Were human telephone-answering and voice-mailbox services taxable, when did the 6% state rate begin, and how did prior-contract relief work?

Plain-English summary

Voice-mailbox retrieval systems were taxable telecommunications services and had been taxable since October 1, 1985. The Comptroller had not yet decided whether traditional human telephone-answering services were taxable information services; it promised to send the rule when developed.

The new 6% state rate took effect October 1, 1987, while the temporary earlier increase continued through September 30. If traditional answering was ultimately classified as an information service, the letter said it would become taxable October 1, 1987.

A qualifying written contract of specific duration under Rule 3.319 could preserve exemption until the contract ended or changed, or January 1, 1990, whichever came first. A month-to-month contract lost relief on its first renewal after the law's effective date.

What this means for you

The historical letter gave a final answer for voice mailboxes but not for human answering services. It also made written terms and renewal timing decisive for temporary prior-contract relief.

Common questions

Were voice-mailbox retrieval systems taxable? Yes, as telecommunications services.

Did the letter decide the taxability of human answering services? No.

When did the 6% state rate begin? October 1, 1987.

What did a qualifying prior contract require? A writing for a specific duration meeting Rule 3.319.

What happened to a monthly renewable contract? The service became taxable at the first renewal after the effective date.

Citations and references

• Texas Comptroller Rule 3.319, prior-contract requirements referenced by the letter

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8709L0829F05

Original ruling text

September 11, 1987

Dear ****:

Thank you for your letter of August 28, 1987, concerning the recent tax
revisions.

I have restated your questions below:

1. Are traditional telephone answering services (i.e. those provided by
   human beings) now taxable under the recently added category of "information
   services" or under any other provision of the Tax Code?

We are still looking at the definition of information service. I'll send
you a copy of the rule when it is developed.

2. Are telephone answering services in the form of voice mailboxes
   taxable as "data processing services", "information services", or any other
   provision of the Tax Code?

Voice mailbox retrieval systems are taxable as telecommunications
services.

3. When will the new tax increase from 5.25% to 6.00% take effect?

The new state tax rate takes effect October 1, 1987.

4. Will the temporary tax rate increase which was instituted at the
   beginning of this year continue in effect until September 30, 1987?

Yes, the temporary tax rate increase was extended to September 30, 1987.

5. If telephone answering services, either traditional or voice
   retrieval systems, are deemed taxable, on what date will they become taxable?

Voice mailbox retrieval systems have been taxable since October 1, 1985.
If the traditional answering service is an information service, it will be
taxable October 1, 1987.

6. The statute provides for an exemption from the tax increase if the
   services are being provided pursuant to a contract entered into on or before
   July 21, 1987, and if the contract is not subject to change or modification by
   reason of the tax rate increase. Does this provision mean that services
   provided under such a contract are also exempt from any tax if the services
   were not taxable services prior to the new legislation?

Yes, if the contract qualifies under the enclosed Rule 3.319, Prior
Contracts, the service will be exempt until the end of the contract, the
contract changes, or January 1, 1990, which ever comes first.

If the telephone answering service entered into a contract that is
renewable each month, would this exemption apply?

The service would become taxable upon first renewal after the effective
date of the law.

Also, does this contract need to be a written contract or a contract of
any specific duration?

Yes, the contract must be in writing and for a specific duration (See the
guidelines provided in Rule 3.319).

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,

Adina Whittemore
Tax Policy Division