Does a telemarketing charge trigger Texas sales tax, and does soliciting Texas clients from out of state create nexus for those clients?

Plain-English summary

A telemarketing company based in Nebraska asked the Comptroller about the taxability of its services and whether its activities create a Texas tax obligation. The Comptroller made several observations based on the facts presented.

• The telemarketing charge is not taxable. The fee the company charges its clients for marketing their goods and services is not itself a taxable service, so the company does not need a Texas sales tax permit to solicit those accounts.
• Its Texas clients collect the tax. The company's Texas accounts are responsible for collecting sales tax on all deliveries to Texas addresses. They are not required to collect Texas tax on shipments to points outside the state, provided they retain shipping documents with their records.
• Soliciting from out of state does not create nexus. The fact that the company comes into Texas to solicit clients — while all calls are originated and taken from Nebraska — is not sufficient by itself to give the company's out-of-state clients nexus in Texas.
• A Texas phone center would create nexus. If the company opened a phone center in Texas, that would establish nexus for its out-of-state clients, who would then be required to collect Texas tax on all shipments into the state.

The Comptroller enclosed statutory information on what causes a retailer to have nexus in Texas and suggested reviewing it with the company's direct-mail question in mind.

What this means for you

Telemarketing and marketing-service providers

Charging clients to market their goods and services by phone is not a taxable service in Texas, and you do not need a sales tax permit merely to solicit accounts. But be aware that your physical presence in Texas can affect your clients' tax obligations.

How your Texas footprint affects your clients' nexus

Coming into Texas only to solicit, with the actual calling operation elsewhere, does not by itself give your out-of-state clients nexus. Establishing a Texas facility — such as a phone center — can create nexus for those clients, obligating them to collect Texas tax on their shipments into Texas.

Sellers shipping into and out of Texas

A seller with Texas nexus collects tax on deliveries to Texas addresses. Shipments to out-of-state destinations are not subject to Texas tax if the seller keeps shipping documents supporting the out-of-state delivery.

Common questions

Q: Is a telemarketing/marketing charge taxable in Texas?
A: No. The charge for marketing a client's goods and services is not itself taxable, and no Texas sales tax permit is needed to solicit accounts.

Q: Does soliciting Texas clients from out of state create nexus for those clients?
A: No. Coming into Texas to solicit, with all calls originated and taken out of state, is not by itself enough to give out-of-state clients nexus.

Q: What would create nexus for the clients?
A: Opening a phone center in Texas would establish nexus for the out-of-state clients, who would then have to collect Texas tax on all shipments into the state.

Q: Do Texas accounts collect tax on out-of-state shipments?
A: No, not if they retain shipping documents. Texas accounts collect tax on deliveries to Texas addresses but not on shipments to points outside Texas when supported by shipping records.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy. Note that the constitutional standards for sales-tax nexus have changed substantially since 1988.

Citations and references

Statutes and rules: The letter enclosed statutory information on what causes a retailer to have nexus in Texas but does not cite a specific Tax Code section or rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8808L0910D12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 24, 1988

Dear ***:

I just want to take a minute to acknowledge receipt of your letter
on the taxability of telemarketing services. Based on the specif-
ic information contained in your letter, I'd like to make a few
observations:

The charge you make to your clients for marketing their goods and
services is not in and of itself taxable. That means you will not
need to take out a sales tax permit to solicit their accounts. Your
Texas accounts will be responsible for collecting the sales tax on
all deliveries to Texas addresses. They will not be required to
collect Texas tax on shipments made to points outside the state if
they retain shipping documents with their records. The fact that
you come into Texas to solicit clients for your telemarketing ope-
ration with all calls originated and taken from Nebraska will not
be sufficient in and of itself to give your out of state clients
nexus in Texas. If you opened a phone center in Texas, you would
establish nexus for your out of state clients. They would then be
required to collect Texas tax on all shipments into state.

I'm enclosing some information from the statute on what causes a
retailer to have nexus Texas. You should look at it carefully with
an eye to your direct mail question.

This opinion is rendered based on the facts you presented. Other
facts, though similar, may yield different results.

Please feel free to call or write me anytime. You can reach me toll
free at 800-531-5441.

Sincerely,
Al Van Allen
Tax Correspondence