A traffic-engineering consultant sells market reports, expert-witness reports, and subject-expert reports to TxDOT and others, and separately performs consulting-style services (expert witness testimony, teaching training courses, nonprofit director work). Which of these are subject to Texas sales tax, and does it matter that the main customer is a state agency?

Plain-English summary

A traffic-engineering consultant based in Bastrop, Texas sold several kinds of reports (market reports on products TxDOT purchased, expert witness reports on tort claims involving TxDOT and various cities, and subject-expert reports recommending changes to training manuals) and also performed several kinds of consulting-style services (expert witness testimony for the Texas Attorney General's office/cities/contractors, teaching training courses, and serving as a nonprofit's director). The consultant asked whether any of this triggered Texas sales tax collection duties, and at what rate in Bastrop.

The Comptroller sorted these into three buckets. First, market reports and expert witness reports that are gathered/compiled specifically on behalf of one client, and that are of a proprietary nature to that client (not resalable by the person who compiled them), are NOT subject to tax under Rule 3.342's information-services exclusion — examples given include opinion polls and management consultant reports. However, if that original client later resells the same information, that subsequent sale IS taxable. Second, even where a report is otherwise taxable, government purchasers are exempt: TxDOT (a state agency) can buy tax-free with a purchase voucher as sufficient proof of exempt status, and an incorporated Texas municipality could likewise buy an expert witness report tax-free. The training-manual report specifically was ruled not taxable at all. Third, the listed consulting services — expert witness testimony, teaching training courses, and acting as a nonprofit's director — are not taxable services, period, regardless of who the customer is.

For any reports that don't qualify as proprietary information and that are sold to non-exempt entities, the Comptroller confirmed the applicable combined rate for a Bastrop, Texas business location: 8.25% (6.25% state + 1.5% Bastrop city + 0.5% Bastrop county).

What this means for you

Consultants selling reports to government agencies

Even if your report would otherwise be taxable as an information service, sales to exempt government entities (like TxDOT, or an incorporated Texas municipality) can be made tax-free — a purchase voucher from the agency is enough proof of exempt status; you don't need a separate resale/exemption certificate process.

Professionals who both sell reports AND provide consulting/testimony

Keep these revenue streams distinct in your recordkeeping. Genuinely proprietary, single-client reports and pure consulting/testimony services are not taxable, but reports sold more broadly (non-proprietary information services to non-exempt buyers) are taxable at your combined local rate.

Businesses in Bastrop, Texas needing the applicable combined sales tax rate

As of this 1998 letter, the combined rate was 8.25% (6.25% state, 1.5% city, 0.5% county) for a business located within Bastrop city limits — confirm current rates with the Comptroller, since local rates can change over time.

Common questions

Q: Are reports I compile for just one client, that they can't resell, subject to Texas sales tax?
A: No — under Rule 3.342, information gathered/compiled on behalf of a particular client that's proprietary to that client (not resalable by the compiler) is not taxable.

Q: What if my client later resells that same report or information?
A: That subsequent resale by the client IS subject to tax.

Q: Does selling to a state agency like TxDOT change the tax treatment?
A: Even if the report would otherwise be taxable, TxDOT and other exempt government entities can purchase tax-free with a purchase voucher.

Q: Is expert witness testimony or teaching a training course taxable?
A: No — these are consulting-type services that are not taxable, regardless of the customer.

Q: Can I rely on this letter for my own reports/consulting business?
A: No. It's based on the facts presented, and the letter notes other facts, though similar, may provide a different result.

Citations and references

• 34 Tex. Admin. Code Rule 3.342 (information services, including the proprietary-information exclusion and taxability of subsequent resale)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9804657L

Original ruling text

April 21, 1998

Dear **:

This is in response to your request for a ruling regarding the various services
that you provide. You are an engineering consultant in the traffic engineering
field. You sell reports to various companies such as:

1. Market reports on products purchased by TxDOT.

2. Expert witness reports on tort claim issues with TxDOT and various cities.

3. Subject expert report for training courses. This may involve reading
   training manuals for the ** and then through a report format
   recommending changes to the training manual.

You also perform the following consulting services:

1. Expert witness testimony for the Texas Office of the Attorney General,
   various cities and
   construction companies that have state contracts.

2. Teach training courses for the **.

3. Director of a non-profit association.

You are asking if you should collect state sales tax for any of these services
and what should the tax percent be if you work in Bastrop, Texas?

Response: The sale of market reports which is gathered or compiled on behalf of
a particular client is not subject to tax if the information is of a
proprietary nature to that client and may not be sold to others by the person
who gathered or compiled the information. Any subsequent sale of such
information by the client for whom the information was gathered or compiled is
subject to tax. Examples include opinion polls and management consultant
reports. See Rule 3.342 - Information Services, copy enclosed.

If the market reports are taxable, TxDOT as a state agency is exempt on its
purchases of taxable items. A purchase voucher issued by TxDOT is sufficient
proof of the entity's exempt status. Similarly, the expert witness reports if
taxable, could be purchased tax-free by TxDOT or an incorporated Texas
municipality. Your report recommending changes to a training manual would not
be taxable.

The consulting services that you perform (expert witness testimony, teaching
training courses and director of a non-profit association) are not taxable
services.

Reports, not qualifing as proprietary information, that you sell to non-exempt
entities would be subject to tax at 8.25% (6.25% state sales tax, 1.5% Bastrop
local sales tax, if your place of business is located within the city limits of
Bastrop, and the .5% Bastrop county tax.)

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division