How did Texas sales tax apply to long-distance service, separately stated 911 surcharges, federal excise tax, and municipal franchise fees?

Plain-English summary

The letter said intrastate long-distance service was taxable, as was interstate long-distance service that originated in Texas and was billed to a Texas service or billing address. Interstate long-distance service was not subject to local sales tax. For intrastate service, local tax depended on the origination location or, if that could not be determined, the service or billing address.

The reseller had to collect the 911 surcharge and the applicable state and local sales tax. Separately stated 911 surcharges and federal excise tax were not included in the Texas sales-tax base because they were assessed to the customer. Municipal franchise fees were included because they were assessed against the telecommunications provider.

The Comptroller did not advise whether federal excise tax itself had to be collected, because that tax was federally administered. An April 1 follow-up directed calculation questions about the 911 surcharge to the Texas Advisory Commission on State Emergency Communications.

What this means for you

Under this 1991 letter, separately stating a charge did not by itself decide sales-tax treatment. The result turned on whether the assessment legally fell on the customer, as with the 911 surcharge and federal excise tax, or on the provider, as with a municipal franchise fee.

Common questions

Was intrastate long-distance service taxable? Yes.

When was interstate long-distance service taxable? When it originated in Texas and was billed to a Texas service or billing address.

Were separately stated 911 surcharges and federal excise tax included in the sales-tax base? No.

Were municipal franchise fees included? Yes.

Did the Comptroller decide the reseller's federal-excise-tax collection duty? No.

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/9102L1155A01

Original ruling text

February 19, 1991

Dear **:

Thank you for your letter of January 28, 1991, concerning the
sales tax responsibilities of a client that resells long-distance
telecommunications services.

Intrastate long-distance telecommunications services and interstate
long-distance telecommunications services that originate in
Texas and are billed to a service or billing address in Texas are
taxable. Local sales taxes on intrastate telecommunications
services is determined by the location where the telecommunications
services originate. If the origination of the telecommunications
services cannot be determined, local sales taxes are determined by
the service or billing address. Interstate long-distance
telecommunications services are not subject to local sales taxes.

Your client will be required to collect the 911 surcharge and the
state and local sales tax as set out in the preceding paragraph.
Federal excise taxes are administered by the federal government;
therefore, we cannot advise whether or not your client is required
to collect the federal excise tax.

The applicable sales tax on telecommunications services does not
apply to separately stated 911 surcharges or federal excise tax.
These assessments are assessed to the telecommunications service
customer, not the telecommunications service provider. Sales tax
does apply to municipal franchise fees because these assessments
are against the telecommunications service provider. The municipal
franchise fee could be the gross receipts tax that you are
referring to; however, I am forwarding a copy of your letter to
Mr. Burrell Lankford of our office regarding state gross receipts
tax on telecommunications services.

The City of * imposes the 1% city sales tax on telecommunications
services; *** County does not tax telecommunications services.

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

You may call 512/463-4600 if you have any questions or need more
information. You may write to Tax Administration Division, Comptroller
of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division

April 1, 1991

Dear **:

Thank you for your letter of February 27, 1991, concerning
calculation of the 911 surcharge.

The Texas Advisory Commission On State Emergency Communications
administers the 911 surcharge. The commission is located at 1101
South Capital of Texas Highway, Building 8, Austin, Texas. Their
telephone number is 327-1911. They should be able to help you
concerning this matter.

You may call 512/463-4600 if you have any questions or need more
information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division