Is a web-based severe-weather forecasting and alert service (for clients like offshore rigs and refineries) subject to Texas sales tax as a taxable information service?

Plain-English summary

The Texas Comptroller ruled that a company's web-based weather forecasting service — sold to retailers, refineries, tech firms, and offshore oil rigs to help make critical operational decisions — is not subject to Texas sales tax.

The provider built its forecasts from purchased third-party meteorological data plus its own in-house meteorologists and proprietary forecasting models, then delivered location-specific forecasts, severe weather alerts, hurricane forecasting, lightning proximity alerts, and on-demand meteorologist access through a client-configured web portal. Clients used the service for decisions like whether it was safe for a helicopter crew-change flight to reach an offshore rig.

Texas generally taxes "information services" — furnishing general or specialized current information — but specifically excludes from that definition any information "primarily derived from laboratory, medical, or exploratory testing or experimentation or any similar method of direct scientific observation of physical phenomena." The Comptroller found the taxpayer's forecasting service fit squarely within that exclusion: it's built from direct scientific/meteorological observation, whether sourced from the taxpayer's own meteorologists or purchased from third-party data providers. So the service is not taxable.

This ruling (issued September 6, 2022) reflects the same reasoning the Comptroller has since applied to at least one earlier ruling: a related 2019 letter about a different taxpayer's generic weather-based electricity-market forecasting was originally ruled taxable, but STAR shows that ruling was partially superseded on the very same date this ruling issued — because the Comptroller's updated position (reflected here) is that forecasting built on scientific observation data qualifies for the exclusion even when the provider sources some of the underlying data from vendors rather than measuring it firsthand.

What this means for you

Weather, geophysical, and seismic forecasting service providers

If your service furnishes forecasts, alerts, or data built primarily from direct scientific/meteorological observation — even when some of the underlying raw data comes from third-party vendors rather than your own instruments — Texas treats that as exempt information from direct scientific observation, not a taxable information service.

Industrial and offshore operators buying forecasting/monitoring services

Your weather/severe-event forecasting subscription is likely not subject to Texas sales tax under this reasoning, regardless of whether it's delivered as generic reports or built around your specific facility locations.

Accountants and tax professionals

This ruling is the cleanest statement of the Rule 3.342(a)(5)(B) scientific-observation exclusion as applied to commercial weather-forecasting services, and it's useful as the CURRENT-law counterpart to the partially superseded 2019 marketing-research/forecasting ruling — cite this one, not the older superseded holding, for weather/scientific forecasting questions.

Common questions

Q: Is a weather forecasting service taxable as an "information service" in Texas?
A: Not if it's primarily derived from direct scientific observation of physical phenomena (meteorological data, whether self-observed or purchased from vendors) — Rule 3.342(a)(5)(B) excludes that kind of information from the taxable "information service" definition.

Q: Does it matter whether the provider gathers the underlying weather data itself or buys it from third parties?
A: Per this ruling, no — the exclusion applied even though the taxpayer used a mix of purchased third-party meteorological data and its own in-house meteorologists/models.

Q: Does this apply only to weather forecasts, or other scientific data services too?
A: The exclusion's text covers information from laboratory, medical, exploratory testing, or "any similar method of direct scientific observation of physical phenomena" — geophysical and seismic information (per this ruling's own subject title) can qualify on the same reasoning, not just meteorological data.

Q: Can I rely on this ruling for my own forecasting or scientific-data business?
A: Only if you're the taxpayer it was issued to. It binds the Comptroller solely as to that taxpayer's specific facts and can't be relied on by others, though it's a clear and current statement of the Comptroller's position on scientifically-derived forecasting information.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (Sales Tax Imposed)
• Tex. Tax Code § 151.010 (Taxable Item)
• Tex. Tax Code § 151.0038 (Information Service — definition)
• Tex. Tax Code § 151.0101(a)(10) (Taxable Services — information services)
• 34 Tex. Admin. Code § 3.342(a)(2) (Information Services — furnishing current information)
• 34 Tex. Admin. Code § 3.342(a)(5)(B) (Information Services — direct scientific observation exclusion)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202209005L

Original ruling text

September 6, 2022

RE: Private Letter Ruling No. PLR20210503122657

Dear **,

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated April 9, 2021 and additional information received on May 25, 2021. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of ** (Taxpayer’s) web-based, weather forecasting service (forecasting).

Facts Presented

Taxpayer provides forecasting to its clients. The forecasting may include location specific forecasts, advance notice and assessment of severe weather threats, severe weather alerts, hurricane forecasting, lightning proximity alerts, and on-demand telephone and email access to meteorologists.

Taxpayer’s forecasting is based on data and information from multiple sources. Taxpayer purchases third-party meteorological data. Taxpayer also employs its own meteorologists and creates in-house forecasting models. The data and models are used to develop the forecasts and provide the alerts included in its service.

Taxpayer’s clients access the service through Taxpayer’s web portal. The portal is programed and configured to meet the specific needs of each client. The portal maintains specific information on clients’ locations, alert parameters, and emergency procedures. Forecasts and alerts are developed and provided based on this information provided by clients.

Most of Taxpayer’s clients are located within the United States or its territorial waters. Taxpayer’s clients include retailers, refineries, tech firms, and oil rigs operating either in Texas or international waters.

Clients use Taxpayer’s services to make critical business decisions such as determining whether and when to perform shut-down or other emergency operations. For example, off- shore rigs need to know wind-speed and wave-heights at the exact location to determine whether a scheduled crew-change helicopter flight can take place.

Question, Ruling, and Analysis

Question: Is Taxpayer’s web-based, forecasting service subject to Texas sales and use tax?

Ruling: Taxpayer’s web-based, forecasting service is not taxable.

Analysis: Section 151.051 (Sales Tax Imposed) imposes tax on each sale of a taxable item in this state. Section 151.010 (Taxable Item) defines “taxable item” as tangible personal property and taxable services. Taxable services include information services. Section 151.0101(a)(10) (“Taxable Services”). “Information Service” is defined as “furnishing general or specialized news or other current information, including financial information.” Section 151.0038 (“Information Service”).

Rule 3.342(a)(2) further defines an information service as “[f]urnishing general or specialized news or other current information, including financial information, by printed, mimeographed, electronic, or electrical transmission, or by utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, or any other method now in existence or which may be devised, and electronic data retrieval or research.” Rule 3.342(a)(5) identifies certain services that are not taxable information services, including any sale of information primarily derived from laboratory, medical, or exploratory testing or experimentation or any similar method of direct scientific observation of physical phenomena is not subject to tax.

Taxpayer’s services are based on meteorological information purchased from third parties and from Taxpayer’s in-house meteorologists and forecasting models. The information provided through the service is primarily derived from direct scientific observation of physical phenomena. Taxpayer’s service falls under the description of services that are not taxable as information services under Rule 3.342(a)(5)(B) is not subject to Texas sales and use tax.

The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20210503122657.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1. Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.