through their books and records a reasonable allocation for the taxable service and for the nontaxable internet access. See Texas Tax Code Section 151.025(d) and Rule 3.313(b)(2), Cable Television Service and Bundle Cable Service. Rule 3.366, Internet Access Services, Rule 3.334, Telecommunication Services and Rule 3.313 are being amended to reflect this change in the taxability of internet access services.
If the service provider cannot establish a reasonable allocation for the nontaxable internet services, the entire charge for the bundled services is taxable.
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.
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.
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 Rule 3.356, Real Property Service and Publication 94-111, Cleaning and Janitorial Services, Publication 94-112, Landscaping and Lawn Care Services, Publication 94-114, Pest Control Services (PDF) and Publication 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 the following:
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.
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 the following:
See 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. Also see Publication 94-143, Draftsmen and Designers, Publication 94-187, Mold Remediation Services and Publication 94-176, Photographers and Texas Sales Tax (PDF).
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.