Is surveying a ship channel to determine water depth (for dredging decisions) a taxable real property service in Texas?

Plain-English summary

A taxpayer asked the Comptroller to confirm, in writing, an earlier telephone answer about the taxability of surveying a ship channel to determine water depth. The channel is periodically "surveyed" to check whether the water is deep enough for ships to navigate to docks without running aground; the results drive a decision on whether to dredge.

The Comptroller confirmed this type of survey is not taxable. Taxable surveying under real property services involves determining or confirming the boundaries of real property — not water depth. The letter also flags a distinct category, marine surveying that assesses damage to ships or cargo, which may be a taxable insurance service in certain circumstances — but that's a different service from the water-depth surveying described here, which is not taxable at all.

What this means for you

Port authorities, marine engineers, and surveying companies

Not all "surveying" is taxed the same way. Boundary/real-property surveys are taxable real property services; marine damage-assessment surveys may be taxable insurance services in some circumstances; but hydrographic/water-depth surveys done to inform dredging decisions are nontaxable.

Common questions

Q: Is surveying a channel's water depth taxable?
A: No — it isn't a boundary survey (the taxable kind under real property services) or a marine damage-assessment survey.

Q: What kind of surveying IS taxable?
A: Surveying that determines or confirms real property boundaries is taxable as a real property service; marine surveying assessing damage to ships or cargo may be taxable as an insurance service in some circumstances.

Q: Can another business rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9709928L

Original ruling text

9709928L

September 26, 1997

Dear ****:

Thank you for asking for written confirmation of the information you received
by telephone on taxability of surveying to determine the depth of water in the
CITY A Ship Channel.

The CITY A Ship Channel is "surveyed" from time to time to determine the depth
of water. This determination is necessary in order to maintain an appropriate
depth to allow ships to navigate the channel to approach docks without running
aground. A decision to dredge or not will be made based on the results of the
survey. You want us to confirm that this type of "survey" is not taxable as a
real property service or other taxable service under the sales tax.

You are correct. The type of survey that is subject to tax under the real
property services has to do with determining or confirming boundaries of real
property. Other surveying that may be taxable includes marine surveying that
involves assessing damage to ships or cargo. Marine surveying may be an
insurance service and taxable under certain circumstances. The surveying to
determine water depth you describe is not a taxable service.

This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 3-4675. The direct line is
(512) 463-4675. You also may write to Tax Administration Division, Comptroller
of Public Accounts. My internet address is .

Sincerely,

Tom Soto
Tax Policy Division