Can a reseller of telephone service buy telecommunications service tax-free using a resale certificate, and who pays the old Telecommunications Infrastructure Fund (TIF) assessment?

Plain-English summary

This letter carries an official partial-supersession notice from the Comptroller's STAR system — read the flag below before relying on any of it.

In 1999, a reseller of local and long-distance telephone service wrote the Comptroller asking how Texas sales tax applied to its business. The Comptroller answered two separate questions:

1. Resale certificates for telecom resellers. A reseller of telephone service could issue a resale certificate to its own telecommunications provider instead of paying sales tax on the service it was reselling. If the provider refused to accept the certificate, the reseller could instead take a credit on its own Texas sales tax return for the tax it had already paid its provider (reducing taxable sales by the amount of the underlying purchase).

2. The Telecommunications Infrastructure Fund (TIF) assessment. Separately, providers of taxable telecommunications services owed a 1.25% TIF assessment on their taxable receipts — a fee imposed on the provider, not the customer. Because the TIF applied only to receipts subject to sales tax, a provider didn't owe TIF on receipts covered by a customer's resale certificate. If a provider chose to pass its TIF cost through to a customer as a separate charge, that charge itself became part of the taxable sales price.

Supersession flag: The Comptroller's STAR system marks this letter's TIF-assessment discussion as partially superseded as of March 23, 2012, because the Texas Legislature repealed the TIF assessment entirely, effective September 1, 2008 (House Bill 735, 80th Regular Session) — see STAR document 200810367L. In other words, item 2 above (the TIF assessment) no longer reflects current law at all. The resale-certificate guidance in item 1 is not flagged as superseded, but this is still a 26-year-old informal letter, not a modern private letter ruling or general information letter, and it predates the STAR system's current PLR/GIL format.

What this means for you

Telecom resellers today

The core resale-certificate mechanic described here — issue a certificate, or take a credit on your own return if the provider won't accept one — reflects a general sales-tax resale principle that likely still applies, but confirm current treatment with a licensed Texas tax professional or a current PLR/GIL rather than relying on this 1999 letter alone.

Anyone researching the old TIF assessment

Don't treat this letter's TIF discussion as current law under any circumstances — the TIF assessment itself was repealed in 2008, and the Comptroller's own system has formally flagged this portion as superseded since 2012.

Common questions

Q: Is the Telecommunications Infrastructure Fund (TIF) assessment still in effect?
A: No — per the Comptroller's own supersession notice on this letter, the TIF assessment was repealed effective September 1, 2008.

Q: Can I still rely on this letter's resale-certificate guidance for telecom resale?
A: The resale-certificate portion isn't formally flagged as superseded, but this is old, informal guidance (1999) rather than a current-format PLR or GIL — confirm with a tax professional before relying on it.

Citations and references

Rules referenced (as they existed at the time; the underlying TIF assessment has since been repealed):

• 34 Tex. Admin. Code Rule 3.1101 (Telecommunications Infrastructure Fund assessment)

Supersession source:

• STAR document 200810367L (explains the TIF assessment's repeal by House Bill 735, 80th Legislature, effective September 1, 2008)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9911890L

Original ruling text

STAR SUPERSEDED INFORMATION
Accession No. - 9911888L
Supersede type - Partial
Document superseded on - 3/23/2012
Issue(s) that caused the document to be superseded - Telecommunications Infrastructure
Fund (TIF) assessment
Reason(s) - Statutory change - House Bill 735, 80th Regular Legislative Session, repealed
the Telecommunications Infrastructure Fund (TIF) assessment effective September 1, 2008.
See also STAR 200810367L.

November 12, 1999

Dear **:

Thank you for your recent fax regarding reselling telecommunications services
and Texas sales tax.

As a reseller of local and long distance telephone services, you may issue a
resale certificate to your telecommunications provider(s) in lieu of paying
them sales tax. If the provider refuses to accept a resale certificate, you
can take credit on your Texas sales tax return for tax paid on services you
resell. For example, if you pay $100 plus Texas sales tax for
telecommunications services that you resell, you may reduce your taxable sales
(line 2) by $100 when filing your Texas sales tax return to take a credit for
the tax you paid your provider.

As a provider of taxable telecommunications services, you are responsible for
paying a 1.25% TIF assessment on taxable telecommunications services. I have
enclosed a copy of Rule 3.1101 for your review.

The TIF is a fee imposed on the provider of telecommunications services rather
than on the consumer. Since the TIF is imposed on the receipts subject to
sales tax, a provider is not required to pay the TIF on receipts customer who
gave a resale certificate. The decision to charge a customer for reimbursement
of TIF is a business decision of the provider. If they do so, they must
collect sales tax on the charge because it is part of the total price.

This opinion is based on the facts presented. Additional or different facts
may yield different results.

You may call me toll free 1-800-531-5441, extension 5-9787, if you have any
questions or need more information. The direct line is 512/305-9787. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Philip Knisely
Tax Policy Division