Was the described information service taxable before October 1, 1987, and what proof was needed for a seller's refund?

Plain-English summary

The Comptroller said the described information service was not taxable before October 1, 1987 but became taxable on that date.

For a refund of tax remitted in 1985 and 1986, Rule 3.325 required the seller either to refund the customer or, with consent, credit the customer's account. The seller needed customer statements showing tax was not collected or had been refunded or credited. If claiming it absorbed the tax, it had to show tax was paid on total gross receipts rather than backed out of customer payments.

What this means for you

The historical letter separates the service's effective date from the seller's refund proof. Remitting tax did not by itself show the seller bore it; the billing records and customer treatment mattered.

Common questions

Was the service taxable in 1985 and 1986? No.

When did it become taxable? October 1, 1987.

What if tax had been collected from customers? The seller had to refund or credit them.

How could the seller show it absorbed the tax? By showing tax was paid on gross receipts and not backed out of customer payments.

Citations and references

• 34 Tex. Admin. Code Rule 3.325 — cited for refunds, interest, and payments under protest.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8709L0832D08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, TX 78774

September 14, 1987

Dear *:

I have been asked to write to you concerning your request for a refund of

sales tax remitted to Texas during 1985 and 1986.

As you have probably heard, we've had some changes in our tax law, and as of

October 1, 1987, this type of service, an information service, will be subject to tax.

Prior to that date, as Ms. Pesl stated, this service is not taxable.

I'm enclosing a copy of Rule 3.325, Refunds, Interest and Payments Under

Protest. Please note that the seller must either, refund the tax to his

customer, or, with the customer's consent, credit the tax to the customer's

account.

I understand that you told *** that you absorbed the tax. If you backed

the tax out of your receipts, then you did collect the tax from your

customers. If you paid the tax on your gross receipts and did not collect

tax from your customers, then you did absorb the tax.

You should provide statements from your customers that you did not collect

tax, or that you have refunded the tax or credited the tax to them. If you

did not collect the tax, then you should demonstrate that the tax was paid on

the total gross receipts and not backed out of the customer's payment.

This opinion is based on the facts presented. If there are additional or

different facts, the opinion may change.

If you have any questions or need more information, please call me at

1-800-252-5555 toll free from anywhere in Texas. The regular number is

512/463-4600. You may write me at the Tax Policy Division.

Sincerely,

Adina Whittemore

Tax Policy Division