Is mobile radio data two-way (packet radio) transmission service taxable the same way as traditional cellular telephone service in Texas?

Plain-English summary

A taxpayer wrote in asking about the taxability of interstate and intrastate telecommunications services, specifically mobile radio data two-way transmission service (packet radio) and traditional cellular telephone service.

The Comptroller's answer: both types of service are taxable if the communication originates in Texas and is billed to a telephone number or a billing or service address in Texas. The fact that packet transmissions use a protocol language to improve accuracy, or that messages may be temporarily stored while waiting for an available channel or to help deliver the message, does not take packet radio service outside the definition of a taxable telecommunications service. All of the charges described were held subject to state sales tax, with local sales taxes due based on the point of origination of the transmission.

What this means for you

Packet radio / mobile data service providers

If your two-way mobile radio data transmission service originates in Texas and is billed to a Texas telephone number or billing/service address, it's taxable as a telecommunications service — the same as ordinary voice service. Technical features like store-and-forward message handling or protocol-based accuracy checks don't change that result.

Cellular telephone service providers

Traditional cellular telephone service is taxable on the same basis: origination in Texas plus billing to a Texas number or address.

Businesses collecting local sales tax on telecommunications charges

Local sales tax on telecommunications services is due based on where the transmission originates, not just where it's billed. The letter notes the Comptroller enclosed a list of jurisdictions imposing the local option sales tax on telecommunications services, along with Rule 3.344 and the relevant Tax Code sections, for the taxpayer's reference.

Accountants and tax professionals

This letter is a useful, if brief, confirmation that "packet radio" or data transmission technology is not treated differently from voice telecommunications for Texas sales tax purposes — the origination/billing test governs both.

Common questions

Q: Is mobile radio data two-way transmission (packet radio) service taxable in Texas?
A: Yes, if the communication originates in Texas and is billed to a telephone number or a billing or service address in Texas.

Q: Does using a protocol language or temporarily storing messages change the tax treatment of packet radio service?
A: No. The letter states that neither feature excludes packet radio service from the definition of telecommunications service.

Q: Is traditional cellular telephone service taxed the same way as packet radio service?
A: Yes — both are taxable telecommunications services under the same origination/billing test described in the letter.

Q: How is local sales tax on these telecommunications charges determined?
A: Local sales taxes are due based on the point of origination of the transmission.

Q: Can I rely on this letter for my own service offering?
A: No. This opinion is based on the facts the taxpayer presented; other facts, though similar, may yield different results, and STAR letters can be relied on only by the taxpayer to whom they were issued.

Citations and references

The letter references 34 Tex. Admin. Code Rule 3.344 (dealing with telecommunications service) and unspecified sections of the Tax Code dealing with sales tax on telecommunications service, which the Comptroller enclosed along with a list of local-tax jurisdictions. No specific Tax Code section numbers are given in the letter text itself.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9206L1176F03

Original ruling text

June 17, 1992

Dear **:

Thank you for your recent letter regarding the taxability of both interstate
and intrastate telecommunications services. You mentioned specifically mobile
radio data two-way transmission service and traditional cellular telephone
service.

Both types of service are taxable if the communications originate in Texas and
are billed to a telephone number or billing or service address in Texas. The
fact that packet transmissions use a protocol language to facilitate accuracy
or that the messages may be temporarily stored pending availability of a
channel or to facilitate delivery of the message does not exclude packet radio
service from the definition of telecommunications service.

Each of the charges you mentioned are subject to state sales tax. Local sale
taxes are due based on the point of origination of the transmission. I am
enclosing information on the local option sales tax on telecommunications
services along with a list of jurisdictions that impose the tax along with Rule
3.344 dealing with telecommunications service and sections from the Tax Code
dealing with sales tax on telecommunications service in general.

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