Do I have to charge sales tax on manual drafting services, or only on computer-aided (CAD) drafting?

Subject

Drafting Services — Draftsman Manually Produces Drawings/Blueprints From Schematic Drawings/Specifications Supplied By Clients

Plain-English summary

A taxpayer had been told over the phone by the sales tax office that only computer-aided (CAD) drafting services were taxable, so they collected sales tax solely on CAD work and treated manual (pen-and-pencil) drafting as tax-free. The Comptroller wrote back to correct this: that phone advice was wrong. Sales tax applies to drafting delineations and blueprints regardless of whether the draftsman produces them manually or with CAD technology. The letter cites a 1967 Comptroller letter as the longstanding basis for taxing drafting services as sales of tangible personal property, and points to Rule 3.312 (Graphic Arts or Related Occupations) as covering both manual and CAD drafting. It also explains the underlying theory: a draftsman who turns a customer's specifications into delineations and blueprints is fabricating tangible personal property to be sold, which is why the manufacturing/fabricating rule (Rule 3.300) applies as well. Additional copies of the drawings or blueprints are taxable too.

What this means for you

Drafting businesses and draftsmen

It doesn't matter whether you draw plans by hand or generate them with CAD software -- sales tax is due on the drawings and blueprints you produce for a customer from their specifications, and on any extra copies you sell.

Architects, engineers, and businesses that hire draftsmen

Expect sales tax to be charged on drafting work you purchase in Texas, whether it's manual or computer-generated. If a vendor tells you only CAD work is taxable, that's inconsistent with this letter's guidance.

Accountants and tax professionals

The letter treats drafting as a fabrication of tangible personal property (Rule 3.300) as well as a graphic arts activity (Rule 3.312), so the same sales tax treatment applies whether the drawings are created by hand or by computer -- there is no manual-vs-CAD distinction for taxability.

Common questions

Q: Is manual (pen-and-pencil) drafting taxed differently than CAD drafting in Texas?
A: No. Per this letter, sales tax is due on drafting delineations and blueprints "regardless of whether a draftsman manually creates the drawings using pen and pencil or a draftsman uses Computer Aided Design (CAD) technology."

Q: Are extra copies of blueprints also taxable?
A: Yes -- the letter states "additional copies of delineations and blueprints are also taxable."

Q: Why are drafting services taxed as if they were a sale of goods?
A: Because the Comptroller views a draftsman producing delineations and blueprints as fabricating tangible personal property to be sold, which brings it under the manufacturing/fabricating rule as well as the graphic arts rule.

Citations and references

Rules:

• 34 Tex. Admin. Code § 3.312 (Graphic Arts or Related Occupations; Miscellaneous Activities)
• 34 Tex. Admin. Code § 3.300 (Manufacturing; Custom Manufacturing; Fabricating; Processing)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9605L1412G08

Original ruling text

May 8, 1996

Dear ****:

Thank you for your letter concerning the taxability of manual drafting
services.

You stated that you were told during telephone conversations with the sales
tax office to only collect sales tax for computer aided drafting services.
This information is not correct. As explained in a May 4, 1967 letter from
former Comptroller Robert S. Calvert (enclosed), drafting services are taxed
as sales of tangible personal property.

Regardless of whether a draftsman manually creates the drawings using pen
and pencil or a draftsman uses Computer Aided Design (CAD) technology, sales
tax is due on all drafting delineations and blueprints produced by a
draftsman from the specifications given by the customer. Additional copies
of delineations and blueprints are also taxable. Manual and CAD drafting
services are covered by Rule 3.312, Graphic Arts or Related Occupations;
Miscellaneous Activities. A copy of that rule is enclosed.

A draftsman producing delineations and blueprints is fabricating tangible
personal property to be sold. For that reason, I have also enclosed a copy
of Rule 3.300, Manufacturing; Custom Manufacturing; Fabricating; Processing.

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

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line
is 512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division

NOTE: Previous Accession Number 9605257L