Is a website-analytics company's fee to install tracking JavaScript, plus its charges for processing user-behavior data and providing dashboard reports to detect bots and fraud, a nontaxable proprietary information service, or taxable software/data processing?

Plain-English summary

A company sells website-analytics services to online lenders, banks, payment processors, insurers, and e-commerce sites, designed to spot "friction" (anything that stops a user from completing an action) and to tell whether a user is a real person or a bot/fraudster. It works by installing a snippet of JavaScript on the customer's website that tracks user interactions (typing speed, hesitation, repeat clicks, and similar behavioral signals), then processes that data into a web-based "Dashboard" the customer can view. The company bills three separately stated charges: a one-time Onboarding Fee to install the JavaScript, a Monthly Proof-of-Value Fee based on data volume processed, and a Monthly Base Subscription Fee for dashboard access. The company argued all of this should be a nontaxable "proprietary information service" — reports specific to one client that aren't resold to others (like an opinion poll or a management consulting report). The Comptroller disagreed and found every piece of it taxable, just under different labels.

The Onboarding Fee is taxable as a sale of software. Installing JavaScript on a website is installing a computer program, and Texas treats a computer program as tangible personal property — its sale or license is taxed the same as any other software transaction, regardless of whether it's delivered as a file the customer downloads or as code installed directly onto the customer's own site.

The Proof-of-Value and Base Subscription Fees are taxable data processing, not exempt information services. The company collects the customer's own website-interaction data, processes and compiles it, and reports it back — which is squarely "data processing" (data retrieval, compiling records, entering/retrieving information) rather than an "information service." Texas's rules specifically say that reformatting or manipulating data a customer already provided is not an information service, even if what comes out the other end (the Dashboard reports) is proprietary and specific to that one client. The proprietary-information carve-out the company wanted only protects things like original research, opinion polls, or consulting analysis — not the processing of a client's own raw data into a usable report. Since these fees are data processing, they get the standard 20% exemption but are otherwise fully taxable.

What this means for you

Website analytics, fraud-detection, and behavioral-tracking companies

Don't assume "our reports are proprietary to each client" makes your service a nontaxable information service. Texas draws a sharp line: processing/reformatting a customer's own data (even into a highly customized, non-resalable report) is taxable data processing, while the nontaxable proprietary-information exception is reserved for services like original research or consulting where you're generating genuinely new information, not just manipulating data the client already gave you.

SaaS companies charging separate install/onboarding fees

A one-time fee to install tracking code, a script, or any other computer program onto a customer's website or systems is generally a taxable software transaction on its own — separate from whatever tax treatment applies to your ongoing service fees. Keep these charges correctly categorized on invoices, since they may be taxed under entirely different legal theories (software sale vs. data processing) even though customers experience them as one product.

Accountants and tax professionals

This ruling leans heavily on Comptroller's Decision No. 114,952 (2019), which held that gathering, reformatting, and compiling a customer's raw data into an accessible, usable report is data processing even when the report itself is a distinct proprietary product — a useful precedent for any client trying to claim the information-services exemption for what is really data manipulation of client-supplied inputs.

Common questions

Q: Why doesn't the "proprietary to one client" argument work here?
A: Because the proprietary-information exception under Rule 3.342(a)(5)(A) is meant for services like opinion polling or management consulting where the provider generates genuinely new information — not for processing and reformatting data the client already gave you, which Rule 3.342(a)(1) specifically excludes from the information-services category.

Q: Is the JavaScript install fee taxed the same way as the ongoing dashboard fees?
A: No — they're taxed under different legal categories. The onboarding/install fee is a taxable sale/license of a computer program (software), while the ongoing fees are taxable data processing services (which get a 20% exemption that software sales don't get).

Q: Does this ruling apply to other analytics, tracking, or behavioral-data services?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts. Similar services should evaluate their own fee structure (software installation vs. data processing vs. genuine information generation) with a Texas tax professional.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010, § 151.009 (sales tax imposition; taxable item; tangible personal property, incl. computer programs)
• Tex. Tax Code § 151.0101(a)(10), (12) (information services; data processing as taxable services)
• Tex. Tax Code § 151.0035(a)(1) (Data Processing Service); § 151.0038 (Information Service)
• Tex. Tax Code § 151.351 (20% data-processing exemption)
• 34 Tex. Admin. Code § 3.308(a)(1), (c)(1)(A) (computer program definition; sale/license as TPP)
• 34 Tex. Admin. Code § 3.330(a)(1) (Data Processing Services)
• 34 Tex. Admin. Code § 3.342(a)(1), (a)(2), (a)(5)(A) (data-processing exclusion from information services; proprietary-information exception)
• Comptroller's Decision No. 114,952 (2019)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202402023L

Original ruling text

February 16, 2024

RE: Private Letter Ruling No. PLR20221213085146

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 December 12, 2022. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether website analytics services are nontaxable information services under Section 151.0038 (Information Service) and Rule 3.342(a)(5)(A) (Information Services).

Facts Presented

** (Taxpayer), a Delaware corporation based in Montana, provides website analytic services to customers in the online lending, banking, payment processing, insurance, and ecommerce industries. To perform its services, Taxpayer collects and processes data to identify friction during a user’s experience of a customer’s website and to determine whether a user is a natural person or a bot. Friction is anything that keeps a user from accomplishing a desired action on a website.

To collect the necessary data, Taxpayer installs JavaScript on the customer’s website to track user interactions. The data collected does not come from any other source. Taxpayer uses its software to process and analyze the data and create a ** Dashboard (Dashboard) viewable by customers on a web-based portal. Customers do not have access to use Taxpayer’s software beyond accessing the ** Dashboard to view reports.

Taxpayer has three distinct service lines: ** Crowd Alert; ** Orchestrator (which includes ** Crowd Alert); and ** Attributes. All service lines require Taxpayer to install JavaScript on customers’ websites to collect data.

** Crowd Alert:

Provides customers with crowd-level insights and alerts via email for meaningful changes in crowd-level behavior attributable to increases in risky end user sessions. This service line simply processes the data from the customer’s website into a report that indicates whether an interaction is considered genuine, neutral, or risky.

** Orchestrator:

Provides customers with the necessary insights and tooling to evaluate whether users are accurately representing their identities based solely on user behavior interactions with a digital application. This service processes the customer data and indicates whether genuine or fraudulent activities have occurred. This service also includes the ** Crowd Alert service.

** Attributes:

A set of data collected which describes a website user’s behavior as part of an end user session. Some of the measurements include interaction time, hesitation, manipulation, automated entry, typing fluency, **, repeat interactions, and time to first answer. This service is useful in determining areas of a website that are difficult to navigate or subject to risky or fraudulent behavior.

The Dashboard is the report provided to customers regardless of the service they have. Customer data is compiled and analyzed into reports that provide feedback on the interactions with end users of the customer’s website. Dashboard reports are available for up to 90 days before being archived.

Taxpayer charges the following separately stated fees to its customers:

Onboarding Fee – A one-time fee to install JavaScript onto a customer’s websites, for the sole purpose of gathering information to analyze.

Monthly Proof-of-Value Fee – A fee based on the amount of end user sessions for which data was collected and processed. The fee includes on-demand usage charges for any end user sessions over a predetermined amount.

Monthly Base Subscription Fee – A charge to access the Dashboard and reports generated from customer data. This includes the Monthly Proof-of-Value Fee.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Do Taxpayer’s services fall within the definition of an information service under Section 151.0038? If so, do the services meet the definition of nontaxable information services under Rule 3.342(a)(5)(A)?

Ruling: No. The onboarding fee is taxable as the sale or license of software. Section 151.009. Additionally, the base subscription and proof-of-value fees are taxable as data processing, subject to the twenty percent exemption. Sections 151.0035 and 151.351. Processing, reformatting, or manipulating data provided by a customer is not considered an information service. Rule 3.342(a)(1).

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. Tangible personal property is personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner. Section 151.009 (Tangible Personal Property). Taxable services include information services and data processing services. Section 151.0101(a)(10), (12) (Taxable Services). An information service is defined as “furnishing general or specialized news or other current information, including financial information,” whereas data processing services include data entry, retrieval, search, and information compilation. See Sections 151.0035(a)(1), .0038.

Taxpayer’s services include three different service lines, but Taxpayer’s invoices to customers contain three separately stated charges: an Onboarding Fee; a Monthly Base Subscription Fee; and a Proof-of-Value Fee.

Onboarding Fee:

This one-time fee to install JavaScript onto customers’ websites is directly related to the installation of the JavaScript code onto customers’ websites to facilitate the desired reporting. JavaScript is a programming language used to create and control website content that moves, refreshes, or changes without reloading a web page. “What is JavaScript?,” May 4, 2022 www.https://developer.oracle.com/learn/technical-articles/what-is-javascript (Last visited February 16, 2024).

Section 151.009 provides that tangible personal property includes a computer program. A computer program is a series of instructions that are coded for acceptance or use by a computer system and that are designed to permit the computer system to process data and provide results and information. Rule 3.308(a)(1) (Computers--Hardware, Computer Programs, Services, and Sales).

Rule 3.308(c)(1)(A) provides that the sale, lease, or license of a computer program is a sale of tangible personal property. Tax is due when the computer program, or a license to use the computer program, is transferred for consideration in Texas, or stored, used, or consumed in Texas, in electronic form or on physical media.

Taxpayer’s agreement with customers includes General Terms and Conditions that state, “nothing in the Agreement shall be interpreted to require delivery of a copy of any software to you or installation of a copy of such software upon your computers or systems, other than the installation of the Code on your website.” (emphasis added). The terms and conditions go on to explain that “You further acknowledge that the license granted pursuant to the Agreement is not a sale and does not transfer to you title or ownership…” (emphasis added). Accordingly, the Onboarding Fee is a charge for a computer program and is subject to sales or use tax.

Monthly Proof-of-Value Fee:

This is a fee based on the amount of end user sessions for which “data was collected and processed.” The fee includes on-demand usage charges for any end user sessions over a predetermined amount.

Data processing is a taxable service in Texas. Section 151.0101(a)(10). It includes “data retrieval” and “data search.” Section 151.0035. Furthermore, the definition of “data processing” in Rule 3.330(a)(1) (Data Processing Services) includes, “[t]he processing of information for the purpose of compiling and producing records of transactions, maintaining information, and entering and retrieving information.”

Taxpayer explicitly states that they are collecting and processing data on behalf of its customers. This data is retrieved and compiled into records of transactions that Taxpayer reports in the Dashboard. These activities meet the definition of data processing and are subject to sales or use tax.

Monthly Base Subscription Fee:

According to Taxpayer’s statements, the Dashboard is, “a web-hosted platform upon which a customer can view reports from [the various service lines]. These reports contain proprietary data and are specific to each client. The data and reports are never made available to the public and are available for 90 days.”

A similar fact pattern is found in Comptroller’s Decision No. 114,952 (2019) where the taxpayer “gathered, reformatted, standardized, and aggregated the customer’s raw data into an accessible, usable format.” The administrative law judge (ALJ) determined that the evidence demonstrated that the taxpayer “provided a taxable data processing service when it compiled its customer’s data, manipulated the data, and provided the reports that contained the customer-specific information….” Comptroller’s Decision No. 114,952 (2019). The ALJ explained that "while the reports are a product separate from the underlying information, [the taxpayer’s] customers also wanted the underlying information to be compiled, maintained, and stored so the customer could retrieve and use the information as needed.” Comptroller’s Decision No. 114,952 (2019).

Taxpayer contends that each of its services are nontaxable proprietary information services. Rule 3.342(a)(2) defines information services 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.” But Rule 3.342(a)(5)(A) states that sale of information that is gathered or compiled on behalf of a particular client is not subject to tax if the information is of a proprietary nature to that client and may not be sold to others by the person who gathered or compiled the information. Examples include opinion polls and management consultant reports.

None of Taxpayer’s charges are for “furnishing general or specialized news or other current information, including financial information…” See Rule 3.342(a)(2). The reformatting and manipulation of client-provided data is data processing and not an information service. Rule 3.342(a)(1). In addition to including the taxable data processing services that comprise the Proof-of-Value Fee, customers desire to have the underlying information that comprise the report. And because the monthly base subscription charges include the manipulation, storage, and compilation of data, these charges are taxable data processing services and cannot be considered a proprietary information service. See Comptroller’s Decision No. 114,952 (2019), Rule 3.342(a)(5)(A).

It is important to note that under Section 151.351 (Information Services and Data Processing Services) there is a twenty percent exemption that applies for taxable data processing services.

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. 20221213085146.

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.