How did Texas tax title-company charges for government certificates, joint-plant reimbursements, copies, delivery, and tax-search information?

Plain-English summary

The Comptroller answered five title-industry sales-tax questions.

• A separately stated amount paid to a government for a tax certificate was not taxable, but the title company's added service fee was. One combined charge was fully taxable.
• A jointly owned title plant paid tax on taxable items used to maintain and update its information. Shareholder reimbursements of those costs were not taxable, although the reimbursement could include the sales tax paid.
• Government open-records documents followed the tax-certificate treatment. An added title-company fee was taxable, and the total charge for copies from the title company's own plant was taxable.
• Delivery connected with a taxable sale was taxable when billed by the seller, even if an independent company performed it. Delivery-only charges billed directly by an independent carrier to the customer were not taxable.
• A title company used purchased tax-search information in its closing activity rather than reselling the information, so it had to pay tax to the search service and could not issue a resale certificate.

What this means for you

The letter repeatedly required separation between a nontaxable government pass-through and the title company's own taxable fee. It also distinguished the seller's delivery charge from a delivery-only transaction billed directly by an independent carrier.

Common questions

Was a separately stated government tax-certificate charge taxable? No, but the title company's added fee was.

Were joint title-plant cost reimbursements taxable? No.

Were copies from a title company's own plant taxable? Yes, on the total charge.

Could the title company buy a tax search for resale? No, because it used the information in the closing.

Citations and references

The letter referred to governmental open-records documents but did not cite a statute or rule number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8803L0903E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

March 21, 1988

Dear ****:

The questions you presented are outlined below with response as to
applicability of the sales tax.

Question 1:Tax Certificates: A title agent obtains a tax certificate
directly from a taxing authority, for a fee of up to $10.00. We under-
stand there is no sales tax due if the title agent passes that charge
directly to customers. However, what if the title company marks up
the fee to cover service costs, cancellations, etc.? Is sales tax to
be collected on the total amount charged to the customer?

Answer:If the amount paid to the governmental agency is separately
stated from the title company's fee for obtaining the tax certificate,
the title company should collect tax only on the additional fee. The
separately stated amount paid to the governmental agency is not taxable.
If the customer is charged a single amount, the total charge is taxable.

Question 2:Joint Plant Participation: A title plant is owned by several
title insurance company/agent shareholders to maintain a single county
title plant for the joint benefit and use of the shareholders. The share-
holders use the title plant to examine title and issue title insurance;
some of the shareholders also use the joint plant to issue abstracts,
abstracters certificates, etc.The operating agreement provides for each
shareholder to equally share the cost of maintaining the joint plant.
The joint plant pays sales tax to vendors from whom it purchases taxable
goods and services.Is the title plant compelled to collect sales tax from
its shareholders when it seeks reimbursement from them?

Answer:Taxable items purchased to maintain and update information in a
title companies' plant are taxable at the time of purchase. Subsequent
reimbursement charges to the shareholders for their share of the costs
are not taxable. However, the sales tax may be included as part of the
reimbursement charges.

Question 3:We request clarification on whether all charges we make for
copies are subject to sales tax. Or, is the first copy of a document
sold exempt from sales tax if it is a copy, of an open records act
document?

Answer: Taxability of a document obtained for a customer from a govern-
mental agency under the open records act should be handled like tax cer-
tificates as outlined in Question 1.Copies of open records documents are
not taxable. However, if you add a charge above the amount charged by
the governmental agency, the two charges should be shown separately and
tax collected on the added portion. If no separation of charges is made,
the entire charge is subject to tax. The total charge for copies of in-
formation obtained from a title company's plant is taxable.

Question 4:Taxability of courier charges/delivery fees.

Answer:Courier charges/delivery fees in Connection with the sale of a
taxable item are taxable whether or not separately stated.

Courier charges/delivery fees in connection with the sale of a nontaxable
item are not taxable, e.g. information obtained from a governmental
agency
under the open records act for which no additional charge is made.
However,
if the customer is charged an additional amount for obtaining the
informa-
tion, the delivery charge is taxable. The amount paid to the
governmental
agency would not be taxable if it is separately stated from the added
portion.

The seller of the taxable item is responsible for collection of
sales tax on taxable courier charges/delivery fees billed to its
customer whether the delivery is performed by its employee or an
independent delivery company.

Courier charges/delivery, fees billed by an independent delivery
company to the seller's customer are not taxable.Charges for
delivery only are not taxable.

Question 5:The tax search service will examine the applicable records to
verify whether taxes are owed on the property in question. For a
fee, the tax search service will furnish the tax information to a
title company. For another fee, the title company will then sell
the tax search information to the parties to the real estate
closing.The fee may or may not be the same fee paid to the tax
search service (particularly because of "bustouts").
The title company will, in reliance upon the tax search
information, issue its policy without exception as to taxes due
and will require that all tax be paid. May the tax search
service rely upon a resale certificate from the title company and
may the title company issue such a certificate under this
scenario?

Answer: It appears that the tax information is to be used as part of the
real estate closing activities and is not resold as information.
The title company should pay tax to the title search service when
the information is purchased. A resale certificate is not
appropriate.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may
write me
at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division