A Laredo communications center lets customers make collect long-distance calls and also buys items online on customers' behalf for in-store pickup — how is each service taxed, and do local taxes apply the same way to intrastate versus interstate/international calls?

Plain-English summary

A company operating "communications centers" starting in Laredo — serving customers who mostly lack credit cards or Internet access — asked about two distinct services: (1) letting customers make collect long-distance calls to other Texas cities, other states, and other countries, and (2) a new proposed service where the company would buy items online on a customer's behalf and have them delivered to the store for pickup, charging a handling fee.

Collect long-distance calls: charges to customers for using the phone to make collect long-distance calls are taxable telecommunications services either way — but the tax rate splits by call destination:

• Intrastate calls (within Texas): taxed at the combined state+local rate. In this Laredo example, that's 7.5% (6.25% state sales tax + 1% Laredo city sales tax + 0.25% Laredo City Transit Department sales tax). The letter notes intrastate rates vary city to city.
• Interstate and international ("foreign") calls: taxed at 6.25% state tax only — interstate and foreign long-distance calls are exempt from all local sales and use taxes, under Tex. Tax Code §§ 151.0103, 151.0104, 151.323, 321.210, 322.110, and 323.208.

The Comptroller couldn't address the company's question about needing PUC authorization in other states to route collect calls there — that's a matter for each state's own regulator, not the Texas Comptroller.

Online purchase/pickup service with handling fee: buying and reselling items customers order over the Internet, with delivery to the store for pickup, makes the company a seller of tangible personal property. The total charge — including the Internet access charge and the handling fee — is taxable. In this Laredo location, that's taxed the same way as prepaid telephone calling cards: 8% combined (6.25% state + 1% Laredo city + 0.25% Laredo city transit + 0.5% Webb county).

What this means for you

Communications centers/stores offering collect-call services

Know your local tax stack for intrastate calls (it varies by city/county/district), but remember interstate and international collect calls are simpler — state tax only, no local tax layers at all. Don't over-collect local tax on interstate/international calls.

Businesses offering "buy it online for you, pick up in store" services with a handling fee

The whole charge — item price, any Internet access fee, and your handling fee — is taxable as a sale of tangible personal property, taxed at your full local combined rate (which can differ from your telecom rate, as it did here: 8% for retail-style sales vs. 7.5%/6.25% for calls, in the same Laredo location).

Accountants and tax professionals

A useful side-by-side of Texas's telecommunications local-tax carve-out (interstate/international = state-only) against ordinary retail sales tax treatment (full local stack applies) — both administered by the same seller in this fact pattern but taxed under different rate structures.

Common questions

Q: Are collect long-distance calls taxable in Texas?
A: Yes, as telecommunications services, but the rate depends on destination — intrastate calls get the full state+local combined rate, while interstate/international calls get state tax only (6.25%), with no local tax at all.

Q: Why don't local taxes apply to interstate and international calls?
A: Texas law (Tex. Tax Code §§ 151.0103, 151.0104, 151.323, 321.210, 322.110, 323.208) exempts interstate and foreign long-distance calls from all local sales and use taxes, unlike intrastate calls.

Q: If I buy items online for customers and they pick them up in-store, is my handling fee taxable?
A: Yes — the total charge, including any Internet access fee and the handling fee, is taxable as part of the sale of tangible personal property, at your full local combined tax rate.

Q: Does the Comptroller regulate whether I can route collect calls to other states?
A: No — that's a matter for each state's own public utility commission or equivalent regulator, not the Texas Comptroller.

Q: Can I rely on this letter for my own communications center?
A: No. This opinion is based on the facts presented; additional or different facts may change the opinion.

Citations and references

Statutes:

• Tex. Tax Code § 151.0103 (telecommunications services)
• Tex. Tax Code § 151.0104 (interstate/international telecommunications)
• Tex. Tax Code § 151.323 (telecommunications services — local tax exemption for interstate/foreign calls)
• Tex. Tax Code § 321.210 (municipal sales tax — telecommunications)
• Tex. Tax Code § 322.110 (special purpose district sales tax — telecommunications)
• Tex. Tax Code § 323.208 (county sales tax — telecommunications)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200003144L

Original ruling text

March 29, 2000

Subject: Telecommunication Questions

Dear **:

Thank you for your recent email concerning your company's Texas sales and use
tax responsibilities as a provider of telecommunications services at your
Laredo communications center.

In your communication centers starting in Laredo, you will already be set up
for long distance calls, etc. You want to know what are the tax consequences
are if you allow customers to make collect calls from your store to other
cities in Texas, other states and other countries. Do the same tax rates apply
as they do for intrastate (7.5%), interstate (6.25%) and international (6.25%)?
This is the scenario for Laredo. You know that the intrastate tax rates vary
from city to city. If you are allowing customers to make collect calls to
another state, do you have to be authorized with the PUC in that other state?

Answer: The charges made to a customer for using a telephone to make collect
long-distance telephone calls are taxable telecommunications services. Charges
for intrastate collect long-distance calls are subject to 7.5% (6.25% state
sales, 1% Laredo city sales, .25% Laredo city transit department (CTD) sales)
tax.

The charges made to a customer for using a telephone to make collect
long-distance interstate of foreign calls are taxable telecommunications
services. The charges for interstate and foreign long-distance calls are
subject to 6.25% state tax only. Interstate and foreign long-distance calls are
exempt from all local sales and use taxes. [Texas Tax Code Sections 151.0103,
151.0104, 151.323, 321.210, 322.110, and 323.208.] See our publication on
telecommunications services at:

We cannot answer you question about other states' regulatory provisions for
telecommunications service providers. You must contact each state regarding
these matters.

Most of your customers that come into our communication centers do not have
credit cards or Internet access. You are providing Internet access for your
customers at a cost. Your marketing manager brought up the fact that buying
things on the Internet is cheaper than buying things in the store. Can you
allow your customers to choose items to buy over the Internet and purchase the
item for them and have it delivered to your stores for pickup later? For this
service, you will charge a handling fee. How would this be taxed?

Answer: You are selling tangible personal property when you buy and sell
products or items customer order over the Internet. The total amount you charge
your customer for the items, including the Internet access charge and handling
fee is taxable. These items will be tax in the same manner as the prepaid
telephone calling cards at 8% (6.25% state sales, 1% Laredo sales, .25% Laredo
city transit department sales, and .5% Webb county sales) tax.

The referenced rules are available at:
.

You may view or down load the sales tax law at: and
then click on the following:

1. State Government
2. Texas Statutes
3. Tax Code
4. Chapter 151
5. Scroll down to the referenced statutory section

You may view or download sales tax publications at: and
then click on the following:

1. Sales Tax
2. Publications
3. Sales Tax Publications WOSG

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 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
e-mail address is .

Sincerely,

Eddie C. Washington
Tax Policy Division