Were connection, PBX-capacity, repair, and building-wiring jobs performed for a Texas telecommunications provider taxable?

Plain-English summary

A contractor connected new telephone service for dormitory and shopping-mall occupants, expanded PBX capacity, installed wiring to new locations, and coordinated line hookups and repairs for the company that sold telecommunications service to the occupants.

The Comptroller said each listed function was taxable. The telecommunications provider could give the contractor a resale certificate for a service it resold to the occupant, such as the occupant's ordered service connection. It could not use a resale certificate for work on the PBX or other equipment that was not transferred to the occupants.

The letter also classified running new wiring and installing telephone jacks as remodeling real property, rather than providing telecommunications services.

What this means for you

Under this 1991 letter, resale treatment followed the specific service passed through to the occupant. Work on provider-owned systems or building infrastructure was not treated as a resold occupant service.

Common questions

Were all the contractor's listed functions taxable? Yes.

When could the customer provide a resale certificate? When it resold the contractor's service to the occupant who ordered it, such as a new service connection.

Could PBX work be purchased for resale? Not where the PBX or other equipment was not transferred to the occupants buying telecommunications service.

How did the letter classify new wiring and telephone jacks? As remodeling real property, not telecommunications services.

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/9103L1088G11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 11, 1991

Dear ***:

Thank you for providing the additional information I requested.
Your facts are restated in part with response below.

Facts: **** (*****) provides services to
another firm that sells telecommunications services to occupants
of a dormitory and a shopping mall. The telecommunications
services are provided through a PBX system which is used to route
the calls.

When an occupant of either the dormitory or the mall requests new
phone service, *** makes the connection and bills the company
selling telecommunications services to the occupants. They in
turn bill the occupant for the new or additional service. When
it is necessary to add capacity to the PBX system, your firm
makes the installation and bills the telecommunications provider.
You also install wiring to new locations in the buildings and
coordinate with ***** on line hook ups and repairs.

Question: Please explain our sales tax responsibilities on each
of the jobs mentioned.

Response: Each of the functions you mentioned is subject to tax.
However, in situations where your customer resells the service to
the occupant who orders it, they may give you a resale
certificate in lieu of tax. For example, they may give you a
resale certificate and bill tax to the occupant on your charges
for service connection. They may not give you a resale
certificate for services you perform on the PBX or on other
equipment that is not transferred to the occupants purchasing the
service, for example wiring the building for new lines. In the
case of ***** running new wiring and installing phone jacks, you
are remodeling real property and not providing telecommunications
services.

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) 475-0900]. You may write to me in care of
Tax Administration Division.

Sincerely,
Al Van Allen
Tax Administration Division