Was a subscription service taxable when it listened to radio contests and phoned a subscriber if the subscriber's number was called?

Plain-English summary

The company listened to radio contests and telephoned a subscriber when that subscriber's contest number was called. Its agreement also prohibited selling the gathered information to anyone other than the subscriber for whom it was collected.

The Comptroller said the charge was not taxable because the company was not providing an information service under Rule 3.342. It was not furnishing general or specialized news or other current information; it merely notified a subscriber of a winning number.

As a provider of a nontaxable service, the company paid tax to suppliers on taxable items used in performing it.

Common questions

Was the subscription charge taxable? No.

Why was it not an information service? It only reported whether the individual subscriber's number had been called.

Did the provider owe tax on its own taxable purchases? Yes.

Citations and references

• 34 Tex. Admin. Code Rule 3.342

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8909L0959B09

Original ruling text

September 11, 1989

Dear **:

Thank you or your inquiry regarding the taxability of your services.

You state that your company will listen to radio contests and inform your
subscribers if their contest numbers are called. The subscription agreement
that you submitted indicates that your service is "an information service,
exclusively engaged in gathering information about radio contests for
subscribers". The agreement also states that "** shall not sell
any of the information collected to anyone except the subscriber for whom it
was gathered". You also attached a copy of the Sales Tax Review (December,
1988) which indicated that the service of gathering or compiling information
exclusively for a particular client isn't taxable if the contract says that the
information can't be sold to a third party.

The charges for your service aren't taxable because you aren't providing
information services. In particular, you aren't furnishing general or
specialized news or other current information as indicated in the enclosed
Comptroller's Rule 3.342 (Information Services). You merely inform your
subscriber (by telephone) if they have a "winning number".

Since you are performing a nontaxable service, you must pay tax to your
suppliers on all taxable items used in providing your service.

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 3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence