Is an annual fee a company charges its independent sales agents to access their own personal sales data on a company web page a taxable service in Texas?

Plain-English summary

A company selling products through independent sales agents nationwide planned to build a web page letting agents view their own personal sales information, for an annual access fee. The company was careful to note what it was not doing: it wasn't providing general Internet access service, and agents wouldn't be buying tangible property or downloading "canned" (pre-written) software -- they'd only be viewing and downloading information the company itself stored about their sales.

The Comptroller found this is a taxable service anyway, just a different one than the company might have expected: storing the sales agent's sales information on a web page is a taxable data processing service, covered by Rule 3.330. Data processing services include the storage or manipulation of data using a computer -- exactly what's happening when the company's system holds and serves up each agent's personal sales data. (The Comptroller also flagged Rule 3.342 on information services as a related, adjacent category, though the core answer here rested on the data-processing characterization.)

Texas taxes data processing services based on where the purchaser's benefit of use occurs. So the company must collect Texas sales tax on the annual access fee from sales agents who are located in Texas -- agents in other states would be outside this letter's Texas tax reach (though their own states might tax the fee under their own rules).

What this means for you

Companies charging fees for web-based access to a user's own data

Don't assume that "we're just letting people view their own information, not selling software or providing Internet access" makes a web access fee non-taxable in Texas. If your system is storing and serving that data, it likely qualifies as a taxable data processing service regardless of how narrowly you've defined what you're NOT providing.

Direct sales organizations building agent/distributor portals

An annual portal-access fee tied to viewing personal sales data is a taxable data processing charge for Texas-based agents -- build tax collection into your fee structure for that portion of your agent base.

Accountants and tax professionals

A useful, concrete pre-2000 illustration of how broadly Texas's data processing services tax net was cast even for simple data-storage/retrieval functionality, and a reminder that the "purchaser's benefit of use" location (not where the server sits, or where the company is based) drives sourcing.

Common questions

Q: Is an annual fee for accessing my own sales data on a company website taxable in Texas?
A: Yes, if the company is storing that data for you -- it's a taxable data processing service under Rule 3.330.

Q: Does it matter that the company isn't providing Internet access or downloadable software?
A: No. The taxable service here is the data storage/processing itself, separate from Internet access or software delivery.

Q: Does Texas tax apply to agents located outside Texas?
A: This letter addresses Texas sales tax on agents located in Texas; the Comptroller doesn't rule on other states' tax treatment.

Q: Can I rely on this letter for my own web-fee structure?
A: No. It is based on the specific facts presented and can only be relied on by the taxpayer to whom it was issued.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.330 (data processing services)
• 34 Tex. Admin. Code Rule 3.342 (information services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9905476L

Original ruling text

May 28, 1999

To: **
<**>

Subject: Sales Tax Question

Dear **:

Thank you for your e-mail concerning the taxability of the following situation.

Situation: COMPANY A sells its products through independent sales agents
located in all states across the United States. COMPANY A is in the process of
creating a web page for access by sales agents so they may view various
information related to their personal sales. The company will be charging an
annual web page access fee of $** to sales agents who wish to
participate in this program. COMPANY A will not be providing Internet access
services.

COMPANY A is questioning the taxability of the access fee. The sales agents
will not be purchasing tangible personal property from the web site, and will
not be downloading "canned" computer software. They will, however, have the
ability to view and download information from the company's web site.

Question: COMPANY A requests a ruling on whether or not the access fee charged
to obtain information stored on a company controlled web page is considered
taxable in Texas.

Response: Texas taxes a variety of services including data processing services
and information services. Information services includes the furnishing of
general or specialized news or other information, including financial
information, by printed or electronic means. Data processing services include
the storage or manipulation of data using a computer. The storage of the sales
agent's sales information on a web page is a taxable data processing service.
Texas taxes data processing services when the purchaser's benefit of use from
the service is in Texas. Therefore, you are required to collect Texas sales tax
on the annual web page access fee from sales agents located in Texas.

Rule 3.330 further explains data processing services. The rule is available
on-line at . Rule 3.342 on information services is found at .
Copies of these rules have been sent to your mailing address.

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

I hope this information helps. If you have further questions, please e-mail me
at [email protected], or you may reach me by phone at 1-800-531-5441,
ext. 5-0030.

Sincerely,

David Somerville
Tax Policy Division