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Ezel / Tax Rulings / TX
TX 8812L0912G08 Sales and/or Use Tax (State,Local,MTA) 1988-12-06

Was an out-of-state computer service that processed Texas-prepared tax-return data subject to Texas use tax?

Short answer: Yes. Texas classified the host-computer work as data processing and said the per-return service fee was subject to Texas use tax.

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This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A tax preparer's staff keyed federal-return data in Texas and transmitted it to a host computer in California. The host computed the return and sent the results back electronically for printing in the Texas office.

The Comptroller classified the vendor's work as data processing and said its per-return fee was subject to Texas use tax.

Common questions

Did the out-of-state computer location avoid Texas tax? No.

What service did Texas identify? Data processing.

What charge was taxable? The fee charged for each processed return.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 6, 1988

Dear ***:

Thank you for your recent letter to Mr. Cherry. I have been asked
to reply. Your facts are restated in part with response below.

Facts:
"In connection with the preparation of federal income tax returns,
I use a computer service, ***, Inc., which charges me a
fee for each return submitted. Information for a return is
keypunched by my staff in my office. The data is transmitted by
telephone lines to the host computer owned-by ***** and located
in California. The return information is computed, and the
results are transmitted by telephone to a computer in my office.
The return is then printed in my office."

Response:

*** is performing a data processing service. Their fee
is subject to Texas Use Tax.

Please feel free to call or write me any time. You may call toll
free, 800-531-5441.

Sincerely,
Al Van Allen
Taxability Section
Legal Services Division

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