Can a paging company give its phone company a resale certificate for the phone exchange numbers and trunk lines it leases and then passes on to its paging customers?

Plain-English summary

A Texas paging service provider purchased or leased phone exchange numbers and trunk lines from the local telephone company, then assigned those numbers to its own paging customers as a component of the taxable paging service it sold them (collecting sales tax from those customers on its total charge). The taxpayer asked the Comptroller whether it could give its telephone company supplier a resale certificate for those phone numbers and trunk lines, rather than paying sales tax on that purchase itself.

The Comptroller's Tax Administration Division answered yes: because the phone numbers and trunk lines were being resold as part of a taxable paging service, the taxpayer could issue a resale certificate to its supplier. The letter enclosed copies of Rules 3.285, 3.338, and 3.344 for reference, and noted that the answer was based on the specific facts submitted — other, similar facts could yield a different result.

What this means for you

Paging companies and other telecommunications resellers

If you buy or lease telephone exchange numbers, trunk lines, or similar components from a telephone company and then resell them (bundled into a taxable service you sell to your own customers, on which you collect sales tax), you generally do not need to pay sales tax on that purchase yourself — you can give your supplier a resale certificate instead.

Accountants and tax professionals

This 1993 letter is fact-specific and turns on the item purchased being an actual component of a taxable service resold to the end customer, not on the reseller's industry label. It cites Rules 3.285 (resale certificates), 3.338, and 3.344 (telecommunications services) as the operative authority. The letter is nearly 33 years old; confirm current versions of these rules and any statutory changes before relying on it, and note that STAR letters generally protect only the taxpayer to whom they were issued.

Common questions

Q: Does this ruling apply to any telecommunications company that resells services?
A: The Comptroller was explicit that this answer was "based on the facts you submitted" and that "other facts, though similar, may yield different results." It applies most directly to a business purchasing/leasing phone numbers and trunk lines that are then transferred to customers as part of a taxable paging (or similar) service.

Q: Does the paging company still have to collect sales tax from its own customers?
A: Yes. The facts recited in the letter state the taxpayer "collects sales tax from its customers on its total charge" for the paging service — the resale certificate only relieves the taxpayer's own purchase of the phone numbers and trunk lines from tax, not the ultimate retail sale.

Q: What rules did the Comptroller point to?
A: The letter encloses copies of Rules 3.285, 3.338, and 3.344 "for your reference," without quoting their text.

Citations and references

Rules referenced (text not quoted in the letter):

• 34 Tex. Admin. Code Rule 3.285
• 34 Tex. Admin. Code Rule 3.338
• 34 Tex. Admin. Code Rule 3.344

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9301L1220C07

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
AUSTIN, 78774

January 29, 1993

Dear ***:

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

Facts: * purchases or leases phone exchanges and trunk lines from the
local telephone company as component parts of the paging service offered to
* customers. * assigns these telephone numbers to * customers
purchasing paging services and collects sales tax from its customers on the its
total charge.

Response: *** may give a resale certificate to its supplier of phone
numbers and trunk lines that it transfers to its customers as part of a taxable
paging service. I am enclosing copies of Rules 3.285. 3.338, and 3.344 for your
reference.

This opinion is based on the facts you submitted. 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 (ext. 34680). My direct line
number is (512) 4634680. 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