Were a minimum-usage shortfall charge and a separate service-line charge in a mixed interstate and intrastate long-distance plan taxable in Texas?

Plain-English summary

The Texas Comptroller said the extra amount charged when actual long-distance usage fell below the plan minimum was taxable. In the example, a customer with $250 of usage under a $300 minimum paid an additional taxable $50.

The separate service-line charge was also taxable. The plan included both interstate and intrastate telecommunications within the minimum fee.

What this means for you

The charge did not become nontaxable merely because it represented unused minimum capacity rather than an additional call. The separate line charge also remained in the tax base under the described plan.

Common questions

Was the minimum-charge shortfall taxable? Yes.

Was the service-line charge taxable? Yes.

Did the plan include interstate and intrastate service? Yes.

Citations and references

• The letter cited no numbered statute or Comptroller rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8611L0783E02

Original ruling text

November 19, 1986

Dear ***:

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

Situation:
I would like a ruling on the taxability of certain new services our
company plans to offer. CORP A provides long distance telecommunications
service to our customers and in one of our new service offerings there will
be imposed a minimum charge. For example, if there is a minimum charge of $300
and actual usage is $250 the customer will be billed an additional $50 to
reach the minimum. Is the $50 additional charge taxable? Is the service line
charge taxable? The line charge is in addition to the actual long distance
telecommunications usage.

Response:
In our recent phone conversation you said that your service would include
both intrastate and interstate telecommunications for the $300 fee. It a
customer used only $250 worth of service, the additional $50 fee would be
taxable. The service line charge would also be taxable.

This opinion is based upon the facts you presented. If there are additional
or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,

Tax Policy Section
Tax Administration Division