Did a Texas electronic tax-return filing service have to collect tax from out-of-state customers?

Plain-English summary

The Comptroller treated electronic tax-return filing as a telecommunications service for sales-tax purposes.

Tax Code Section 151.323 exempted long-distance telecommunications not both originating from and billed to a telephone number, billing address, or service address in Texas. The provider therefore did not have to charge Texas tax to the described non-Texas customers, while its sales to Texas residents were taxable.

The letter could not decide the treatment of cable companies' sales into Texas without reviewing the provider's contracts with them.

When state sales or use tax was due, local tax applied only if the telecommunications service was delivered to a Texas location. Interstate telecommunications services were not subject to local sales tax.

What this means for you

Customer and service location controlled the result. The letter did not issue a blanket rule for cable-company transactions whose contracts had not been supplied.

Common questions

Was electronic tax filing treated as a telecommunications service? Yes.

Did the provider charge Texas tax to the described out-of-state customers? No.

Were sales to Texas residents taxable? Yes.

Did the letter decide how cable companies' Texas sales were taxed? No.

Was local tax imposed on interstate telecommunications? No.

Citations and references

• Tex. Tax Code § 151.323 (long-distance telecommunications services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9011L1059F06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller November 29, 1990

Dear ** :

Thank you for your question on the taxability of electronic tax
filings. We treat these as telecommunications services for sales
tax purposes.

The Texas Tax Code Sec. 151.323 exempts the sale of "long-distance
telecommunications services that are not both originated from and
billed to a telephone number or billing or service address within
Texas."

That means you will not be required to charge Texas tax to non
Texas customers. However, until I can review the contract you
enter into with the cable companies, I cannot determine how the
sales they make into Texas will be taxed. Of course, any sales
you make to Texas residents will be subject to sales tax.

In situations where the state sales or use tax is due, local tax
will be due only if the telecommunication service is to a loca-
tion within Texas. Interstate telecommunications services are not
subject to local sales tax.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call our
toll-free number 1-800-531-5441. My direct line number is 463-4680
[FAX (512) 475-0900]. You may write to me in care of Taxability
Section.

Sincerely,
Al Van Allen
Taxability Section
Legal Services Division