Texas Comptroller of Public Accounts    STAR System


August 17, 1995


Dear **************:

Thank you for your letter of August 8, 1995, concerning the taxability of 
various services performed by interior decorators.

You requested that we address the taxability of the following transactions;

1. Design Services included in cost of Fee.

A separately stated charge for interior design services is not taxable. A fee 
for design services that is included in a lump-sum billing for the sale of 
tangible personal property is taxable. The design fee cannot be a percentage of 
the item's cost without being seen as part of the sales price (see Question 2). 
A fee for design service that is included in the charge for the performance of 
a taxable service will be taxable if the portion relating to taxable services 
represents more than 5% of the total charge. See enclosed Rule 3.357 Section 
(b)(9), concerning remodeling of commercial real property.

2. Purchasing Fees charged as a percentage of cost of Fee.

A purchasing fee that is a percentage of the taxable item's (either tangible 
personal property or taxable service) cost will be considered a mark-up and 
will be taxable.

3. Administrative charges added to consultants' bills.

Administrative charges are taxable if made in connection with charges for 
taxable items.

4. Administrative charges added to reimbursable expenses.

A reimbursable expense occurs when the interior designer pays tax to the 
furniture or supply vendor and passes the charge on to their customer. The 
decorator must separately state the item and the associated tax on their 
invoice to show that it is just a reimbursement. An administrative charge added 
to a reimbursable expense is taxable when it is a percentage of the taxable 
items sale price. The administrative charge is not taxable when it relates to 
nontaxable interior design services.

5. Sales tax on freight, move-in and storage.

Sales tax is due on freight and move-in fees associated with sales of taxable 
items. An interior decorator will not need to collect tax on professional fees 
to arrange the furniture. An interior decorator is not responsible for 
collecting sales tax on freight or move-in charges for items that they do not 
sell. Reimbursed items are not considered "sold" by the interior decorator. 
Storage fees are not taxable.

6. Merchandise sold to clients (cost and mark-up).

The sale of tangible personal property or taxable services (i.e.; remodeling of 
commercial real property) including any mark-up is taxable.

7. Consultation fee alone.

A consulting fee for interior design work is not taxable.

This opinion is based on the facts presented. If there are additional or 
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 5-0613. The direct line is 
512/475-0613. You may also write to Tax Policy Division, Comptroller of Public 


Kevin Koller
Tax Policy Division

DATE: 08/17/1995