Did Texas sales and local taxes apply to automated radio-dispatch and telephone-interconnect services, and could dedicated exchange lines be bought for resale?

Plain-English summary

The automated dispatch service and telephone-interconnect radio service were taxable telecommunications services, so the provider had to charge Texas state sales tax.

No city, county, or transit local tax applied on the facts described because the service originated at a tower outside any local taxing jurisdiction. The letter also cautioned that not every local jurisdiction taxed telecommunications.

Texas-origin service was not subject to state or local tax unless the telephone number, billing address, or service address was in Texas. For the interconnect service, a basic local-exchange line purchased exclusively for one customer's use could be bought with a resale certificate.

Common questions

Were both radio services taxable? Yes, as telecommunications services.

Did local tax apply? No on these facts, because the originating tower was not in a local taxing jurisdiction.

Could the provider buy a dedicated customer line for resale? Yes, when the line was exclusively dedicated to that customer.

Citations and references

• Comptroller Rule 3.344(c)(1), (e), (f), and (h).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9006L1025D12

Original ruling text

June 1, 1990

Dear **:

In your letter, you requested information regarding the taxability of your
dispatch and telephone interconnect radio services.

You state that your system is located in CITY A, Texas but your home office is
in CITY B. Although you have customers located in various areas, most
customers are located between Beaumont and Houston.

In our telephone conversation, you stated that you provide two separate
services:

1. Your dispatch service consists of relaying a customer's radio signal from a
   mobile radio to the customer's base station. This service involves the
   reception of the customer's signal by your station which is automatically
   relayed to the base station (i.e., there is no manual intervention). You
   charge a flat rate per month for this service.

2. Your interconnect service involves the reception of a signal from a
   customer's mobile radio and relaying the "call" to a telephone. You purchase a
   "local exchange number" for each separate customer which is used to relay the
   call. You charge the customer based on the air time used. You also indicated
   that any long distance calls are directly billed to your customers (charged on
   credit card) or to the call recipient (the call is "collect").

The charges for your services are taxable because you are providing
telecommunications services as indicated in the enclosed Comptroller's Rule
3.344 (Telecommunications Services). You may issue a resale certificate on
certain taxable items as indicated in Rule 3.344(e) and (f). For example,
with regard to the interconnect service, you may issue a resale certificate in
lieu of tax on the basic local exchange service if you purchase lines which
are exclusively dedicated to the use of a customer.

Accordingly your charges are subject to state sales tax. However, your
charges aren't subject to local taxes (i.e., city, county, metropolitan
transit authority/ city transit department taxes) because the location where
your service originates (i.e., your tower in CITY A) isn't located in a local
taxing jurisdiction. In addition, you should note that:

1. Not all local taxing jurisdictions impose tax on telecommunications services
   [Rule 3.344(h)]. I have enclosed an excerpt from Publication #98-249
   (October, 1989) which lists the various local jurisdictions imposing sales tax
   through January 1, 1990. In addition, I have enclosed our current pamphlet of
   telecommunications services ("Telecommunications Service Taxes" [Publication

96-234 reprinted January 1990)).

2. No state or local taxes are imposed on telecommunications services which
   originate in Texas unless the telephone number, billing address, or service
   address are in Texas [Rule 3.344(c)(1)].

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. You may write me at Tax Correspondence, Comptroller of Public
Accounts.

Sincerely,

Bob Jeffcoat
Tax Correspondence