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Ezel / Tax Rulings / TX
TX 9910829L Sales and/or Use Tax (State,Local,MTA) 1999-10-26

Is a referral fee paid by a nursing home or retirement community to a locator service (that helps senior citizens find a home, at no charge to the senior) subject to Texas sales tax?

Short answer: No. The referral fee paid by the nursing home or retirement community for the locator service is not subject to Texas sales tax, when the senior citizen being referred is not charged.

Apply this to your situation

This page answers the general question as of 1999. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1999
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A business that helps senior citizens locate a nursing home or retirement community — with the referral fee paid by the nursing home or retirement community itself, and the senior citizen paying nothing when referred — asked whether that referral fee is subject to Texas sales tax. The Comptroller's answer is a brief, direct no: the fee paid by the nursing home or retirement community for the referral service is not subject to Texas sales tax.

What this means for you

Senior-living locator and referral services

Referral fees paid by a facility for connecting it with a prospective resident are not taxable in Texas, based on this letter's fact pattern (fee paid by the facility, not the senior citizen). This is a favorable, straightforward answer for businesses operating this kind of matching/referral model.

Nursing homes and retirement communities paying referral fees

You can pay a locator/referral fee to a service like this without Texas sales tax being added to that charge.

Common questions

Q: Is a referral fee paid by a nursing home to a locator service taxable in Texas?
A: No, based on this letter — as long as the fee is paid by the facility and the senior citizen being referred isn't charged.

Q: Would the answer differ if the senior citizen paid the referral fee instead?
A: This letter doesn't address that scenario — its facts specifically involve the nursing home/retirement community paying, with no charge to the senior citizen.

Q: Can another locator/referral business rely on this letter?
A: Only the taxpayer who requested it can use it for detrimental reliance, and the Comptroller notes the answer is based on the facts presented; a business with different fee arrangements should confirm its own facts.

Citations and references

No specific Tax Code section or Comptroller rule number is quoted in this brief letter.

Source

Original ruling text

October 26, 1999

Dear **:

Thank you for your recent letter regarding your locator service for senior
citizens to find a nursing home or retirement community.

You stated that the referral fee is paid by the nursing home or retirement
community, and the senior citizen is not charged when referred.

The fee paid by the nursing home or retirement community for your referral
service is not subject to Texas sales tax.

This opinion is based on the facts presented. Additional or different facts
may yield different results.

You may call me toll free 1-800-531-5441, extension 5-9787, if you have any
questions or need more information. The direct line is 512/305-9787. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Philip Knisely
Tax Policy Division

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