Were services to collect delinquent real-property rent and medical bills subject to Texas sales tax?

Plain-English summary

A debt-collection business asked about collecting delinquent real-property rental payments and medical bills. The Comptroller agreed that medical services and real-property rent themselves were not subject to sales tax.

The collection work was different. Activities performed to collect or adjust past-due debts or claims were taxable debt-collection services under Rule 3.354. Tax Code § 151.0101 listed debt collection as a taxable service, and § 151.0036 defined it.

The letter said the sales-tax law provided no exemption for debt-collection services merely because the underlying claim came from an unpaid medical bill or real-property rental.

What this means for you

Taxability followed the collection service, not the original charge. A nontaxable medical service or real-estate rent could still generate a taxable fee when a business was hired to collect or adjust the delinquent account.

Common questions

Was real-property rent itself taxable? No, according to the letter.

Were medical services taxable? No.

Was collecting those unpaid amounts taxable? Yes.

Did the source of the debt create an exemption? No.

Citations and references

• Texas Tax Code § 151.0101 — taxable services, including debt collection
• Texas Tax Code § 151.0036 — definition of debt-collection services
• 34 Tex. Admin. Code Rule 3.354(a)(4), (a)(5), and (b) — debt-collection activities

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9106L1114A07

Original ruling text

June 4, 1991

Dear *****:

Your second letter, dated May 30, 1991, was given to me for a
response. We have no record of having received your first letter
concerning collection of delinquent real property rental payments
and medical bills.

Although, as you pointed out in your letter, sales tax is not due
on medical services or rental of real property, you are required
to collect sales tax on activities performed to collect or adjust
past due debts or claims. Please refer to sections (a)(4),
(a)(5) and (b) of the enclosed Rule 3.354-Debt Collection Services.

Debt collection services are specifically listed as a taxable
service in section 151.0101 of the sales tax law. Section
151.0036 provides a definition of debt collection services. I
have enclosed photocopies of both sections for your convenience.
The sales tax law does not provide any exemptions for debt
collection services performed on claims resulting from unpaid
medical bills or real property rentals.

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 any additional
questions. You may write me, call toll free 1-800-252-5555 from
anywhere in the United States or phone 512/463-4600.

Sincerely,

Julie Pesl
Tax Administration Division