What Texas state and local sales taxes applied when hotel guests called a Richardson provider for information or call-connection services?

Plain-English summary

The Richardson provider offered two services through “800” calls prompted by tent cards placed in hotel rooms.

When a Texas caller paid to obtain information, the charge was a taxable information service. The provider had to collect state tax, Richardson city tax, and any applicable local tax imposed where the caller was located, subject to a total 8.25% cap stated in the letter. Out-of-state callers did not owe Texas tax.

When the provider connected a caller to a local telephone number, it supplied a telecommunications service. That service was also taxable only to Texas callers, but its local tax depended entirely on the rate in effect at the caller's location because local telecommunications tax was imposed on an optional basis.

What this means for you

Information and call-routing providers

Classify the service and identify the caller's location. The same call center applied different local-tax sourcing depending on whether it sold information or connected a telephone call.

Multi-state businesses

The letter did not impose Texas tax on callers outside Texas, even though the provider's Richardson office handled the call.

Common questions

Were information charges to Texas callers taxable? Yes.

Which local taxes applied to information services? Richardson city tax plus applicable local taxes based on the caller's location, subject to the letter's 8.25% total cap.

How was a restaurant call connection classified? As a telecommunications service.

Did an out-of-state hotel guest owe Texas tax? No.

Citations and references

The letter does not cite a numbered statute or rule. It references Comptroller brochures on telecommunications tax and Texas sales-and-use-tax rates.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1164G04

Original ruling text

January 30, 1992

Dear **:

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

We are an information provider located in Richardson, Texas
doing business all over the United States. We put "tent
cards" (sample enclosed) in hotel rooms where people will
call us in Richardson on an "800" number to obtain
information. We will always know where the phone call is
coming from. There are 2 applications that I would like to
know what taxes to collect and who to pay them to:

1. As described above.

Response: You are providing an information service. Your
charges to Texas callers will be subject to both state and
Richardson city sales tax. In addition, if a Texas caller is
located in another type taxing jurisdiction such as a mass
transit authority or a county or hospital district that imposes a
local sales tax, you must also collect that tax. However, in no
case will you collect more than a total of 8 1/4%. Callers from
outside Texas are not required to pay Texas tax.

2. Sometimes we will simply connect them to a local (for
   them) phone number. For example, if they want to be
   connected to a particular restaurant, we can connect them.
   The phone call would still go through our Richardson office.

Response: In this case, you are providing a telecommunication
service. And, again this is taxable only to Texas callers.
However, the local tax is determined entirely by the rate in
effect at the callers location. And, since local tax on
telecommunications services is imposed on a local option basis,
computing it can be complicated. I am enclosing copies of our
brochures "Sales Tax on Telecommunications Services" and also
"Texas Sales and Use Tax Rates" to assist you in this process.

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 or
write. You may reach me by calling toll free, (800) 531-5441.
My direct line number is (512) 463-4680. The number for FAX
transmissions is (512) 475-0900. You may write to me in care of
Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division