Which title-company searches, abstracts, insurance, amortization schedules, closing charges, tax forms, and delivery fees were taxable?

Plain-English summary

The Comptroller gave the Texas Land Title Association a detailed classification list.

Taxable information services

The following were taxable: abstracts, abstracter's certificates, abstracter's letters, title runs, take-off services, tax searches, tax-service fees, tax certificates, and title-plant information sold to landmen, developers, or others. When the information came from a title company's plant, the total information charge and all copy charges were taxable.

Government agencies' open-records charges were nontaxable. If the title company separately stated the government amount from its own service charge, only the title company's service charge was taxable.

Title companies sometimes bought third-party information to update a title plant. Shared costs among joint plant participants were not taxed, but sales tax was due on the information services when purchased.

Insurance and title evidence

Title-insurance premiums were nontaxable. When a second title company supplied title evidence to the policy issuer for a share of the insurance premium, that charge was also nontaxable.

Other title and closing charges

• Preparing and selling an amortization schedule was taxable.
• Escrow fees, long-distance telephone reimbursements, and attorney fees for legal services received at closing were nontaxable.
• Preparing Form 1099 for the transaction parties was nontaxable.
• A courier charge to deliver documents was nontaxable by itself, but delivery connected with a taxable item—such as a sold abstract—was taxable.

Because title companies had relied on earlier information, the Comptroller said the new guidelines would not be enforced against association members until April 1, 1988.

What this means for you

The historical guidance distinguished the sale of compiled property information from insurance, professional, governmental, and stand-alone delivery charges. Separate statement mattered when a title company passed through a governmental open-records charge.

Common questions

Was an amortization schedule taxable? Yes.

Were title-insurance premiums taxable? No.

Were government open-records charges taxable? No; when separately stated, only the title company's service fee was taxed.

Were courier charges taxable? Not by themselves, but yes when connected with a taxable sale such as an abstract.

Citations and references

The letters cite no numbered statute or rule; the cover letter says it enclosed the information-services rule and bulletin.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0848E12

Original ruling text

January 25, 1988

Dear Ms. **:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay in
answering your question involving changes in the sales tax law. This isn't the
way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which would
not adversely impact businesses. In many instances, an answer to a question
just wasn't available when the question arrived.

I have enclosed a copy of a letter we recently sent to the Texas Land Title
Association. The letter explains which items provided by title companies are
taxable. I have also enclosed a copy of the rule and bulletin on information
services for your use.

If you have a specific problem or concern that this information does not cover,
please contact us at 1-800-531-5441. The regular number is 512/463-4600. You
may also write us at the Tax Policy Division.

Sincerely,

Mona Ezell Shoemate
Tax Policy Division

January 20, 1988

Ms. **
Texas Land Title Association
220 West 7th, Suite 201
Austin, Texas 78701

Dear Ms. **:

I have reviewed the information you sent me and tried to reconstruct the list
of items you originally submitted. If my understanding of what each of the
items listed includes is incorrect, please let me know.

The following services are subject to sales and use tax as information
services:

Abstracts - A compilation of all documents recording transactions on a
particular piece of real property.

Abstracters Certificates - A form prepared by the abstracter certifying that
all documents recording the property transactions are included in the abstract
and that the abstract is complete and correct.

Abstracters letter - A summary of all the transactions involving a piece of
property.

Title run - Information on the property transaction gathered through a search
of the title company's or county's records.

Take off services - An accumulation of information from county records.

Tax search - A search of county records to determine if the taxes have been
paid on a piece of property.

Tax service fee - A fee charged by companies that perform tax searches.

Tax certificate - A document provided by the county or tax service company
certifying that the taxes have been paid on a piece of property.

Plant information used by landmen, developers, etc. - Charges for allowing
others to obtain information from the title company's plant.

In some cases, the information listed above is obtained from a title company's
plant. If so, the total charge for the information service is taxable. All
charges for copies of the information are taxable.

In other situations, the information is obtained from the country. When
governmental agencies are required to provide information under open records
laws, the amount charged by the agencies is not taxable. If you separate the
amount paid to the government agency from the amount you charge your client for
obtaining the information, you should collect tax only on your service charge.
The separately stated amount paid to the government is not taxable.

Some of the services listed above are purchased from third parties by title
companies. These purchases are often made to maintain and update the
information in the title companies' plant. Some title companies share a title
plant (joint plant participation) share these costs of maintaining it. The
respective costs shared by the title companies are not taxed, but sales tax is
due on these information services at the time of purchase.

Title companies may sell title insurance policies to their clients. This
insurance policy replaces abstracts. The charge for premiums for title
insurance is not taxable. The title company performs a title run prior to
issuing the title policy. The title company may have to go to another title
company for information on property in another county. The second title company
provides title evidence to the first company in return for a share of the
insurance premiums. This charge is not taxable.

The preparation and sale of an amortization schedule is taxable.

A title company which handles a closing may receive escrow fees, reimbursements
for long distance phone calls, and attorney fees for legal services. These
amounts are not taxable.

The title company may also prepare 1099 forms for the parties to the
transaction to submit the IRS. Charges for this service are not taxable.

If the title company provides a courier to deliver documents, the charge is not
taxable. Delivery charges are taxable if connected with the sale of a taxable
item. For example, if you sell an abstract to a client and deliver it, your
delivery charges are taxable.

As Ms. ** stated in her December 9, 1987, letter, we realize your
members have relied on the information we've previously provided. We will not
require your members to comply with these guidelines until April 1, 1988. That
should give you time to notify your members.

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 512/463-4006.

Sincerely,

Dan Pearson
Deputy Comptroller