TexasARP: The Continued Sales Tax Burden on Repossessions After Comptroller’s Decision

On March 7, 2025, we received clarification from the Texas Comptroller of Public Accounts regarding their rulings on sales tax applicability to debt collection services, specifically repossession and related fees. These rulings, which follow continual issues and ongoing ambiguity surrounding the tax treatment of these services, have the potential to significantly impact the financial bottom line of all entities providing or utilizing such services within the state of Texas.

Read the entire response here!

March 10, 2025

Dear Members and Clients,

We are writing to you today to share important information regarding the Texas Comptroller of Public Accounts’ recent clarification on the sales tax treatment of debt collection services. This information may impact your business operations, particularly if you utilize or provide debt collection services.

On March 7, 2025, we received a response from the Texas Comptroller of Public Accounts, in the form of a general information letter, addressing our inquiry about sales tax on debt collection services and associated expenses.

Key Takeaways from the Comptroller’s Response:

Debt collection services are subject to Texas sales tax. This includes services such as collecting overdue accounts, repossessing property, and managing debt recovery.
Sales tax applies to the entire charge for debt collection services. This includes any costs incurred during the process, such as impoundment or motor vehicle storage fees.
Reimbursable costs, like impoundment or storage fees, are also subject to sales tax. When these costs are passed on to the client, the total charge must include sales tax on both the debt collection service and the reimbursable costs.
The sales tax on impoundment and storage fees is separate from the tax on debt collection services. Therefore, it is not considered double taxation.

In essence, the Comptroller has clarified that all aspects of debt collection services, including any related expenses, are subject to sales tax.

What This Means for You:

If you provide debt collection services, ensure that you are collecting and remitting sales tax on the total charge, including any reimbursable expenses.
If you utilize debt collection services, be aware that you will be charged sales tax on the total service fee, including any related costs.

Further Information:

The Comptroller referenced the following resources for additional information:

Publication 94-107, Debt Collection Services
Sales Tax Rule 3.354, Debt Collection Services
Rule 3.315(b), Motor Vehicle Parking and Storage
Texas Taxes webpage (comptroller.texas.gov/taxes/)

We encourage you to review these resources and consult with a tax professional if you have any questions or concerns.

We are committed to keeping you informed of important regulatory updates that may affect your business. If you have any questions about this information, please do not hesitate to contact us.

Sincerely,

TexasARP

Texas Accredited Repossession Professionals (TexasARP)

TexasARP is an organization comprised of collateral recovery agency owners/employees in Texas and nationwide. Our goal is to educate our members, financial institutions and law enforcement with regard to business requirements and ordinances set forth by the cities and counties in the state of Texas. The purpose of the association is to strengthen understanding between recovery agency owners, law enforcement, financial institutions, regulatory agencies and the consumer. TexasARP will provide continuing education to our members, financial institutions and law enforcement officials. Education platforms will focus in the fields of professionalism, business principles, public relations and innovations in the industry.

Many of our goals include:

TexasARP Acknowledgment by the Texas Department of Licensing and Regulation (TDLR).
Having a TexasARP representative on the TDLR board.
Assisting the TDLR to develop a license category specifically for repossession agency business owners.
Educating law enforcement throughout the state on the current laws regarding repossessions.
Educating our clients of the requirements in the state of Texas to conduct business as a repossession agency.
Educate Texas recovery agencies on the TDLR- License, Finance Code – Sales Tax and Franchise Tax Reports.
To be a one stop shop for the clients to validate our members accreditations.
Implementing legislation to balance all the laws and policies in each of the counties in Texas to be universal statewide.

We look forward to working with each of you and if there are additional items you would like to see accomplished, discussed or tackled please let me know! Your opinion is valued.

If you have any questions or comments please contact us. We would love to hear from you!