Which parts of a computer communication system for hearing-impaired users were exempt from Texas sales tax?

Plain-English summary

Phone Communicator software enabled hearing-impaired users to communicate through a personal computer and telecommunications devices for the deaf.

With a prescription from a licensed healing-arts practitioner, the adaptive software and peripheral equipment enabling telephone communication were exempt.

General-purpose equipment remained taxable, including the computer, screen, printer, and any modem usable for other purposes.

When components were separately billed, tax applied only to taxable items. For a single-price package, the package followed its essential character: if exempt components had greater retail value, the whole package was exempt; if taxable components had greater value, the full price was taxable.

What this means for you

The prescription did not exempt an entire general-purpose computer system automatically. Component function, separate billing, and relative retail value determined the result.

Common questions

Was the adaptive software exempt? Yes, with a qualifying prescription.

Were telephone-communication peripherals exempt? Yes when they were adaptive equipment covered by the prescription.

Was the computer itself exempt? No.

Were the screen, printer, and general-purpose modem exempt? No.

How was one bundled price taxed? According to whether exempt or taxable items had greater retail value.

Citations and references

The letter did not cite a specific statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9010L1057G01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

October 26, 1990

Dear ****:

Thank you for your letter concerning the taxability of the Phone
Communicator system.

It is my understanding that Phone Communicator is computer soft-
ware that enables hearing impaired persons to communicate, using
a personal computer and other devices, with other persons using
either the same equipment or other telecommunication devices for
the deaf.

Adaptive devices or software for computers used by people who are
hearing impaired may be purchased tax exempt with a prescription
from a licensed practitioner of the healing arts. This would in-
clude the Phone Communicator software and peripheral equipment
that allows the computer to communicate via the telephone to ano-
ther party. Equipment other than the adaptive equipment is taxa-
ble. The computer, screen, printer and any modem (which could be
used for other purposes) are taxable.

If the seller bills separate charges for each component, the tax
will be applied only on the taxable items. If the vendor sells a
package of both taxable and exempt items for a single charge, the
taxability depends on the essential character of the complete
package. When the retail value of the exempt items is more than
the retail value of the taxable items, the entire sales price of
the package is exempt. On the other hand, when the retail value
of the taxable items is greater, the total sales price is taxable.

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

If you have any questions or need more information, please contact
the Tax Correspondence Division. You may call toll free at 1-800-
252-5555, extension 3-4684 or write to the division.

Sincerely,
Curt Swenson
Tax Correspondence