Could a cellular provider buy a flat-fee call-forwarding roaming feature tax-free for resale when it bundled the feature into taxable service?

Plain-English summary

A cellular provider charged customers a flat monthly rate plus a per-minute charge, both subject to Texas sales tax. It also bought a "Follow Me Roaming" call-forwarding feature from COMPANY X for a flat monthly fee based on customer count and included that feature without a separate customer charge.

The Comptroller said the provider could issue COMPANY X a resale certificate because the feature was supplied as part of the telecommunications service sold to each customer.

What this means for you

A telecom input did not need its own separately stated customer charge to qualify for resale under these facts. Its inclusion in the taxable cellular service was enough.

Common questions

What did Follow Me Roaming do? It allowed customers to be contacted outside their home market or area.

How did the supplier charge the cellular provider? A flat monthly amount based on the provider's number of customers.

Did the provider separately pass the fee to customers? No.

Could it still issue a resale certificate? Yes.

Citations and references

• The letter did not cite a numbered statute, regulation, or case.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1113D10

Original ruling text

May 20, 1991

Dear **:

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

Facts: We are in the business of providing cellular telephone
service for which we charge our customers a flat monthly rate
plus a charge for each minute of time their cellular phone is in
operation. Both of these charges are subject to Texas sales tax.
One of the features of our service is a call forwarding feature
called "Follow Me Roaming". This feature enables a customer to
be contacted even though they are outside their home market or
area. This feature is provided by COMPANY X which charges us a
flat monthly fee based on our number of customers and not upon
how much the feature is used. Since we are charged a flat monthly
rate to enable our customers to use this feature, we do not pass
this charge directly through to the customer as a separate charge.

Question: Please give us some guidance as to whether or not we
would be qualified as a reseller of this service?

Response: Because the service is provided as part of the
telecommunications service sold to each customer, you may issue
your supplier a resale certificate in lieu of tax.

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

If you have any questions or need more information, please call our
toll-free number 1-800-531-5441. My direct line number is 512-
463-4680 [FAX (512) 475-0900]. You may write to me in care of
Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division