Was a monthly apartment-locator package taxable when it included updated pricing information, a computer, laser disc, and software?

Plain-English summary

A provider supplied apartment locators with a computer, laser disc, software, and pricing information updated monthly, with more-current information available by phone. Customers returned the equipment and software when service ended and paid a flat monthly fee.

The Comptroller classified the entire charge as a taxable information service, with possible city, county, transit, or special-purpose-district taxes. Because care, custody, and control of the equipment and software passed to the customer, the provider could buy those items tax-free for resale.

STAR now displays an alert directing readers to Rule 3.285, amended November 1, 2017, for specific current guidance on care, custody, and control of tangible personal property used in a taxable service.

What this means for you

Bundling access to equipment with regularly updated apartment information did not avoid tax on the monthly service charge. The provider's purchase treatment depended on customer control of the property.

Common questions

Was the monthly fee taxable? Yes, in full.

Could local taxes apply? Yes.

Could the provider buy the computer and software for resale? Yes under the letter's care-custody-and-control facts.

Does STAR flag later guidance? Yes; it points to amended Rule 3.285.

Citations and references

• 34 Tex. Admin. Code Rule 3.285 — resale certificates and sales for resale; later-guidance alert shown by STAR

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1087G10

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale (amended 11/01/2017.

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 12, 1991

Dear ** :

Thank you for your recent letter concerning the taxability of your
client's services to be provided to apartment locators.

The situation, as I understand it from your letter and your tele-
phone conversation with Mary Clark of our office, is as follows:

Your client will provide the apartment locator with a
computer, laser disc, software, and pricing information,
The information will be updated each month. However, if
more current information is needed, the apartment locator
can call your client to obtain this. If the apartment
locator decides to stop the service, the equipment, soft-
ware, etc. is returned to your client. A flat fee per
month will be charged.

The service your client will be providing is taxable as an infor-
mation service. Tax must be collected and remitted on the entire
charge. Local taxes (city, county, transit, and/or special pur-
pose district) may also apply.

In lieu of paying tax at purchase, a taxable service provider may
issue a properly completed resale certificate to suppliers of tan-
gible personal property if care, custody, and control of the prop-
erty will be transferred to the customer. In your client's case,
the equipment and software may be purchased tax free.

Enclosed for your reference are several rules and bulletins that
are pertinent to your client's business. I've also included a
copy of a resale certificate form.

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

You may call me at 512/463-4697. You may also write to Tax Admin-
istration at the above address.

Sincerely,
Sandi Skaggs
Tax Administration Division