Texas Letter Clarifies Taxability of Bookkeeping Services

The Texas Comptroller clarified the tax treatment of bookkeeping services. In the clarification, the Comptroller stated that 80% of the charge for data processing services was taxable. However, the law specifically excludes services where the computer is used “to facilitate the performance of the service or the application of the knowledge of … accounting principles and tax laws…” from the definition of taxable data processing services. Based on the law, charges for bookkeeping services will not be subject to tax if the service requires calculating or creating the data. If the charge was for a service such as an automated accounts payable or payroll system, the charge would be taxable since it is primarily data entry. The charges for taxable and nontaxable services should be separately stated or the lump-sum charge is subject to tax if taxable services account for more than 5% of the total charge. (Letter 200607779L, Texas Comptroller of Public Accounts, July 31, 2006)

Posted on November 20, 2006