Ezel / Tax Rulings / TX
TX 9810895L Sales and/or Use Tax (State,Local,MTA) 1998-10-07

A Texas company plans to resell satellite phone service (from a Netherlands provider, with ground stations in South America) to customers mostly based in Texas. What Texas taxes apply?

Short answer: Sourced by where the call originates, not by billing address alone. A company planned to resell satellite phone service -- purchased from a Netherlands-based provider using ground stations in Venezuela, Argentina, Bolivia, and Colombia (none in Texas) -- to its own customers, most of whom are based in Texas. The Comptroller applied the general telecommunications sourcing rule: charges for telecommunications services that ORIGINATE in Texas and are billed to a Texas telephone number, billing address, or service address are subject to Texas sales tax, with no local sales tax due on interstate or international calls. Charges for calls that originate OUTSIDE Texas are not subject to Texas tax at all -- so calls placed from the South American ground stations would fall outside Texas tax even though the reselling company and most of its customers are Texas-based.

Apply this to your situation

This page answers the general question as of 1998. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1998
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 company planned to become a satellite service provider, reselling satellite phone service to its own customers (most of them based in Texas). The underlying satellite service and equipment would come from a Netherlands-based provider, using ground stations located in South America (Venezuela, Argentina, Bolivia, and Colombia) — not in Texas. The Netherlands company would bill the reseller an annual fee plus monthly airtime charges, and the reseller would then bill its own Texas-based customers.

The Comptroller applied its general telecommunications sourcing rule: Texas sales tax applies to telecommunications charges that originate in Texas and are billed to a Texas telephone number, billing address, or service address, with no local sales tax due on interstate or international calls. Charges for calls that originate outside Texas are not subject to Texas tax at all. Since the ground stations here are all outside Texas, calls originating from those South American stations fall outside Texas tax — even though the reselling company and most of its customers are based in Texas.

What this means for you

Satellite and telecom resellers with international infrastructure

Where your customer is billed, and where your company operates from, doesn't by itself determine Texas sales tax exposure on telecommunications charges — what matters is where the call or transmission actually originates. Service routed entirely through out-of-state or international ground stations/hubs can fall outside Texas tax even when your customer base is Texas-heavy.

Accountants and tax professionals

This letter is a clean, general-purpose statement of Texas's call-origin sourcing rule for telecommunications services — useful any time a client's telecom service mixes domestic and international origination points.

Common questions

Q: Does Texas tax satellite phone service billed to a Texas customer if the call originates outside Texas?
A: No, per this letter — Texas taxes telecommunications charges based on where the call originates, not the billing address alone; calls originating outside Texas aren't subject to Texas tax.

Q: Is local sales tax ever due on interstate or international calls?
A: No, per this letter — no local sales tax is due on interstate or international calls, even when Texas state tax might otherwise apply.

Citations and references

No specific Tax Code section or Comptroller rule number is cited in this letter; the Comptroller applied its general telecommunications call-origin sourcing policy to these facts.

Source

Original ruling text

October 7, 1998

Dear Ms. **:

Thank you for your recent letter which is restated in part with response below.

We would like to become a satellite service provider for our customers with
installations in South America. Satellite service and equipment will be
provided by a company in the Netherlands. We are looking at installing
satellite phones on stations in Venezuela, Argentina, Bolivia and Colombia.
The Netherlands company will bill us an annual fee for service plus monthly
airtime charges. We will then bill our customers, most of which are based in
Texas. The ground station used will not be in Texas. Please advise what Texas
taxes are applicable to this business.

Response: Charges for telecommunications services that originate in Texas and
are billed to a telephone number, or billing or service address in Texas are
subject to Texas sales tax. No local sales tax is due on interstate or
international calls. Charges for calls that originate outside Texas are not
subject to Texas tax.

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

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 Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division

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