Texas Issues Letter Ruling Providing Guidance on Various Website-Related Services

The Texas Comptroller has issued a private letter ruling in response to a taxpayer’s request regarding the taxability of website design, development, marketing, and advertising services.

The taxpayer provides a website design service that involves creating a website blueprint, which is the strategic plan for a customer’s website. The website design service includes goal setting, site mapping, usability consulting, and planning for website architecture. It does not include the development of a website. The website design service may be provided as a stand-alone product or as part of a package which includes website development.

The taxpayer’s website development services include the creation of template-based or custom websites. The development services include planning the website layout, the development of webpage design and functionality, and the creation and launch of the website.

The Comptroller stated that services to design and plan, but not create, a website do not fall under the list of taxable services in Texas. As a result, the taxpayer’s website blueprinting service is not taxable when provided on a stand-alone basis.

The creation and maintenance of a website involves the compilation, storage, and manipulation of data and meets the definition of data processing, which is taxable in Texas. As a result, the taxpayer’s website development services are taxable.

The taxpayer provides marketing, consulting, and advertising services. The consulting services include implementation and training services related to a third-party customer relationship management platform. The Comptroller stated that the consulting services do not fall under the state’s list of taxable services. The advertising services include project management, strategy and consulting, campaign planning, media placement, marketing performance reporting, copywriting, keyword research, design of visual elements, the production of finished art, and training on automating repetitive marketing tasks. Advertising services generally do not fall under the state’s list of taxable services. However, the production of finished art is a taxable sale of tangible personal property.

The Comptroller determined that the taxpayer may provide both taxable and nontaxable items under its lump-sum charge for retainer services. The taxpayer is not required to separately state taxable and non-taxable items on its invoices to customers for retainer services. Invoices must indicate that tax is included for any taxable items provided to customers. The taxpayer is responsible for collecting and remitting tax on any taxable items provided under a charge for retainer services and document the tax collected in its books and records. (Letter No. 202404008L, Texas Comptroller of Public Accounts, April 2024)

Posted on May 28, 2024