Does a home business owe Texas sales tax on computerized calling services, like automated appointment reminders, wellness check-in calls, or community information lines?
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This page answers the general question as of 1994. Ezel answers yours, under current Texas tax law, with citations.
Subject
Computer Appointment Reminder/Verification — Computer Calls Patients/Clients To Remind Of Appointments
Source
- STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
- Opinion: https://star.comptroller.texas.gov/view/9402L1284F11
Plain-English Summary
A sole proprietor running a home business asked the Comptroller about the taxability of seven different computer-driven calling and information services. The Comptroller addressed each one separately:
- Automated wellness check-in calls (the computer calls homebound individuals to make sure they're okay, and dials an emergency number if there's no response) — not taxable. The Comptroller noted this would be taxed as a security service only if it required a license under the Private Investigators and Private Security Agencies Act, and the State Board of Private Investigators confirmed no license was required for this service.
- Automated child check-in calls (the computer calls children to confirm they're home, with an emergency-number fallback) — not taxable.
- Computerized scholarship search (personalized search of a national database for scholarship funds via on-line access) — taxable as an information service, citing Rule 3.342.
- Bi-weekly mortgage payment computer reports (showing homeowners potential savings, then linking them to a company that services the bi-weekly payments) — the Comptroller did not rule on taxability outright; it asked for more facts, including the customer agreement and the servicing agreement, and noted that parts of the service appeared to be taxable data processing services under Rule 3.330.
- Community information recording (a recorded message about community events, weather, and lottery numbers, reached by calling a number) — not taxable if free to the caller; a business's fee for the advertising space in the recording is not taxable; but if the caller pays to hear the time/weather message, that charge is taxable as a telecommunication service.
- Automated patient appointment reminder calls (once patient phone numbers are in the database, the computer automatically calls to remind them of appointments) — taxable as a telecommunication service.
- Discount travel/hotel cards (cards purchased at wholesale, manufactured out of state, and resold at retail, giving the buyer a discount at certain hotels) — not taxable, because the customer is purchasing the right to a discount rather than a taxable item or service.
What This Means For You
If you run automated calling services: The taxability turns on what the call actually does, not just that a computer is placing it. A simple wellness or safety check-in call (with no information being conveyed beyond a yes/no status and an emergency contact trigger) was found not taxable. But an automated call that reminds a specific person of an appointment was ruled taxable as a telecommunication service.
If you provide database or search services: A personalized search of a database (here, for scholarship funds) was found to be a taxable information service under Rule 3.342.
If you provide computer-generated financial reports plus a referral/servicing arrangement: Expect the Comptroller to want more facts before ruling — this ruling flagged the mortgage-savings/bi-weekly payment service as potentially a taxable data processing service under Rule 3.330, but did not issue a final determination without seeing the actual agreements.
If you charge for a recorded information line: Whether tax applies depends on who pays. Free-to-caller messages are not taxable to the caller, and advertiser fees for message space are not taxable, but if the caller pays to access the recording, that charge is taxable as a telecommunication service.
If you sell discount cards: Selling a card that conveys the right to a discount (rather than the underlying taxable good or service) was found not subject to sales tax in this fact pattern.
Q&A
Q: Is an automated call reminding a patient of an appointment subject to Texas sales tax?
A: Yes. The Comptroller ruled that once patient phone numbers are entered into a database and the computer automatically calls patients to remind them of appointments, that service is taxable as a telecommunication service.
Q: Is an automated wellness check-in call service (calling homebound individuals to make sure they're okay) taxable?
A: No. The Comptroller found this service not subject to sales tax. It would only be taxable as a security service if a license were required under the Private Investigators and Private Security Agencies Act, and the State Board of Private Investigators confirmed that this type of service does not require such a license.
Q: Is a computerized search of a national database for scholarship funds taxable?
A: Yes, the Comptroller ruled this is a taxable information service, referencing Rule 3.342.
Original ruling text
February 3, 1994
Dear ***:
Your letter to Ms. Olvera has been assigned to me. Your facts are
restated in part with responses below.
As a sole proprietorship and home business, I offer my clients a number
of services as follows:
1.How are you today? My computer automatically calls the homebound to
make sure they're okay, and an emergency number if there is no response.
Response 1: The service you provide is not subject to sales tax. It
would be taxed as a security service if a license were required under the
Private Investigators and Private Security Agencies Act, but, I checked with
The State Board of Private Investigators and was told that the service you
describe does not require a license.
2.** . My computer calls children when they are to be home, and,
an emergency number if there is no response.
Response 2: The service is not taxable.
3.** . Through on-line access to a national data base, I provide
a personalized computer search for scholarship funds.
Response 3: This is a taxable information service. I am enclosing a copy
of Rule 3.342 for your reference.
4.** . Through computer-generated reports, I show homeowners how
they can save money on their mortgages by using a bi-weekly payment plan.
I then link them up with a company through which their biweekly payments
are then made.
Response 4: Please provide additional information about this service,
including a copy of the agreement that you plan to use with a homeowner as
well as a copy of the agreement that you have with the ** or
local banks to service these accounts. Parts of this service appear to be
taxable data processing services under Rule 3.330.
5.** . Residents may hear community information messages by
calling the computer number and listening to a recording about community
events, the time, weather, and lottery winning numbers.
Response 5: If the caller receives the information free of charge, no tax
is due from the caller. A fee paid by a business for advertising space is
not taxable. If the caller pays to receive the time and weather message,
that charge is taxable as a telecommunication service.
6.** . Once patient telephone numbers are added to the data
base, the computer automatically calls patients and reminds them of
appointments.
Response 6: This is taxable as a telecommunication service.
- ** I sell a discount travel card which allows customers a
discount on certain hotels in the privilege card network. This card is
manufactured out of state. I purchase the cards and brochures at
wholesale and sell them at retail.
The customer is purchasing the right to a discount at these hotels.
Response 7: The sale of the cards is not subject to sales tax.
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 9402019L
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