How did Texas classify 900-number access, cellular and messaging services, online information, modem services, and merchandise sold through a 900 number?

Plain-English summary

The Comptroller explained that one offering could fall into more than one taxable-service category and that exemption under one category did not prevent tax under another.

The letter classified cellular telephone service, fax, electronic mail, voice mail, 900-number access, and access to telephone lines as telecommunications services. Online data retrieval and modem-delivered mailing lists were information services. Modem bill production was a data-processing service.

For the 1991 sourcing rules described, long-distance telecommunications originating in Texas were taxable while those originating outside Texas were exempt. Information originating outside Texas was taxable when the customer received it in Texas. The letter also noted that only some local jurisdictions then taxed telecommunications.

If a caller used a 900 number to buy taxable merchandise, the 900 provider also had to collect tax on the merchandise.

What this means for you

The service label and sourcing facts both mattered, and a single pay-per-call arrangement could create responsibilities for telecommunications, information, data processing, or merchandise sales.

Common questions

How was access to a 900 number classified? As a telecommunications service.

How was online data retrieval classified? As an information service.

How was bill production by modem classified? As a data-processing service.

Who collected tax on taxable goods bought through a 900 number? The 900 provider.

Are the local-jurisdiction counts current? The letter's figures describe 1991 and should not be treated as current.

Citations and references

• The letter enclosed rules on telecommunications, information, and data-processing services but did not identify their rule numbers in the text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1110B04

Original ruling text

May 16, 1991

Dear **:

Thank you for your recent letter regarding the tax treatment of
telecommunications services in Texas.

As we discussed, Texas imposes tax on a wide variety of services,
including both information and telecommunications services. It is possible for
a service to fall under more than category or to be exempt under one only to be
taxed under another.

This is important since Texas imposes tax on long distance
telecommunications services originating in Texas but exempts those that
originate out of state. On the other hand, information services that originate
outside Texas are subject to Texas tax if the customer receives the information
in Texas. In addition, there are over a thousand local jurisdictions that
impose sales tax, but only 365 of these impose the local sales tax on
telecommunications services.

Turning to your survey, each of the headings you mentioned is restated
with the taxability below.

• Cellular Telephone / Telecommunications Service
• FAX, Electronic Mail & Voice Mail / Telecommunications Service
• On line data retrieval (Dow Jones) / Information Service
• Access to 900 numbers / Telecommunications Service
• Mailing lists provided by modem / Information Service
• Bill Production by modem / Data Processing Service
• Access to telephone lines / Telecommunications Service

If an individual uses a 900 number to purchase taxable merchandise, the
900 provider is also responsible to collect tax on those items. I am enclosing
a list of local jurisdictions that impose local tax on telecommunications
services as well as a list of all local taxing jurisdictions and their rates.
I am also enclosing copies of the rules on Telecommunications, Information and
Data Processing Services for your reference.

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 512-4634680 [FAX (512)
475-0900]. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division