Were confidential paleontologic and geologic analyses and studies taxable Texas information services?

Plain-English summary

The company analyzed customers' well-rock samples and prepared confidential paleontologic reports for each contracting company's exclusive use. It also performed long-term paleontologic and geological studies funded by one company or a subscribing group, and sold completed copyrighted studies subject to exclusive-use and no-resale restrictions.

The Comptroller classified all three described functions as an information service but said the charges were not taxable under Rule 3.342(d)(2).

What this means for you

The historical result depended on the facts presented, especially confidentiality and exclusive use. The letter did not say that every geological report or subscription product was exempt regardless of how broadly it was sold or reused.

Common questions

Were customer-specific rock-sample analyses taxable? No, on the exclusive-use facts described.

What about jointly funded long-term studies? The letter included them in its nontaxable answer when they were for the subscribers' exclusive use.

What about completed copyrighted studies? They were included when sold for the buyer's exclusive use and could not be traded or resold.

Citations and references

• 34 Tex. Admin. Code Rule 3.342(d)(2) — historical information-service provision applied 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/8802L0892C09

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN 78774

February 23, 1988

Dear ***:

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

I am writing to request a ruling on whether any service of CORP A
is subject to sales tax. In your response please quote the section
of the law which applies to us and if possible send a copy of that law.

The following is a full description of the services we provide:

1. We perform paleontologic examination and interpretations of a
   company's rock samples for that company's exclusive use. Such work
   may be performed in the office of CORP A or in the office of a sub-
   contracted paleontologist or geologist or on the property of the
   contracting company. Rock samples from drilled wells are supplied
   by the contracting company for CORP A to perform a paleontologic
   analysis. The data developed is presented to the contracting com-
   pany in report from. Such work is performed with a high degree of
   confidentiality.

2. On occasion a company, or group of companies, will contract or
   subscribe to provide funds for a long term paleontologic/geologic
   study for their exclusive use.

3. Also, on occasion, CORP A may complete and provide paleontologic/
   geologic studies for sale to petroleum companies on the basis that
   these studies are for their exclusive use and may not be traded or
   sold by them. The studies will remain the property of CORP A as copy-
   righted material.

Response: The functions you are performing constitute an information
service. I am enclosing Rule 3.342 for your reference. Section (d)(2)
of the rule is applicable in this case. Therefore, your charges are
not taxable.

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 our toll-
free number 1-800-531-5441. The regular number is 512/463-4600. You may
write me at the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division