Texas Sales Tax: Certification Services and Registration Fees for Learning Centers

The Texas Comptroller of Public Accounts (TCPA), a governing body for sales tax matters, published the private letter ruling regarding the taxability of certification services and registration fees provided to learning centers in Texas. The ruling was issued upon the request of the taxpayer, a not-for-profit organization that sets standards related to workforce safety for the energy industry.

In addition, the taxpayer develops certification programs to meet industry standards, including helicopter safety and escape, sea survival, and first aid.

Facts of the Case and Ruling

The taxpayer does not directly provide training to students. Still, it provides certification services to third-party learning centers, which then train students. The taxpayer's services only include guidance on necessary learning level results, whereas it is up to learning centers to develop and provide training materials following standards set by the taxpayer.

Once the learning centers develop the learning material, the taxpayer reviews it and verifies whether it meets the standard. The taxpayer also goes to the learning center facilities to observe the training and ensure that all standard requirements are respected and met. In the end, the learning centers receive accreditation to train students and issue certificates upon completion of the training. 

In addition, the taxpayers' services include maintaining an online database of all students who took the courses, including data on whether the student received the certificate and it is still valid. This service is charged under the monthly registration fee that learning centers pay, where the fee is formed based on the number of students that receive the certificate.

Since the taxpayer was unsure whether the certification service and registration fee were subject to Texas sales and use tax in Texas, a private ruling from the Texas governing body was required. 

In its ruling, the TCPA stated that while certification services are not taxable, registration fees are considered data processing services and, as such, are subject to sales and use tax.

Only listed services are taxable in Texas; certification services are not on that list. In contrast, the data processing services are listed as taxable services. However, there is a 20% exemption of the charge for related data processing services, meaning that taxpayers must collect and remit the sales and use tax on 80% of its monthly registration fees.

Conclusion

Generally, private rulings are strictly related to the party that requested them. Nevertheless, a ruling clarifies the applicability of sales and use tax in Texas and may help other taxpayers comply.

Anyway, all taxable persons providing services should consult the list of services to determine whether they are taxable.

Source: Texas Comptroller of Public Accounts, Sales Tax Institute