Was a $25 employee per diem recharged to customers part of the Texas sales-tax base for taxable services?

Plain-English summary

The company paid certain employees a $25 daily per diem when they worked more than 75 miles from the company's location, then collected the same amount from customers that had agreed to pay it. The company said it did not record those amounts as profit.

The Comptroller stated the general rule that per diem charges associated with taxable services were expenses included in the tax base. For this company, however, the Comptroller allowed exclusion because the company did not book the amounts as income.

What this means for you

The letter's result is expressly tied to the company's accounting treatment. It does not decide the tax treatment of every travel, meal, lodging, mileage, rental, or airfare charge listed in the broader STAR caption.

Common questions

Are per diem charges connected with taxable services generally included in the tax base? Yes.

Why could this company exclude them? It did not book the customer-reimbursed amounts as income.

How much was the per diem? $25 per day.

Does the letter separately decide other travel-expense categories? No.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8707L0821E10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller July 2, 1987

Dear ***:

Thank you for your letter concerning the taxability of a per diem charge
to
your customers for your employees who are working in excess of 75 miles
from ***.

Situation:
Per diem is provided by some of your customers when you are working in
excess of 75 miles from ***. You consider this as a
reimbursement to
your employees for commuting to the job site as their payroll period
begins
when the rig fires up. Travel to and from is strictly on them. They are
paid $25 per day which the Internal Revenue Service rules as ordinary
income
and they are subject to tax on same. you pay those due per diem on a
weekly basis and merely collect this in turn from your customers that are
in
agreement. These figures are not recorded in your record books as profit.

Answer:
Per diem charges associated with taxable services are considered to be
expenses and includable in the tax base. However, if your company is not
booking these amounts as income then we will allow you to exclude the
charge
from the tax.

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

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,
F. Wayne McDonald
Tax Policy Section
Tax Administration Division