Does Texas local sales and use tax apply to conference calling charges when the conference call center or 800 number is located outside Texas but some participants call in from Texas?

Plain-English summary

This letter, signed by Al Van Allen of the Comptroller's Tax Administration Division, responds to a taxpayer's questions about how Texas state and local sales and use tax applies to three different conference calling arrangements. The taxpayer's letter proposed that all three types of calls should be exempt because the conference call center or 800 number was located outside Texas. The Comptroller largely disagreed, explaining that the correct question is where each individual call leg originates, not simply where the conference center sits.

• "Dial Out": The client calls a conference call center outside Texas and gives it phone numbers and a time; an out-of-state operator then places and connects all the calls. The taxpayer argued the whole arrangement was exempt because it originates outside Texas. The Comptroller's response: the client owes state sales tax on the cost of its own initial call to the conference call center (interstate calls are exempt from local sales and use tax), but no state or local tax is due on the calls the out-of-state operator places to connect the other participants.
• "800 Meet Me": The client gives participants an out-of-state 800 number (owned by the out-of-state vendor) that each participant calls at a set time to join the conference. The taxpayer argued this was exempt because the 800 number doesn't originate or terminate in Texas. The Comptroller disagreed in part: charges are taxable to the extent the calls originate in Texas — a Texas participant dialing that out-of-state 800 number is originating their portion of the call from Texas, so that portion of the billing is subject to Texas sales tax regardless of where the bill is sent.
• "Toll Meet Me": Participants are given a toll number to call into the conference center, which connects everyone. Here, tax is paid by each Texas caller to their own long-distance telecommunications provider on their individual call, and no Texas tax is due on the separate charge the out-of-state company bills for connecting the callers (since each caller has already paid tax on their own call).

The letter notes it is based on the facts submitted and that other facts, though similar, may yield different results. A note at the end indicates this letter carries a previous accession number of 9508438L.

What this means for you

Businesses that arrange or resell conference calling services

Don't assume a conference call is tax-exempt just because the conference bridge, call center, or 800 number is physically located outside Texas. The Comptroller looks at where each leg of the call originates. If a Texas-based caller or client is the one placing a call — whether directly to an out-of-state conference center, or by dialing an out-of-state 800 number — that Texas-originated leg can be subject to Texas sales tax even though the rest of the call chain occurs out of state.

Businesses using "Dial Out" conference services

Your own outbound call to the conference call center is subject to Texas state sales tax (but not local sales and use tax, since it's an interstate call). The calls the out-of-state operator then places to connect other participants are not subject to state or local tax.

Businesses using "800 Meet Me" services

Expect Texas sales tax to apply to the portion of billing attributable to participants calling in from Texas, even though the 800 number is out-of-state property and doesn't itself originate or terminate in Texas. Where the invoice is sent does not change this result.

Businesses using "Toll Meet Me" services

Each Texas participant's tax liability is handled through their own long-distance carrier on their individual call. The separate fee the out-of-state conference company charges for connecting already-paid-for calls is not subject to Texas tax.

Accountants and tax professionals

This letter illustrates that Texas sourcing analysis for multi-leg telecommunications arrangements requires tracing tax treatment call-leg-by-call-leg (origination point) rather than treating the overall service as a single transaction sourced to the conference center's location. Note also the state-tax/local-tax distinction drawn in the "Dial Out" scenario: interstate calls can carry state sales tax exposure while being exempt from local sales and use tax.

Common questions

Q: If the conference call center is located outside Texas, is the whole conference call automatically exempt from Texas tax?
A: No. The Comptroller rejected that framing. Exemption depends on where each call leg originates, not simply on where the conference center or 800 number is located.

Q: For a "Dial Out" call, does the client owe tax on the call it makes to the conference center?
A: Yes, state sales tax is owed on that initial call. It is exempt from local sales and use tax because it's an interstate call. No state or local tax applies to the calls the out-of-state operator subsequently places to connect participants.

Q: For an "800 Meet Me" call, is a Texas participant's call into an out-of-state 800 number taxable?
A: Yes, to the extent the call originates in Texas. A Texas participant dialing the 800 number is originating that portion of the call from Texas, so it is subject to Texas sales tax regardless of where the bill is sent.

Q: For a "Toll Meet Me" call, who pays tax and on what?
A: Each Texas caller pays tax to their own long-distance provider on their individual call. No separate Texas tax applies to the out-of-state company's charge for connecting the already-paid-for calls.

Q: Can this letter be relied on for a different set of facts?
A: The letter itself cautions that it is rendered based on the facts submitted, and that other facts, though similar, may yield different results.

Citations and references

No statutes, rules, or cases are cited in the body of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9508L1367G01

Original ruling text

August 8, 1995

Dear *****:

Thank you for your recent letter regarding the tax treatment
of conference calls. Your situations are restated with responses
below.

"Dial Out" Our client calls the conference call center in
** and gives the phone numbers and time to place the
conference call. An operator in ** places all the calls
and connects the calls for conference. In this instance,
it appears clear that this conference all originates
outside the state of Texas and is exempt from State and local taxes.

Response: The client owes state sales tax on its cost of making
the initial call to the conference call center. Interstate calls
are exempt from local sales and use tax. No state or local sales
or use tax is due on calls placed by the operator in ****.

"800 Meet Me" Our client gives all call participants an 800
number, which is assigned to and is the property of *,
which each call participant calls at a pre-determined time.
By calling this 800 number, each conference participant is
connected by **** to the conference call. Although less clear,
it would appear that since the call revolves around an 800
number that does not originate in Texas and terminates outside
the State, that these type of calls are also exempt from state
and local taxes.

Response: The charges are taxable to the extent that the calls
originate in Texas. Individuals in Texas originate their portion
of the conference call from Texas by calling the out-of-state
operator. Accordingly, that portion of the billing is subject to
Texas sales tax regardless of where the bill is sent.

"Toll Meet Me" Our client is given a toll call number to call
into the conference center. The conference center then connects
all of the participants. In this instance, it is unclear to me
whether such a call is or is not exempt from state and local taxes.

Response: Tax is paid by callers in Texas to their individual
long-distance telecommunications providers. No Texas tax is due
on the charge by the out-of-state company for connecting the
callers, each of which has paid for his own call.

This opinion is rendered based on the facts you submitted. Other
facts, though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The
direct line is 512/463-4680. You may also write to Tax
Administration, Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9508438L