How did a Texas electronic tax-filing provider tax customers and buy the underlying data transmission?

Plain-English summary

The Comptroller treated electronic tax-return filing as a telecommunications service. The filing provider's customers were the ultimate consumers, while the provider's purchases of data transmission were purchases for resale.

The provider could give its transmission firm a resale certificate. It did not charge Texas tax to non-Texas customers, but it had to charge state and local tax to Texas customers.

For the described Texas sales, local telecommunications tax was based on the location of the provider's sales office.

What this means for you

This letter addresses both sides of the transaction: the provider's upstream transmission purchase and its downstream filing sale. It is more specific on resale and local sourcing than the companion electronic-filing letter issued the same day.

Common questions

Was electronic filing treated as telecommunications? Yes.

Could the provider buy transmission tax-free for resale? Yes, with a resale certificate.

Were non-Texas customers charged Texas tax? No.

Were Texas customers charged tax? Yes, state and local.

Where was local tax sourced? To the provider's sales-office location under the described facts.

Citations and references

• Tex. Tax Code § 151.323 (long-distance 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/9011L1059D08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller November 29, 1990

Dear *:

Thank you for your question on the taxability of electronic tax
filings. We treat these as telecommunications services for sales
tax purposes.

The Texas Tax Code Sec. 151.323 exempts the sale of "long-distance
telecommunications services that are not both originated from and
billed to a telephone number or billing or service address within
Texas."

We will consider the sales you make to your customers as sales to
the "ultimate consumer" and the purchases of telecommunications
transmissions you make as purchases for resale.

That means:

• you may give the firm that transmits the return data for
  you a resale certificate in lieu of tax,
• you will not be required to charge Texas tax to non Texas
  customers, but
• you must charge both state and local tax to Texas customers.
  In this case, local telecommunications tax should be collected
  based on the location of your sales office.

This opinion is based on the facts you presented. Other facts, though
similar, may yield different results.

If you have questions or need more information, please call our toll-
free number 1-800-531-5441. My direct line number is 463-4660 [FAX
(512) 475-0900]. You may write to me in care of Taxability Section.

Sincerely,
Al Van Allen
Taxability Section
Legal services Division