Was computer-assisted geophysical data analysis a taxable data-processing service or a nontaxable scientific-analysis service?

Plain-English summary

A geophysical analyst used computers, including rented computer time, to analyze and interpret customer data.

The Comptroller said the service was not taxable data processing when the computer merely facilitated the analyst's scientific knowledge, analysis, and interpretation. If the provider instead only entered customer data, manipulated it by computer, and produced a report, the service was taxable data processing.

The computer time-sharing charge paid by the analyst was itself taxable to the analyst.

Common questions

Did using a computer automatically make the analysis taxable data processing? No.

When was the customer service taxable? When it consisted only of data input, manipulation, and report production.

Was rented computer time taxable to the analyst? Yes.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8902L0937B12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 10, 1989

Dear **:

Thank you for your letter dated January 27, 1989 about geophysical data
analysis.

According to your telephone conversation with ***, your client uses
a
computer to facilitate his analysis and interpretation of the client's
data.
The enclosed Rule 3.330 states in Section (a) that the use of a computer
to
facilitate the performance of other services or the application of the
knowledge of the service provider is not considered to be data
processing.
Therefore, if your client provides scientific analysis and interpretation
of
the geophysical data for his customer, his services will not be taxable.

If he is merely inputting his client's data into a computer, manipulating
the
data, and producing a report, he is providing a data processing service
and
his services will be taxable. On the phone, you stated that your client
uses
both his own computer, and also rents computer time to facilitate his
analysis and interpretation. Please note that the computer time-share
charge
is taxable to your client.

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 our
toll-free
number 1-800-252-5555. The regular number is 512/463-4600. You may
write me
at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Julie Pesl
Tax Correspondence