Does a company have to collect Texas sales tax on charges for setting up and supervising a contest?

Subject

Contest Executional Services — Setting Up And Supervising A Contest Are Not Taxable

Plain-English summary

A taxpayer sent the Comptroller's office a copy of a contest proposal and asked whether it had to collect sales tax on its charges for "executional services" — meaning the work of setting up and supervising the contest itself. The Comptroller's Tax Administration Division answered that setting up and supervising a contest are not taxable services. However, the same short letter makes clear that tax must still be collected on charges for materials and prizes sold to the client in connection with the contest.

In other words, the ruling draws a line between two different things a contest-running business might charge for: the service of running the contest (not taxable) and any tangible items — materials and prizes — it sells the client along the way (taxable).

What this means for you

Businesses that run contests, sweepstakes, or promotions for clients

If your charges are purely for the labor of setting up and supervising a contest, this letter indicates the Comptroller does not treat that service as taxable. But if your invoice also includes materials or prizes you're providing and selling to the client, tax needs to be collected on those items.

Accountants and tax professionals

This is a very short, fact-specific letter with no statutory citations in the text. It's useful as an example of how the Comptroller distinguishes a nontaxable execution/supervision service from a taxable sale of tangible personal property (materials and prizes) bundled into the same arrangement, but it doesn't establish a general rule you can rely on for a different set of facts.

Common questions

Q: Is tax owed on fees for setting up and supervising a contest?
A: No. The letter states plainly that "[s]etting up and supervising a contest are not taxable services."

Q: Is tax owed on anything in this arrangement?
A: Yes — the letter directs the taxpayer to "[c]ollect tax on charges for materials and prizes sold to your client."

Q: Can I rely on this letter for my own contest business?
A: Not directly. The letter itself says "[t]his opinion is based on the facts presented[;] other facts, although similar, may result in a different conclusion." It also predates STAR's modern reliance framework, but the same caution applies: it was written for one taxpayer's specific facts.

Q: Does this letter cite any statutes or rules?
A: No. The original text contains no statutory or rule citations — it is a brief, direct answer to a narrow factual question.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9304L1235C06

Original ruling text

April 26, 1993

Dear ***:

Thank you for sending a copy of your contest proposal. You asked if the
agency must collect tax on charges for executional services.

I understand the executional services are setting up and supervising the
contest. Setting up and supervising a contest are not taxable services.
Collect tax on charges for materials and prizes sold to your client.

This opinion is based on the facts presented other facts, although
similar, may result in a different conclusion.

If you have any questions or need more information, please call. My
number is 1-800-531-5441, ext. 3-4614. Or you may write to the Tax
Administration Division.

Sincerely,

Adina Whittemore
Tax Administration Division

NOTE: Previous Accession Number 93050113.L02