Were teleconferencing charges and the related long-distance charges taxable, and could the provider buy long-distance service for resale?

Plain-English summary

The provider connected participants around the country into conference calls using its own hardware and software plus long-distance service bought from telecommunications carriers.

The Comptroller classified the conference service as taxable telecommunications under Rule 3.344(a)(6). The provider's total customer charge was taxable, including the long-distance carrier charge, when the two conditions in Rule 3.344(b)(4) were met.

The provider could issue a resale certificate to its long-distance carrier if it made no personal use of the purchased long-distance service. The source does not reproduce the two subsection (b)(4) conditions, so this page does not invent them.

Common questions

Was the conferencing or bridging charge taxable? Yes.

Could the long-distance component also be taxed? Yes, when the cited rule's conditions were met.

Could the provider buy long-distance service for resale? Yes, if it made no personal use of that service.

Citations and references

• 34 Tex. Admin. Code Rule 3.344(a)(6) and (b)(4) (Telecommunications Services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L0978E02

Original ruling text

February 1, 1990

Dear **:

Thank you for your letter of January 12, 1990, concerning the tax
responsibilities of your client who provides telephone conferencing services
(teleconferencing services).

The receipts from the sales of the teleconferencing services are taxable. Your
client is providing telecommunications services as that term is defined under
section (a)(6) of the enclosed Rule 3.344 (Telecommunications Services).

The total amount charged by your client to provide the teleconferencing
services is taxable, including the charge made by any long-distance
telecommunications carrier, if the service meets both conditions set out in
section (b)(4) of the rule. If this is the case, your client may issue a
resale certificate to the long distance telecommunications carrier if your
client does not make any personal use(s) of the long-distance
telecommunications services purchased from the provider.

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, you may call toll-free
1-800-242-5555, ext. 3-4683. The regular number is 512/ 463-4600. You may
write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Correspondence

JANUARY 12, 1990

Mr. Bob Bullock
Comptroller of Public Accounts
Capitol Station
Austin, TX 78774

Dear Mr. Bullock:

This letter is to request your advice on whether the following services are
subject to either your state's sales or use tax or utility taxes.

Our client is in the business of providing telephone conferencing services. The
teleconferencing service allows people in various parts of the country to take
part in a telephone conference call. This service is accomplished primarily
via proprietary software and hardware which our client has developed.

A typical conference transaction works as follows. A customer will call one of
our client's operators who obtains the necessary information for the call
including the number of parties to be included in the call, their names,
telephone numbers, etc. At the time selected for the conference, the operator
calls each of the parties and connects them to the conference call. Another
option allows conferees to call a central number and be connected to the
conference call automatically.

Our client is not a regulated telephone company nor does it own any telephone
facilities. In order to provide the conferencing service, our client purchases
long distance telephone service from the long distance telecommunication
services provider such as ** or **.

Customers are billed by our client for two items.

1) A conferencing charge for the services needed to put together and manage the
conference calls, and

2) A charge for the long distance phone service which was purchased from the
telecommunications provider.

Question:

Are the receipts from either the conferencing service or the resale of the long
distance phone service taxable under your states sales or use tax statutes or
any other utility tax statutes (assuming our client has nexus in your state)?

Thank you for your assistance. If additional information regarding this
request is needed, please call or fax me at the above numbers.

Very truly yours,

Vice President
Research and Consulting Services