Taxable Services

Amusement services and places that offer amusement services include, but are not limited to, the following:

• live and recorded performances such as movie theaters, circuses and concerts
• exhibitions and displays, including antique shows, auto shows and museums
• sporting events such as automobile races, horse races, rodeos, football and baseball games, including skybox rentals
• participatory sports and games played in bowling alleys, health clubs and fitness centers, skating rinks and swimming pools, or played on paintball fields, go-cart raceways, mudding pits, and golf courses
• carnivals, country clubs, amusement parks and other similar events and venues

Taxable amusement services include sightseeing tours, online games, fortune telling and similar activities.

See Rule 3.298, Amusement Services.

Cable television service is the distribution of video programming, with or without the use of wires, to subscribing or paying customers. The term includes the following:

• direct broadcast satellite service (DBS)
• subscription television service (STV)
• satellite master antenna television service (SMATV)
• master antenna television service (MATV)
• multipoint distribution service (MDS)
• multichannel multipoint distribution service (MMDS)
• any audio portion of a video program, streaming video programming and video on demand services

Satellite television service provided directly to a customer’s premises is exempt from local sales and use tax. This applies to both residential and nonresidential customers.

See Rule 3.313, Cable Television Service.

Creation or delivery of a credit report (or any part of a credit report) for a fee or any other consideration is a credit reporting service. A credit report is any statement that has a bearing on a person’s credit worthiness.

Tax is due on credit reporting services if the address of the credit applicant is in Texas at the time of the request for a report, and the person who requested the credit report is in Texas or is doing business in Texas.

See Rule 3.343, Credit Reporting Services, and Publication 94-106, Credit Reporting Services.

Using a computer for word processing, data entry, production, compilation, storage or manipulation is a taxable data processing service.

Twenty percent of the charge for data processing services is exempt from tax.

Examples of data processing include the following:

• check preparation
• accounts payable or receivable preparation
• web hosting, web site creation and maintenance
• data storage, including offsite backup of electronic files
• conversion of data from one type of medium to another (i.e. converting paper documents or videotapes to digital files)
• performance of a totalisator service with the use of computational equipment required by the Texas Racing Act

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.

See Rule 3.330, Data Processing Services and Publication 94-127, Data Processing Services are Taxable.

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:

• collect overdue bills or returned checks for a retailer or service provider
• send letters or make telephone calls related to delinquent accounts
• receive incoming calls related to delinquent accounts
• repossess property and
• file liens

Tax is due on the total charge for debt collection activities when the last known address of the debtor in the creditor’s records, at the time the account is placed for collection, is in Texas; and the creditor for whom the debt is collected is located in Texas, or is engaged in business in Texas, at the time the debt is referred for collection.

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.

See Rule 3.354, Debt Collection Services and Publication 94-107, Debt Collection Services.

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.

Twenty percent of the charge for information services is exempt from tax.

Examples of taxable information services include the following:

• subscriptions to genealogical, financial, geological or similar databases
• newsletters
• scouting reports and surveys
• financial market reports
• data retrieval and/or research (for example, stock reports and quotations, court cases or administrative hearings)
• news clipping services, wire reports
• multiple listing services
• mailing lists
• global positioning system information including driving directions
• sports, news and similar information provided through satellite audio programming 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.

See Rule 3.342, Information Services and Publication 94-109, Information Services.

Taxable insurance services include damage and loss appraisal, inspection, investigation, claims adjustment or processing, actuarial analysis or research, and insurance loss prevention.

See Rule 3.355, Insurance Services.

Internet access service enables users to connect to the internet in order to access information, email and other content online.

Texas does not impose sales tax on separately stated internet access charges due to the Internet Tax Freedom Act (ITFA) of 2016, effective July 1, 2020.

Federal law included a grandfather clause for those state and local governments, including Texas, who imposed a tax on internet services prior to Oct. 1, 1998. This clause expired on June 30, 2020.

Tax was due on any amount over $25 charged for internet access before July 1, 2020.

Bundled Charges

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 151.025(d) and Rule 3.313(b)(2), Cable Television Service and Bundle Cable Service. Rule 3.366, Internet Access Services, Rule 3.334, Telecommunication Services and Rule 3.313 are being amended to reflect this change in the taxability of internet access services.

If the service provider cannot establish a reasonable allocation for the nontaxable internet services, the entire charge for the bundled services is taxable.

See Rule 3.366, Internet Access Services.

Laundry, cleaning and garment services are taxable services.

Examples include the following:

• carpet cleaning and repair
• diaper cleaning
• drapery cleaning
• dry cleaning garments or rugs
• fur cleaning, repairing and storage
• garment alterations, mending and repair
• ironing or pressing garments
• laundry by machine or hand
• rug cleaning, dying and repairing services
• uniform or linen cleaning services
• upholstery cleaning and repair
• treating or applying protective chemicals to carpet, upholstery, rugs or drapery

See Rule 3.310, Laundry, Cleaning, and Garment Services and Publication 98-709, Carpet Cleaning and Related Services.

Motor vehicle parking and storage services include charges for parking meters (including private and municipally-owned meters); parking decals and permits; valet parking services; and impound fees.

See Rule 3.315, Motor Vehicle Parking and Storage.

All charges for labor and materials to rebuild, replace, alter, modify or upgrade existing nonresidential realty are taxable.

''Nonresidential real property" includes commercial establishments such as manufacturing facilities, restaurants, offices, farms, ranches and hospitals, as well as parking lots, retention ponds and similar improvements, but does not include property used as a family dwelling such as apartment complexes, nursing homes and retirement homes.

The repair, restoration or remodeling of nonresidential real property does not include the addition of new usable square footage or scheduled and periodic maintenance.

See Rule 3.357, Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance and Publication 94-116, Real Property Repair and Remodeling.

Services such as shoe shining or repair, appliance repair, furniture refurbishing or upholstering, jewelry repair or cleaning and dog grooming are taxable.

See Rule 3.292, Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property.

Personal services provided by a massage parlor, Turkish bath or escort service are taxable.

Massage parlors include any business that provides massage services for a fee, but does not include massage services performed by a licensed physical or massage therapist.

A Turkish bath is a business where a customer first uses a steam room and then receives a massage or rubdown.

Escort services include any business that provides an escort, date or bodyguard.

Local sales and use tax is due at the service provider’s place of business.

See Rule 3.317, Massage Parlors, Escort Services, and Turkish Baths.

Pest control and extermination, garbage and other waste collection or removal, janitorial and custodial services (including parking lot sweeping or cleaning), landscaping and lawn maintenance (including tree surgery and plant leasing) and surveying are taxable real property services.

See Rule 3.356, Real Property Service and Publication 94-111, Cleaning and Janitorial Services, Publication 94-112, Landscaping and Lawn Care Services, Publication 94-114, Pest Control Services (PDF) and Publication 94-157, Homebuilders and Real Property Services.

Security services include any service for which a license is required by the Private Security Bureau of the Texas Department of Public Safety under sections 1702.101 or 1702.102 of the Texas Occupations Code.

Examples include the following:

• locksmith services
• private investigation
• armored car services
• armed courier services
• burglar alarm system installation and/or monitoring
• unclaimed property services

Taxable security services also include computer forensic services that constitute the analysis of computer-based data, particularly hidden, temporary, deleted, protected or encrypted files, for the purpose of discovering information related (generally) to the causes of events or the conduct of persons; as well as computer repair and support services that include reviewing computer data for the purpose of investigating potential criminal or civil matters.

See Rule 3.333, Security Services and Publication 94-119, Security Service Companies.

Telecommunications services involve the electronic or electrical transmission, conveyance, routing or reception of sounds, signals, data or information using wires, cable, radio waves, microwaves, satellites, fiber optics or any other method now in existence or that may be devised.

Examples of telecommunications services include long-distance and local telephone service, including mobile or satellite phone service and Voice over Internet Protocol (VoIP), fax service, pager services, texting services and electronic mail (unless sold bundled with internet access).

See Rule 3.344, Telecommunications Services and Publication 94-132, Sales Tax on Telecommunication Services.

Receiving and relaying of telephone messages by a human operator is a taxable telephone answering service. Taxable telephone answering services do not include call center operations such as handling customer complaints and receiving orders.

Services provided by a transmission and distribution utility are taxable if the transmission or delivery is directly to an end-use customer whose consumption of the electricity is subject to sales tax.

See Rule 3.295, Natural Gas and Electricity.

In addition to the taxable services noted above, other types of sales that may commonly be considered "services" are taxable as the sale, processing or remodeling of tangible personal property.

For example, tax is due on charges for manufacturing, assembling, fabricating or processing products, even when the customer provides the raw materials, tools or equipment.

Examples of labor that result in the sale of a taxable item include the following:

• photography and videography
• producing artwork
• printing
• calligraphy
• embroidering
• custom sewing or tailoring
• woodworking
• welding
• catering
• assembling products such as computer systems, toys, furniture or equipment

See Rules 3.300, Manufacturing; Custom Manufacturing; Fabricating; Processing, 3.293, Food; Food Products; Meals; Food Service and 3.312, Graphic Arts or Related Occupations; Miscellaneous Activities. Also see Publication 94-143, Draftsmen and Designers, and Publication 94-187, Mold Remediation Services.