Ezel / Tax Rulings / TX
TX 8908L0951A06 Sales and/or Use Tax (State,Local,MTA) 1989-08-06

Was processing insurer-supplied data against a database and returning driver-location reports taxable?

Short answer: Yes. Processing customer-provided information was taxable data processing, while gathering or compiling information for customers was a taxable information service. The described business appeared to provide both.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

Insurance companies supplied information that the service provider processed against its database. The provider then returned reports listing drivers and their locations.

The Comptroller distinguished processing information supplied by a customer, which was data processing, from gathering or compiling information to provide to customers, which was an information service. Based on the described work, the company appeared to provide both, and both were taxable.

Common questions

What counted as data processing? Processing information supplied by the customer.

What counted as an information service? Gathering or compiling information to provide to customers.

Which service did this company provide? The letter said it appeared to provide both.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

August 6, 1989

Dear ***:

Thank you for your letter concerning your sales tax responsibilities.
According to your letter, insurance companies provide your company
with information to be processed against your data base. After the
information is processed, you provide the insurance company with a
report listing drivers and their location.

When a company processes information provided by its customer, this
is considered data processing services for sales tax purposes. However,
when a company gathers or compiles information to provide to its cus-
tomers, then for sales tax purposes the company is providing information
services.

Based on your letter, it sounds like your company is providing data
processing and information services, which are both taxable services for
sales tax purposes. Enclosed is a copy of Rule 3.330 relating to data
processing services.

This opinion is based on the facts presented. If there are additional
or different facts, the opinion may change.

If you have any questions, please contact Tax Correspondence. You may
call toll free 1-800-252-5555, or our regular number is 512/463-4600.
My extension is 3-4668.

Sincerely,
Sherry Buckley
Tax Correspondence

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