How is local sales tax (like the Regional Transportation Authority tax) sourced on cellular telephone and cellular roaming charges?

Subject

Local Tax — Cellular Telephone/Cellular Roaming Charges — Tax Determined By Cell Site Location Or Billing Address Of Customer

Plain-English summary

A taxpayer asked the Comptroller how local sales tax -- including local transit taxes like the Regional Transportation Authority (RTA) tax -- applies to cellular telephone and cellular roaming charges. The taxpayer was a customer of a carrier referred to as MOBILE SYSTEMS X, with a billing address in a rural county.

The rule has two tiers. Local sales tax on cellular telephone service is first sourced to the location of the cell site that receives and re-transmits the call. If the cellular carrier does not keep records of where calls originate (i.e., which cell site handled the call), local tax instead defaults to the rate in effect at the customer's billing address.

Outcome for this taxpayer. The Comptroller did not know whether MOBILE SYSTEMS X tracked cell-site locations for its calls. But the letter noted that if the carrier did not track that information, and the taxpayer's billing address was in the rural county mentioned, then no local sales tax would be owed on the cellular telephone bill -- implying that county had no applicable local sales tax rate. This is a mixed/conditional outcome: it turns on facts (carrier's recordkeeping practices) that the Comptroller could not confirm from the letter alone.

What this means for you

Cellular customers questioning local tax on their bill

Check whether your carrier tracks the specific cell site that handled each call. If it does, local tax follows that cell site's location. If it doesn't, local tax is instead based on the rate at your billing address -- so if your billing address is in an area with no local sales tax, you should not see local tax (such as an RTA tax) on your cellular charges.

Cellular carriers determining how to source local tax

Local sales tax sourcing depends on your own recordkeeping: if you track the cell site that received and re-transmitted each call, source local tax to that cell site's location. If you don't track that data, fall back to the customer's billing address to determine the applicable local tax rate.

Accountants and tax professionals reviewing cellular billing disputes

The relevant fact question is whether the carrier maintains cell-site-level call records. Absent that tracking, the customer's billing address controls, which can mean no local tax is due if the billing address is outside any local taxing jurisdiction's boundaries.

Common questions

Q: How is local sales tax determined on cellular telephone calls?
A: By the location of the cell site that receives and re-transmits the call.

Q: What if the cellular carrier doesn't track which cell site handled a call?
A: Then local tax is based on the rate in effect at the customer's billing address.

Q: Does this affect local transit taxes like the Regional Transportation Authority (RTA) tax?
A: Yes -- the letter specifically addresses local sales tax including RTA-type local taxes on telecommunications service.

Q: Would the taxpayer in this letter owe local sales tax?
A: It depends on whether MOBILE SYSTEMS X tracked cell-site call locations. The Comptroller didn't know either way, but noted that if the carrier did not track that data, and the taxpayer's billing address was in the rural county described, no local sales tax would be owed.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9611891L

Original ruling text

November 18, 1996

Dear ***:

Thank you for your letter regarding the application of local sales tax, such
as the Regional Transportation Authority tax, on telecommunications services
for local tax purposes. Mr. Sharp asked me to research the issue

Local sales tax on cellular telephone telecommunications service is determined
by the location of the cell site that receives and re-transmits the incoming
signal. If the cellular company does not track those locations, local tax is
collected based on the rate in effect at the customer's billing address.

I do not know if MOBILE SYSTEMS X keeps records of where cellular calls
originate. However, if they do not, and your billing address is in rural
ABC COUNTY, you would owe no local sales tax on your cellular telephone bill.

If you have further questions, please contact Al Van Allen in my Tax Policy
Division. You may call Al toll free at 1-800-531-5441, extension 3-4680.
Al's direct line is 512/463-4680. His internet address is
[email protected].

Let me know any time I can be of service to you.

Sincerely,

Karey W. Barton
Manager, Tax Policy Division