A commercial vehicle monitoring service places decals with an 800 number on trucking/shipping company vehicles so other drivers can call in complaints about how the vehicle is being driven; the service forwards the complaint reports back to the vehicle-owning company. Is this service taxable as an information service?

Plain-English summary

A company (referred to here by its service name, "Safetynet," per the STAR subject heading) provides commercial vehicle monitoring for trucking and shipping firms so they can improve driver safety. Client companies place decals bearing the service's 800 number on their vehicles, inviting other motorists to call in and report on how the vehicle is being driven. The service answers the calls — routed through a permanent call-forward to a third-party answering service, "A Better Answer," to which it pays sales tax — using a prepared list of questions. The answering service's operators write down callers' answers and fax them back, and the vehicle-monitoring company forwards that report to its client company, keeping all responses confidential by agreement.

This letter withdraws two earlier Comptroller opinion letters (from March 4, 1992 and June 9, 1992) that had addressed the taxability of this same service — the Comptroller states the service "has been difficult to pigeonhole." Having gotten the fuller factual picture, the Comptroller concluded the service is not taxable because it meets the definition of a proprietary information service under Rule 3.342(d)(1): soliciting callers to register complaints and passing their opinions on to the client is treated as akin to an opinion poll, which is excluded from tax as a proprietary information service.

What this means for you

Vehicle monitoring / "how's my driving" service operators

If your service's core function is soliciting third-party opinions or complaints (here, about a vehicle's driving) and relaying that feedback confidentially to your client, you may be able to qualify as a nontaxable proprietary information service rather than a taxable information service — even if you use an outside answering service to actually field the calls.

Businesses that already paid tax to a subcontracted answering service

Note that in this case the vehicle-monitoring company was itself paying sales tax to its third-party answering service ("A Better Answer") for the call-answering work, while its own service to its end customers was ruled nontaxable. Being a customer of a taxable service doesn't automatically make what you sell to your own customers taxable too.

Accountants and tax professionals advising on close-call service classifications

This letter is a useful example of the Comptroller reversing itself after getting more complete facts about how a service actually operates. It underscores that the proprietary/opinion-poll exclusion in Rule 3.342(d)(1) can apply even to services that aren't a classic survey company, if the substance is soliciting and relaying complaints/opinions to a single client on a confidential basis.

Common questions

Is this motor vehicle monitoring/complaint service subject to Texas sales tax?

No. The Comptroller ruled it is not taxable because it meets the definition of a proprietary information service under Rule 3.342(d)(1).

Why did the Comptroller issue this letter?

To withdraw two earlier opinion letters (dated March 4, 1992 and June 9, 1992) that had addressed the taxability of the same service; the Comptroller said the service had been difficult to classify.

Why is this treated like an "opinion poll"?

Because the service solicits callers (other motorists) to register complaints about how a vehicle is being driven, and then passes those opinions on to its client company — which the Comptroller equated to an opinion poll, a type of activity excluded from tax as a proprietary information service.

Does using a third-party answering service change the analysis?

No. The letter notes the company's phone is on permanent call-forward to "A Better Answer," which fields the calls using the company's prepared questions and faxes the answers back — the company still pays sales tax to that answering service, but its own service to its trucking/shipping clients was ruled not taxable.

Can another business rely on this exact letter for its own similar service?

No. The letter states the opinion is based on the facts presented and that different, though similar, facts might lead to a different answer. Only the taxpayer this letter was issued to may rely on it, and even then only for materially the same facts.

Citations and references

The letter references 34 Tex. Admin. Code § 3.342(d)(1) (described in the letter as the "enclosed Rule 3.342(d)(1)"), regarding the definition of a proprietary information service. No other statutes or rule numbers were cited in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207L1190B09

Original ruling text

July 17, 1992

Dear **:

I am writing to withdraw our opinion letters of March 4, 1992 and June 9, 1992,
regarding the taxability of your service. I apologize for any confusion on our
part, but your service has been difficult to pigeonhole. In your letter of
January 22, you described your service as follows:

** is a service business providing commercial vehicle monitoring for
trucking and shipping firms in order to improve their safety. Companies place
decals with our telephone number on their vehicles. **** is
responsible for answering the phone and providing a report to the particular
company regarding the driving of their vehicles.

You have since told me that your telephone is on permanent call-forward to a
third-party answering service ("A Better Answer"), to whom you have been paying
sales tax. You provided the answering service with a list of questions to ask
all callers. The operators write down the answers and FAX them to you. In
turn, you forward the response to your customer. By agreement, all responses
remain confidential.

Your service is not taxable because it meets the definition of a proprietary
information service in enclosed Rule 3.342(d)(1). Essentially, you solicit
callers to register their complaints, and you pass their opinions on to your
client. This is akin to an opinion poll, which is excluded from tax as a
proprietary information service.

This opinion is based on the facts presented. Different facts, though similar,
might lead to different answers. If you have further questions, feel free to
write or call me at 1-800-252-5555, ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration Division