Were monthly subscriptions and per-lead charges for faxed trade-lead information subject to Texas state and local sales tax?

Plain-English summary

The company downloaded trade leads gathered from around the world, processed them at its Texas office according to each client's requested criteria, and faxed matching leads to subscribers. Customers paid a flat monthly fee whether or not they received any leads, plus a charge for each lead actually delivered.

The Comptroller said Texas customers owed both state and local sales tax on both the monthly subscription fee and the per-lead charge. The company did not have to charge Texas tax on either amount when it faxed the information to customers located outside Texas.

What this means for you

Under this 1991 letter, the fixed subscription charge and the usage-based lead charge followed the same tax treatment. Customer location controlled whether Texas tax was collected.

Common questions

Was the monthly subscription fee taxable to a Texas customer? Yes.

Was the per-lead charge taxable to a Texas customer? Yes.

Did it matter that the monthly fee was charged even when no leads were delivered? No different treatment was given; the letter taxed the fee.

Was Texas tax collected from customers outside Texas? No, when the information was faxed to those out-of-state customers.

Citations and references

The letter did not cite a numbered statute or 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/9102L1074G13

Original ruling text

February 19, 1991

Dear **:

Thank you for your recent letter which is restated in part with response below.

FACTS: We electronically download trade leads which originate from all around
the world and are collected in a computer located in Washington, D.C. everyday.
Our clients specify the type of leads they are interested in and after
processing the downloaded information in our computer, we fax them only the
leads that match their specifications from our office located in
**, Texas.

We charge a flat monthly subscription fee to our clients some of which are
based in Texas, others in various states and potentially overseas. This monthly
subscription fee is charged whether they receive any leads within a month or
not. In addition to the subscription fee, we bill them for each lead received
throughout the month.

QUESTION: Are these charges subject to state and local tax?

RESPONSE: Your Texas customers must pay both state and local taxes on their
information purchases. The tax would be due on both the subscription fee and
the per lead charge. You are not required to charge Texas tax on either charge
when you fax the information to customers who are located outside Texas.

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 512-463-4680 [FAX
512-474-1643]. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division