Ezel / Tax Rulings / TX
TX 9503L1345E01 Sales and/or Use Tax (State,Local,MTA) 1995-03-10

Is a business that programs customers' own cellular phones by selecting preset options built in by the manufacturer required to collect Texas sales tax on that service?

Short answer: No. The Comptroller's Tax Policy Division held that this cellular phone programming service is not subject to Texas sales tax, because the business does not sell or repair any tangible personal property — it only programs phones that customers bring in themselves by selecting preset options already built into the phone by the manufacturer.

Apply this to your situation

This page answers the general question as of 1995. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1995
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

A business wrote to the Comptroller's Tax Policy Division describing a service it provides: customers bring in their own cellular phones, and the business programs those phones by selecting preset options that the phone's manufacturer already built into the device. The business included a brochure describing the service.

The Comptroller's office confirmed that this business is not selling or repairing any tangible personal property — it is only programming phones that customers already own, using options the manufacturer pre-built into the phone. Based on those facts, the letter concludes that the service described is not subject to tax. The letter notes that this conclusion is based on the facts presented, and that the opinion could change if there are additional or different facts.

What this means for you

Cellular phone programming businesses

If your service is limited to programming a customer's own phone by selecting preset options that the manufacturer already built into the device — without selling the customer any tangible personal property and without repairing the phone — this letter indicates that service is not subject to Texas sales tax.

Businesses offering related phone services

This letter is narrowly tied to the specific facts described: no sale of tangible personal property, no repair, and only selection of manufacturer preset options at the customer's request. If your business also sells phones, accessories, or performs repairs, or if the "programming" involves anything beyond selecting built-in preset options, this letter's conclusion may not extend to those additional activities, and the Comptroller's office cautions that different facts could change the outcome.

Common questions

Q: Does this business need to collect sales tax on its phone programming service?
A: No. The letter states that "the service described above is not subject to tax," based on the business only programming customers' own phones by selecting preset options built in by the manufacturer, with no sale or repair of tangible personal property involved.

Q: Why isn't this service taxable?
A: The Comptroller's office based this on the fact that the business was not selling or repairing any tangible personal property — it was only selecting preset options already built into the customer's own phone by the manufacturer.

Q: Can another business with a similar-sounding service rely on this letter?
A: This letter is based on the specific facts presented by this taxpayer, and the letter itself states the opinion may change if there are additional or different facts. STAR letters generally can be the basis of a detrimental reliance claim only for the taxpayer to whom they were issued.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

Original ruling text

March 10, 1995

Dear *****:

Thank you for your letter dated March 2, 1995, concerning the service
provided by your business. The brochure included with your letter was
most helpful.

You will not be selling or repairing any tangible personal property.
You will be programming cellular phones (selecting preset options built
into a phone by the manufacturer). Customers bring their own cellular
phone to you for programming.

The service described above is not subject to tax.

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

If you have any questions or need more information, you may call me toll
free at 1-800-531-5441, ext. 50330. The direct line is 512/475-0330.
You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9503058L

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