Is a Muzak-style 'Marketing on Hold' service — messages and music played to callers while they wait to be connected — a taxable service in Texas?

Plain-English summary

A taxpayer asked whether Muzak's "Marketing on Hold" service — playing messages and music to callers waiting to be connected — is a taxable service in Texas.

The Comptroller's answer: the Muzak "Marketing on Hold" service itself is not taxable. However, if the same seller ALSO provides "on hold" tapes containing marketing messages to be played to waiting callers, charges for those tapes and the related equipment ARE subject to sales tax. If the seller bills a single charge covering both the (nontaxable) transmission service and the (taxable) tapes/equipment, that single bundled charge is taxable in total. The Comptroller noted it couldn't tell from the information provided whether the specific dollar amount the taxpayer asked about actually included a charge for tapes played at the business.

What this means for you

Businesses buying "on hold" marketing/music services

Ask your vendor to separately state any charge for physical tapes or equipment from the charge for the underlying transmitted service — bundling them into one price makes the WHOLE charge taxable, even though the transmission service alone would be nontaxable.

Vendors selling on-hold marketing/music services

If you sell both a nontaxable transmission service and taxable tapes/equipment, keep those charges separately stated on your invoices. A single lump-sum charge covering both will be taxed in full, which likely surprises customers who expect the whole thing to be treated like the (nontaxable) transmission service.

Common questions

Q: Is a Muzak-style "on hold" marketing/music transmission service taxable in Texas?
A: No, not by itself.

Q: What if the vendor also sells or provides "on hold" tapes and related equipment?
A: Charges for those tapes and equipment ARE taxable.

Q: What happens if the tapes/equipment charge and the service charge are billed together as one amount?
A: The entire bundled charge becomes taxable.

Q: Can I rely on this letter for my own on-hold marketing arrangement?
A: No. This opinion is based on the facts presented, and other facts, though similar, may provide a different result; it can be relied on only by the taxpayer it was issued to.

Citations and references

No specific statutes or rule numbers were cited in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200001975L

Original ruling text

January 13, 2000

Dear Ms. **:

This is in response to your letter request on whether Muzak "Marketing on Hold"
service is a taxable service.

Response: Muzak "Marketing on Hold" service is not a taxable service.

However, if the seller is also providing "on hold" tapes containing marketing
messages to be played to callers while they wait to be connected, charges for
the tapes and related equipment are subject to sales tax. A single charge for
"on hold" tapes and music transmitted to your business will be taxable in
total. From the information provided, I am unable to determine if the
$** charge also includes a charge for tapes played at your
business.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division