Sales/Use/Indirect:
Texas: Credit Ratings of Legal Entities are Taxable but Credit Ratings of Debt Obligations are Not

Letter No. 202208011L, Tex. Comptroller of Public Accounts (8/22/22). Clarifying policy that “will be applied prospectively from the date of this memo,” the Texas Comptroller of Public Accounts (Comptroller) explains that the provision of credit ratings services for legal entities is taxable under Texas law, but the provision of credit ratings services for debt obligations is not. In doing so, the Comptroller explains that:

• Credit ratings assigned to a legal entity are an indication of that entity’s ability to pay its outstanding debts;
• The credit rating of a legal entity constitutes the assembly of credit information relating to a “person” bearing on a person’s creditworthiness, credit standing, or credit capacity; and
• Sellers of credit rating services for legal entities generally are required to collect Texas sales and use tax as described by Title 34 Tex. Admin. Code section 3.343(b) (“Rule 3.343”).

In contrast, the Comptroller explains that charges to assign a credit rating for a debt obligation are for the evaluation of a financial instrument rather than a “person,” and such services are not the assembling or furnishing of credit information of a person as described by applicable Texas statute and Rule 3.343 and thus are not taxable. Please contact us with any questions.