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Ezel / Tax Rulings / TX
TX 8511L0681A06 Sales and/or Use Tax (State,Local,MTA) 1985-11-04

Was a customized questionnaire-based business performance analysis service taxable in Texas?

Short answer: No. The analysis service was nontaxable, but the provider had to pay tax to suppliers on all materials used to provide it.

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This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1985 Texas Comptroller taxpayer-response letter based on a performance-analysis service using client-selected topics, questionnaires, weighted scoring, comparisons, identified problems, and suggested remedies in a customized report. It expressly says different facts could change the opinion. Current consulting, information, data-processing, reporting, training, materials, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The company sent clients questionnaires about selected operational areas, applied a weighted scoring system, and produced a report on management strengths, weaknesses, performance, comparisons, likely problems, and suggested remedies. Although the process was standardized, each report reflected the client's own answers.

The Comptroller said the performance-analysis service was nontaxable. The provider still had to pay tax to its suppliers on all materials used to provide the service.

Common questions

Was the analysis fee taxable? No.

Did the customized report change the result? The letter described the unique client input as part of the nontaxable service.

Could the provider buy its materials tax-free? No. It had to pay tax to suppliers.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

November 4, 1985

Dear ***:

Thank you for your letter of October 23, 1985, concerning the taxability
of a performance analysis service.

Situation. COMPANY A provides a "Quantified Performance Analysis" service
to medium sized businesses. Our services contain the following process:

  1. Client company selects operational areas to be analyzed by COMPANY A
    and requests the service by sending a fee to COMPANY A.

  2. COMPANY A sends client a questionnaire with questions to be answered by client.

  3. When COMPANY A receives completed questionnaires back from client, it applies
    a weighted scoring system to determine management strengths and weaknesses of client.

  4. A report is compiled (QPA) and returned to client. The report contains our
    findings, such as a performance percentage, a comparison to other businesses, a
    list of most likely reasons for problems, and a list of suggested remedies to be
    implemented by client to overcome the identified problems.

While there is much standardization within the reporting process, each report is
unique in that it is the direct result of the input provided by the client,
through his answers of the questionnaire.

Response: Your business of providing a performance analysis is not taxable. You
are required to pay tax, to your suppliers, on all materials purchased for use
in providing this non-taxable service.

This opinion is based on the facts presented. If there are additional or different
facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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