When was a debt-collection service taxable based on the debtor's Texas address and the creditor's Texas location or business activity?

Plain-English summary

The Comptroller said a debt-collection service was taxable when two conditions were met at referral:

1. The debtor's address was in Texas when the account was placed for collection.
2. The creditor was located in Texas or was doing business in Texas.

If the requester's finance-company client was doing business in Texas, its debt-collection service was taxable. The letter enclosed Texas Tax Code § 151.107 for the doing-business standard.

What this means for you

The 1988 test considered both the debtor's address and the creditor's Texas nexus. The source does not disclose whether the specific finance company actually met the doing-business definition; it states the result conditionally.

Common questions

Did a Texas debtor address alone make the service taxable? No. The creditor also had to be in or doing business in Texas.

Was the finance company's service taxable? Yes, if the company was doing business in Texas.

Citations and references

• Texas Tax Code § 151.107, enclosed for the doing-business definition.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8802L0868F04

Original ruling text

February 2, 1988

Dear ***:

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.

A debt collection service is taxable if the address of the debtor 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 doing business in
Texas at the time the debt is referred for collection.

If your client, the finance company, is doing business in Texas, the debt
collection service is taxable. I am enclosing a copy of Sec. 151.107
from H.B. 61 for your information.

This opinion is based on 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 or phone 512/463-4600.

Sincerely,

Jo Ann Dieck
Tax Policy Division