Which radio-dispatch, signal-boosting, and elevator-phone services were taxable telecommunications or telephone-answering services?

Plain-English summary

The Comptroller divided the members' activities into taxable telecommunications, taxable telephone answering, and unrelated or nontaxable services. Amplifying a weak two-way radio signal and retransmitting it to another radio was taxable telecommunications because the statutory and Rule 3.344 definitions included radio communications.

Dispatching for private radio systems, marine telephone companies, or vending companies was telephone answering when a person answered the radio communication and routed the call to a land-line number. Answering elevator telephones was also taxable telephone answering.

For telephone-answering services, setup fees, equipment-space rental, passed-through long-distance charges, and administrative charges were part of the taxable sales price. A separately stated late-payment fee was not taxable. Separately stated post-office-box rental and yellow-pages charges were also nontaxable.

The letter needed more facts to decide facilities-management treatment. It also denied resale-certificate treatment for direct-inward-dialing trunks and numbers because the provider used those taxable items to perform the answering service.

What this means for you

Communications providers should classify the core service first, then determine which ancillary charges become part of its taxable price. Separately stating a fee helped only for the specific late, PO-box, and yellow-pages charges recognized here.

Common questions

Was signal boosting taxable? Yes, as telecommunications. Was radio dispatch taxable? Yes when it answered and routed calls as described. Were setup and administrative fees taxable? Yes. Were separately stated late fees taxable? No. Could the provider buy inward-dialing trunks for resale? No.

Citations and references

• Texas Tax Code Section 151.0103
• 34 Tex. Admin. Code Rule 3.344(a)(6)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9112L1145E01

Original ruling text

December 17, 1991

Dear *****:

Thank you for your letter of November 12, 1991, concerning the
taxability of the services provided by members of the *****.

I concur with your conclusions that the services provided by
***** members fall into three categories: (1) taxable
telecommunications services, (2) taxable telephone answering services,
and (3) unrelated or nontaxable services.

** members that provide dispatching for a private radio
system, marine telephone companies, or for vending companies are
providing telephone answering services. The ** member has
a person who answers the radio communication and routes the call
to a land-line telephone number.

In a letter dated September 13, 1985, addressed to you, I stated
that a client that receives a weak two-way radio system, amplifies
it and re-transmits it to the receiving two-way radio was providing
telecommunications services. The statutory definition of
"telecommunications service" found in Section 151.0103 of the
Texas Tax Code and Rule 3.344 (a)(6) encompasses radio communications.

***** members answering elevator telephones are providing
telephone answering services.

Charges made by ***** members providing telephone answering
services are required to collect sales tax on set-up fees, rental of
space for equipment, long-distance telephone charges that are
passed through, and administrative charges as part of the sales
price of the telephone answering service. A late fee charged for
untimely payment of the bill for the telephone answering service
is not taxable if separately stated.

Charges for post office box rental and yellow pages are not taxable if
separately stated to the customer.

Additional information is required before I can determine your
client's tax responsibilities for providing facilities management.

** members may not issue a resale certificate to the
telephone company for direct inward dialing trunks and numbers
because these taxable items are used by ** members to
provide the telephone answering services.

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