How were local taxes sourced when mobile-phone equipment was rented with telecommunications service, versus equipment sold or rented by itself?

Plain-English summary

Leasing or renting telecommunications equipment together with telecommunications service was treated as one telecommunications service for local-tax purposes.

The provider sourced tax to the location where the call originated. If that location could not be determined, it used the address where the call was billed. For paging, the transmission began where the provider received the incoming call.

An outright equipment sale, or an equipment lease or rental without telecommunications service, was instead a sale of tangible personal property sourced to the seller's place of business under the cited local-tax rules.

Common questions

How was a bundled mobile-phone service sourced? To call origin, or the billing address if origin was unknown.

How was paging sourced? From the point where the provider received the incoming call.

What if equipment was sold or rented without service? Tax was based on the seller's place of business.

Citations and references

• 34 Tex. Admin. Code Rules 3.374 and 3.375
• 34 Tex. Admin. Code Rules 3.424 and 3.425

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L1041F13

Original ruling text

February 6, 1990

Dear ***:

Thank you for your letter requesting confirmation of the application of
local taxes to the telecommunications services provided by your company.
I apologize for the delayed response.

You stated in your letter that your company is a communications company
doing business in various parts of Texas. I confirmed in a telephone
conversation with a representative of your company that CORP A, sells mobile
telephone equipment and provides access to telecommunications lines or signals,
etc. In other words, you sell, lease, or rent mobile telephone equipment and
also provide telecommunications services along with that equipment.

The lease or rental of telecommunications equipment along with the provision
of telecommunications services is considered to be the provision of
telecommunications services. This position is taken in an effort to treat
these charges the same for local tax purposes. This prevents a company from
having to charge one local tax for the rental and another for the
telecommunications. You should charge tax based upon the location from which
the transmission (call) originates; if the point of origin cannot be determined,
the local tax is allocated to the address to which the call is billed. In the
case of paging services, the transmissions begin from the point where you
receive the incoming calls.

In the event that your company leases or rents telephone equipment without the
provision of telecommunications services, or if you sell the equipment outright,
you must charge tax based upon the place of business from which the sale is made.
In doing this, you are simply selling, leasing, or renting tangible personal
property and must collect tax based upon your places of business. I have enclosed
the four rules that cover local taxes. Rules 3.374 and 3.375 apply to city, county,
and special purpose district taxes; Rules 3.424 and 3.425 apply to transit
authority taxes.

I hope this information helps in your situation. If it remains unclear you may
write or call with more specific information regarding particular situations, etc.
I have also enclosed the rule regarding telecommunications services, brochures
on local taxes, and a letter regarding paging services.

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

You may also write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence