Could a long-distance service seller shift its sales-tax filing, remittance, and recordkeeping liability to a billing-and-collection agent?

Plain-English summary

A long-distance service seller proposed using another company as its billing and collection agent. The Comptroller rejected the procedure to the extent it shifted the seller's tax obligations. The seller remained responsible for collecting and remitting tax on taxable transactions, maintaining its sales records, and producing those records in an audit.

Texas accepted an agent for billing and collection purposes, but each individual long-distance company remained responsible for its own tax and could not pass its liability for collecting, reporting, and remitting tax to the agent.

What this means for you

Outsourcing customer billing did not outsource the seller's legal tax obligations under the facts of this letter. A seller still needed its own reporting, remittance, and audit-ready records.

Common questions

Could an agent send bills and collect payments? Yes.

Could the agent assume the seller's filing and remittance liability? No.

Who had to maintain the sales records? The seller.

Citations and references

The letter did not cite a 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/9104L1099G05

Original ruling text

April 17, 1991

Dear ***:

I am writing in response to your rebuttal to the previous responses
provided to ** (*****). I apologize for the long delay in
providing your response.

Your letter provided a bit more detailed information than the previous
correspondence received on this issue. However, after review of the
information presented and your recent telephone conversation with Mr. Al Van
Allen, the responses provided to *** remain unchanged.

The procedure described in your correspondence and that of ***
is not acceptable. ** is the seller of these services to its
customers and is responsible for collecting and remitting the taxes due on
taxable transactions. As the seller, *** is also responsible for
maintaining records regarding these sales and making these records available in
event of audit.

Although this agency accepts the use of an agent for billing and
collection purposes, each individual long distance company is responsible for
its own tax. *** may not pass its liability for collecting,
reporting, and remitting the tax to *****

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

You may also write to Tax Administration Division, Comptroller of Public
Accounts.

Sincerely,

Tax Administration Division