Is sales tax due on charges for calls to 900 telephone numbers, and who is responsible for collecting it if the 900 number is sub-leased to another company?

Subject

900 Numbers — Tax on Texas-Originated Calls and Sub-Leased 900 Number Billings

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9309L1257G06

Plain-English Summary

A taxpayer operating 900 telephone numbers asked the Comptroller about the taxability of charges for the use of those numbers. The letter states that sales tax is due on calls to 900 telephone numbers if the calls originate from points within Texas. Practically, the telecommunications firms that transmit the customers' calls to the 900-number holder also collect the holder's charges — including the tax — from the customers on the holder's behalf. Even so, the letter makes clear the 900-number holder itself is responsible for obtaining a sales tax permit, maintaining records of which calls were taxable and which were not, and remitting the sales tax, all "in keeping with the enclosed Rule 3.286."

The letter also addresses sub-leasing: companies that sub-lease 900 numbers from the holder are responsible for collecting tax on their own sales made through those numbers. But because the numbers remain listed in the original holder's name, the letter recommends the holder build a requirement into its lease contracts that sub-lessors provide a statement that they hold a sales tax permit, the permit number itself, and a resale certificate. If the holder doesn't obtain that information from a sub-lessor, the letter states the holder "should retain and remit the tax on their sales" instead.

Finally, the letter notes the holder may give resale certificates to its telecommunications service providers in lieu of paying tax to them, but must collect sales tax on its own charges for transcripts of 900 messages that are mailed to locations within Texas. The letter closes with the standard caveat that it is rendered based on the facts submitted and that other, similar facts could yield a different result.

What This Means For You

If you operate 900 numbers reaching Texas callers: You are on the hook for a Texas sales tax permit, recordkeeping distinguishing taxable from non-taxable calls, and tax remittance — even though the telecom carrier is the one actually collecting the charge (and tax) from the calling customer on your behalf.

If you sub-lease your 900 numbers to other companies: Build a contract requirement that the sub-lessor supply proof of its own sales tax permit (including the permit number) and a resale certificate. Without that documentation, the letter says you — not the sub-lessor — should be the one collecting and remitting tax on the sub-lessor's sales, since the number is still in your name.

If you sell transcripts of 900-number messages: Charges for mailing those transcripts to Texas addresses are subject to sales tax, separate from the tax treatment of the calls themselves.

If you buy telecommunications service to run your 900-number operation: You may furnish your telecom providers a resale certificate instead of paying tax on their charges to you.

Q&A

Q: Is sales tax due on all 900-number calls, or only some?
A: Only on calls that originate from points within Texas, per the letter.

Q: Who actually collects the tax from the customer calling a 900 number?
A: The telecommunications firms that transmit the calls collect the 900-number holder's charges, including the tax, from the customers on the holder's behalf.

Q: Does the 900-number holder still have obligations even though the telecom carrier collects the tax?
A: Yes — the letter states the holder is responsible for obtaining a sales tax permit, maintaining records of taxable and non-taxable calls, and remitting sales tax "in keeping with the enclosed Rule 3.286."

Q: What happens if a company sub-leases a 900 number and the original holder doesn't get a permit number/resale certificate from it?
A: The letter says the holder "should retain and remit the tax on their sales" if it does not obtain that information from the sub-lessor.

Q: Is tax due on mailed transcripts of 900 messages?
A: Yes — the letter states the holder must collect sales tax on charges for transcripts of 900 messages mailed to locations within Texas.

Original ruling text

September 15, 1993

Dear ***:

Thank you for your recent letter regarding the taxability of charges
for the use of 900 telephone numbers.

Sales tax is due on calls to 900 telephone numbers if the calls
originate from points within Texas. The telecommunications firms that
transmit your customers calls to you also collect your charges
including the tax on your behalf from your customers. You are
responsible for obtaining a sales tax permit, maintaining the records
of taxable and non-taxable calls, and remitting sales tax in keeping
with the enclosed Rule 3.286.

The companies that sub-lease 900 numbers from you will also be
responsible for collecting tax on their sales. However, since the
numbers are in your name, you should include in your contracts with
the lessors a statement that they hold a sales tax permit, the permit
number, and a resale certificate. You should retain and remit the tax
on their sales if you do not obtain this information.

You may give resale certificates to your telecommunications service
providers in lieu of tax. You must collect sales tax on your charges
for transcripts of 900 messages mailed to locations within Texas.

This opinion is rendered 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) 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

NOTE: Previous Accession Number 93070167L.2 and/or 9307167L