Is an annual membership fee for access to an online hunting-lease database taxable as an information service, even though the company calls it a "membership" rather than a service, and charges a flat yearly fee instead of per-inquiry pricing?

Plain-English summary

A company operating a website providing "a reliable source for statewide hunting lease information" pushed back on an earlier classification (from a January 14, 2000 letter) that its services were a taxable "information service." The company argued it sells yearly memberships, not taxable services — pricing was a flat annual fee, not charged per inquiry or per web page hit.

The Comptroller rejected that framing by looking at what the membership actually delivers, quoting the company's own website and brochures: joining gave members "instant access to our extensive online database of Texas hunting leases," "email updates as new leases become available," "clickable region and county maps," and daily-updated details on "who to contact, type of lease..., number of hunters, acreage, amenities, price and more."

That's squarely an information service under Tex. Tax Code § 151.0038, which covers furnishing general or specialized news or other current information, including electronic data retrieval or research. Tex. Tax Code § 151.005(a)(3) defines a taxable "sale" to include the performance of a taxable service for consideration — so the membership fee itself is the taxable consideration, regardless of the flat annual billing structure or the "membership" label. The billing method (flat fee vs. per-use) doesn't change whether the underlying service is a taxable information service.

What this means for you

Online database and subscription service operators

Don't assume calling your offering a "membership" (rather than a "service") or charging a flat annual fee (rather than per-use pricing) changes your sales tax exposure. The Comptroller looks at what the customer actually receives — access to current, regularly updated specialized information/data — not how you've labeled or priced the offering.

Businesses providing regularly updated online listings or databases

If your service description emphasizes "regularly updated," "current information," "daily revisions," or similar language (as this company's own marketing did), that's exactly the kind of language that supports classification as a taxable information service.

Accountants and tax professionals

This letter is a good illustration that the "information service" classification under § 151.0038 is driven by the functional content delivered (electronic data retrieval/research, current information), not by billing structure or corporate labeling — worth citing when a client tries to escape taxability by restructuring fees as a "membership."

Common questions

Q: Does calling a fee a "membership fee" instead of a "service charge" avoid sales tax?
A: No — this letter confirms that what matters is the substance of what's provided (access to a regularly updated database of current information), not the label used for the fee.

Q: Does charging a flat annual fee instead of per-inquiry pricing change the tax treatment?
A: No — the flat yearly membership fee here was still taxable consideration for a taxable information service.

Q: What makes an online database an "information service" under Texas law?
A: Furnishing general or specialized news or other current information, including electronic data retrieval or research, per Tex. Tax Code § 151.0038.

Q: Can any online database or membership business rely on this exact classification?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own service's content and marketing with a tax professional.

Citations and references

Statutes:

• Tex. Tax Code § 151.005(a)(3) (sale includes performance of taxable service for consideration)
• Tex. Tax Code § 151.0038 (definition of information service)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200010759L

Original ruling text

October 3, 2000

Dear **:

Thank you for your letter concerning the application of sales and use taxes to
your services/memberships.

You received a letter from Harold Lee, dated January 14, 2000, stating that
** was a seller of taxable information services. You feel that this
classification is in error. You hold that the firm sells memberships and not
taxable services. The fees are on a yearly basis and a separate charge is not
made based upon the number of inquiries or web page hits.

Response. Your brochures and web site state that, by joining **, a
customer acknowledges and understands and agrees to your "Terms of Service."
Your website states the following:

"About us...** was created to provide the Texas hunter with a
reliable source for statewide hunting lease information. Unlike many other
states, Texas real estate is 98% privately owned. That has made finding a
quality and affordable place to hunt a real chore."

"In addition to having access to our database of hunting leases, members enjoy
valuable time-saving convenience of email updates as new leases become
available. As a member of ** you will enjoy:

• Instant access to our extensive online database of Texas hunting leases.
• Membership for a full year.
• Information that is regularly updated.
• Free email updates.
• Clickable region and county maps that make searching easy.
• Lease information from every region in the state.

"The type of information provided includes who to contact, type of lease (day,
season, annual, etc...), number of hunters, acreage, amenities, price and more!
Revisions are made daily to ensure that you are getting the most current
information possible."

Section 151.005 (a)(3) states that a sale includes the performance of a taxable
service for consideration. Section 151.0038 states that an information service
includes furnishing general or specialized news or other current information
including electronic data retrieval or research. Your services are taxable
information services and the membership fee is the taxable consideration paid.

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 at
1-800-531-5441, ext. 5-0613. The direct line is 512/475-0613. You may also
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Kevin Koller
Tax Policy Division