Could a Texas provider of taxable services separately state bond and insurance costs and leave them out of the sales-tax base?

Plain-English summary

The operative November 27 letter revised the attached June 24 opinion specifically as to bond and insurance charges. It said a person performing taxable services could not separately state those costs and omit tax because they were expenses connected with selling the taxable service.

The earlier June letter had accepted the requester's contract-maintenance and property-management analysis and described a new-construction pass-through structure. Its broader statement that permits, fees, bonds, and insurance were generally nontaxable was superseded by the November correction for bonds and insurance connected with taxable services.

What this means for you

Itemizing bond and insurance costs did not remove them from a taxable service's sales price. The later correction controls over the earlier attached statement on those charges.

Common questions

Did the November letter revise the June letter? Yes. What did it change? Treatment of bond and insurance costs. Could those costs be separately stated as nontaxable when tied to a taxable service? No.

Citations and references

• The corrective letter does not identify a numbered statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9111L1146D05

Original ruling text

November 27, 1991

Dear ***:

I would like to revise my letter of June 24, 1991 regarding charges for
bonds and insurance.

Individuals performing taxable services may not separately state and not
tax their costs of bonds and insurance. These are expenses connected
with the sale of the taxable service.

If you have questions or need more information, please call or write.
You may reach me by calling toll free, (800) 531-5441. My direct line
number is (512) 463-4680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division

June 24, 1991

Dear ***:

Thank you for your recent letter regarding the contract maintenance, and
other services you provide.

I agree with your analysis under both the headings Contract Maintenance
and Property Management Services.

In the area of new construction, you said that your firm functions like
a general contractor. You take bids from subcontractors and pay them for
their labor and materials plus any tax due on the materials. You then
pass these charges through on a dollar-for-dollar basis and add your
management fee at the bottom. I agree that no additional tax is due from
the building owner.

You further say that certain permits, fees, bonds, and insurance may be
required in order to do a particular new construction or remodeling job.
These charges are not subject to tax unless they are directly attributable
to the sale of tangible property.

This opinion is based on the facts you presented. Other facts, though
similar, may yield different results.

If you have any questions or need more information, please call or write.
You may reach me by calling toll free, (800) 531-5441. My direct line
number is (512) 463-4680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division