Ezel / Tax Rulings / TX
TX 9204L1166A01 Sales and/or Use Tax (State,Local,MTA) 1992-04-01

Were annual membership fees for a dial-before-you-dig underground-utility database subject to Texas sales tax?

Short answer: No. Annual fees paid by pipeline owners to list underground pipelines, cables, and wires in the dial-before-you-dig database were not taxable.

Apply this to your situation

This page answers the general question as of 1992. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1992
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The company maintained a database showing underground pipelines, cables, and wires. Pipeline owners paid annual membership fees based on how many database grids their property occupied.

Anyone could call a toll-free number before digging to learn whether a pipeline was underground and whom to contact. The company received no payment from either the caller or the affected pipeline owner when it supplied that information.

The Comptroller concluded that the annual membership fees for this service were not taxable.

What this means for you

On these facts, charging utility owners to participate in a database while giving excavation callers the location service without a transaction-time charge did not create a taxable membership fee.

Common questions

Who paid the annual fee? Owners of pipelines listed in the database.

How was the fee calculated? By the number of database grids occupied by the pipeline owner's property.

Did callers pay for location information? No. The company received no compensation when it gave the information.

Citations and references

The letter cited no specific statute or rule.

Source

Original ruling text

April 1, 1992

Dear **:

Thank you for your letter of January 28, 1992, regarding the taxability of a
database of underground pipelines.

As I understand, COMPANY maintains a database of underground pipelines, cables
and wires. Owners of the pipelines pay an annual fee to list their pipeline
location with COMPANY The dollar amount of the fee is based on the number of
grids that the pipeline owner's property occupies in ABC's database. COMPANY
has set up a toll-free telephone number that anyone may call before digging in
an area and receive information as to whether there is a pipeline underground
and, if so, whom to contact before digging. COMPANY receives no compensation
at the time it provides this information from either the contractor or the
owner of the affected pipeline. You question whether the annual fee charged to
the pipeline companies is subject to sales tax.

The membership fees paid for the service described above are not taxable.

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

If you have any questions or need additional information, you may call toll
free 1-800-252-5555 or the regular Austin number is 512/463-4600. You may also
write to Tax Administration Division.

Sincerely,

Lindey Osborne
Tax Administration Division

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