Were charges for proprietary telephone-survey results taxable as Texas information services?

Plain-English summary

A provider used an automated computer system to conduct rapid telephone surveys and asked whether the overall transaction was telecommunications or an information service.

The Comptroller classified the work as an information service. Because the resulting information was proprietary, the charge to customers was not taxable under Rule 3.342(d).

The provider nevertheless had to pay tax on taxable goods and services purchased to perform the work.

What this means for you

Classification as an information service did not automatically make the customer charge taxable. The proprietary nature of the survey information supplied the exemption described here.

Common questions

Was the service telecommunications? No; the Comptroller classified it as an information service.

Was the customer charge taxable? No.

Why not? The information was proprietary.

Were the provider's inputs exempt? No. Tax remained due on taxable purchases used to provide the service.

Citations and references

• 34 Tex. Admin. Code Rule 3.342(d) — proprietary information services

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1110D02

Original ruling text

May 16, 1991

Dear **:

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

Facts:

* owns an automated computer system known as the *** which
facilitates phone surveys in a rapid manner. Copies of the invoices are
attached for your reference. If this service is considered on a component
basis, our interpretation is that tax is due on all but the charge for **
use. If the service is viewed collectively, it could be considered a
telecommunications service or an information service. We would appreciate a
ruling from you on how to view this transaction.

Response:

You are providing an information service. However, since the information
is of a proprietary nature, your charge to your customers is not taxable.
Please refer to subsection (d) of the enclosed rule 3.342. You must pay tax on
your purchases of taxable goods and services used in providing this service.

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