Can you tax a service

Little or no tangible personal property is involved in these transactions, but when it is e. Repair, maintenance, and installation services can be provided to tangible personal property like your refrigerator or car or to real property like your house. The taxability of services provided to the real property often hinges on whether the property is residential or commercial and whether the project is new construction or a remodel.

Here again, the fact that tangible personal property is often involved e. Determining whether or not a service is subject to tax in a particular state is the first step. Next comes figuring out the proper rate to apply to the transaction. This can be complicated because states source the sale of services in one of two different ways:. Often the location is the same, as when hair is cut or a car is repaired.

Once sourcing is understood, varying rules and rates can come into play and make sales tax compliance more complex. For example, confusion can arise when a service provider is located in a state that applies tax based on where the service is performed but the consumer is located in a state that applies tax based on where the benefit is received.

Audits invariably arise. When the District of Columbia expanded the sales tax to yoga in , scores of people performed the warrior pose on Freedom Plaza in protest. Data processing services providers include sellers of software as a service and application service providers. Merely using a computer as a tool to help perform a professional service is not a data processing service. For example, the use of a computer and computer-aided-design CAD software by an architect during preparation of original building plans is not data processing.

Similarly, a bookkeeper or accountant is not performing taxable data processing services when applying knowledge of accounting principles to produce financial reports such as income statements, balance sheets, or profit or loss statements, or to prepare federal income tax, state franchise or sales tax returns, even if such work is performed on a computer. Data processing does not include the transcription of medical dictation by a medical transcriptionist or internet advertising provided through a classified advertisement, banner advertisement, vertical advertisement, or link when the item is displayed on an Internet website owned by another person.

A debt collection service is any activity to collect or adjust a delinquent debt, to collect or adjust a claim, or to repossess property subject to a claim. For example, charges to perform any of the following services are subject to tax:. The term "debt collection service" does not include the collection of court-ordered child support or medical child support, or the collection of current credit and real estate accounts, including mortgage payments and rental payments.

Charges for these services are not taxable. Gathering and furnishing general or specialized news or other current information to others, including electronic data research or retrieval and providing access to databases of such information are information services.

News syndicates, financial reporters and investment researchers must collect tax on their services. These services are not taxable, however, when provided to Federal Communications Commission FCC -licensed radio or television stations or to newspapers published daily, weekly or at other short intervals.

Taxable insurance services include damage and loss appraisal, inspection, investigation, claims adjustment or processing, actuarial analysis or research, and insurance loss prevention. Internet access service enables users to connect to the internet in order to access information, email and other content online. Federal law included a grandfather clause for those state and local governments, including Texas, who imposed a tax on internet services prior to Oct.

This clause expired on June 30, When a service provider bundles internet access with a taxable service such as telecommunications service or cable television service, the service provider should not collect tax on the amount allocated to internet access if the service provider can establish through their books and records a reasonable allocation for the taxable service and for the nontaxable internet access. See Texas Tax Code Section Some functions of this site are disabled for browsers blocking jQuery.

Where Is Use Tax Due? What Must a Seller Do? A seller must register for use tax with the Department of Treasury. On-line registration is available. If you are already registered for sales or withholding taxes you only need to complete and submit a Notice of Change or Discontinuance form Form to add use tax to your registration.

Blank forms are available on our Web site. Once you are registered you will receive pre-identified returns. To avoid delays in properly crediting your account you should complete and submit the pre-identified returns with payment of the tax collected.