Was an hourly service that searched for scholarships, grants, student loans, and other financial aid taxable, and which inputs could be bought for resale?

Plain-English summary

An educational consultant charged hourly fees to search for scholarships, grants, financial aid, student loans, and other student funding sources. The Comptroller classified the work as a taxable information service under Rule 3.342.

The consultant had to pay tax on supplies, materials, and equipment consumed in providing the service. A resale certificate could be used for tangible personal property when care, custody, and control transferred to the customer, and the consultant could also buy the database used to provide the information service for resale.

What this means for you

The letter taxed the research service itself and then separated consumed business inputs from property or information acquired for transfer to the customer.

Common questions

Was the scholarship-search service taxable? Yes.

Did the consultant need a sales-tax permit? Yes.

Could the consultant buy the database for resale? Yes, under the letter.

Could all supplies be bought tax-free? No. The resale treatment applied only when care, custody, and control transferred to the purchaser.

Citations and references

• 34 Tex. Admin. Code Rule 3.342 — information services
• 34 Tex. Admin. Code Rule 3.285 — current STAR reference for resale and care-custody-and-control guidance

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9108L1129D08

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale (amended 11/01/2017.

August 27, 1991

Dear ****:

Thank you for your recent letter regarding the taxability of the service
you will be providing as an educational consultant.

According to information in your letter, you will search and locate
scholarships, grants, financial aid, student loans and other sources of
financial assistance for students. You will be charging an hourly fee for the
service.

The service you are providing is taxable as an information service. An
application for a sales tax permit is enclosed. You may mail the completed
application to Austin or to the El Paso Field Office, located at 1421 N. Lee
Trevino, Suite B-002, 79936.

You are required to pay tax at the time of purchase on all supplies,
materials and equipment used to provide the service. However, you may issue
resale certificates in lieu of tax to suppliers of tangible personal property
if care, custody, and control of the property will be transferred to the
purchaser of the service. You may also issue a resale certificate on the
purchase of the data base you will be using to provide the information service.

Rule 3.342 on Information Services is enclosed for your reference.

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, you may call me toll
free at 1-800-531-5441, extension 5-0330. The regular number is 512/463-4600,
or write Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division