Ezel / Tax Rulings / TX
TX 8812L0915E01 Sales and/or Use Tax (State,Local,MTA) 1988-12-07

How did Texas tax geophysical-data licenses, transferred media, reproductions, and third-party computer processing?

Short answer: Exclusive and nonexclusive data licenses were not taxable. Some related media charges were nontaxable, while third-party reproduction and computer processing were taxable.

Apply this to your situation

This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Comptroller said purchases of geophysical survey information under exclusive or nonexclusive data-license agreements were not taxable, even when the seller had not performed the original survey.

Separately stated charges by the information vendor for mylar films and magnetic tapes carrying the nontaxable information were also not taxable to the purchaser, although the vendor paid tax on those media. If a third party reproduced the master for the vendor, that reproduction was taxable to the vendor.

Third-party computer processing of magnetic tapes was taxable whether bought by the information vendor or purchaser, and a third party's total charge for paper prints or mylar films was taxable. The letter separately said charges for additional copies of geophysical information on tape, paper, or mylar were not taxable.

Common questions

Were exclusive and nonexclusive licenses taxable? No.

Was third-party computer processing taxable? Yes.

Who paid tax on media carrying the original nontaxable information? The information vendor paid tax on the media; its separately stated reproduction charge to the buyer was not taxable under the stated facts.

Source

Original ruling text

December 7, 1988

Dear ****:

Thank you for sending me the background data on geophysical survey information
and your questions on the taxability of the various transactions by which the
information is sold.

Your questions are restated below along with the answers.

  1. Is the purchase of geophysical survey information under a "Nonexclusive
    Data License Agreement" taxable:

Answer: No.

  1. Is the purchase of geophysical survey information under an "Exclusive Data
    License Agreement" taxable?

Answer: No.

  1. Will the answers to Questions Nos. 1 and 2 be different if the geophysical
    survey information is purchased from someone other than the person who
    originally performed the survey?

Answer: No.

  1. Many times the charge for the purchase of the license agreement includes
    paper prints of the seismic section. The charge for the mylar films and the
    magnetic digital tapes will be separately stated on the-original invoice or
    will be invoiced separately as "Reproduction Charges." Will the separated
    charges for the mylar films and the magnetic tapes be taxable? Please keep in
    mind that charges for mylar films and magnetic digital tapes are labeled
    "Reproduction Charges" because these are reproduced from masters held by the
    vendor. "Reproduction Charges" are not charges for making additional copies of
    tapes or films held by the buyer.

Answer: The separately stated charges for the mylar film and magnetic tapes are
not taxable. The vendor of the service should pay tax when purchasing those
items on which the non- taxable information is transferred. The reproduction
charges are also not taxable to the purchaser of the geophysical information.
If the vendor of the information service has the master reproduced by a third
party, the reproduction is taxable to the vendor of the service.

  1. Are charges by third-party vendors for computer processing of magnetic
    digital tapes taxable?

Answer: Yes, the data processing service would be taxable whether performed for
the vendor or for the purchaser of the magnetic digital tapes.

  1. Are charges for paper prints or mylar films taxable when invoiced by the
    third party vendor noted in Question No. 5? Answer: Yes, the total charge is
    taxable.

  2. Will the answers to Question Nos. 5 and 6 be different if the original
    geophysical survey information was purchased under a "Nonexclusive License
    Agreement" as opposed to one which was purchased under an "Exclusive License
    Agreement"?

Answer: No.

  1. Are charges for additional copies of magnetic tapes, paper prints, or mylar
    films taxable?

Answer: Additional copies of geophysical information on magnetic tapes, paper
prints, or mylar films are not taxable.

This opinion is based on the facts you presented. Additional or different facts
may cause the opinion to change.

If you have any questions or need more information, you may call or write. The
toll-free number is 1-800-252-5555. The regular number is (512)463-4600; my
extension is 3-4675.

Sincerely,
Tom Soto
Tax Correspondence

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