Is a Texas company's 1-800 toll-free telephone service subject to Texas state sales tax on calls that originate outside Texas but are billed to a Texas address?

Plain-English summary

A company (called "Company A" in the letter) sold 1-800 toll-free telecommunication service to business subscribers located and billed in Texas. Callers could dial the 1-800 number from anywhere in the continental United States to reach the subscriber's place of business, and Company A billed the subscriber for all of the calls based on time used.

The taxpayer asked the Comptroller to confirm two things, and the Comptroller agreed with both:

1. Calls that originate within Texas and are billed to a Texas billing address are subject to Texas state sales tax.
2. Calls that originate outside Texas but are billed to a Texas billing address are not subject to Texas state sales tax. What controls is the originating number — where the call is physically placed from — not the business or billing location of the 1-800 subscriber.

The letter also confirms a related point about the Public Utility Commission (PUC) Gross Receipts Tax: only the intrastate portion of the 1-800 service (calls originating in Texas) is subject to that tax; the interstate portion (calls originating outside Texas) is not.

What this means for you

Telecom and toll-free service providers

If you bill Texas customers for 1-800/toll-free service, this letter says the taxable event turns on where each call originates, not where the subscriber's business or billing address sits. A subscriber's Texas billing address does not, by itself, make an out-of-state-originated call taxable. In practice this means providers need to track call-origination data (or a similar allocation method) to separate the taxable intrastate calls from the non-taxable interstate calls, both for state sales tax and for the PUC Gross Receipts Tax.

Business subscribers of 1-800 services

If your company is the subscriber (not the provider) and your vendor bills you a single toll-free service charge, this ruling suggests that charge is not automatically taxable in full just because your business and billing address are in Texas — the calls that came from outside Texas should not carry the state sales tax, and only the Texas-originated call traffic should.

Accountants and tax professionals

This is a short, fact-specific 1993 letter with no statute or rule citations in the text itself. It simply confirms the taxpayer's own stated facts and legal conclusions ("You are correct") rather than laying out independent analysis. Treat it as evidence of how the Comptroller's office answered this one company's specific fact pattern, not as a freestanding statement of current law — and note that STAR documents this old can be superseded by later guidance even without a "superseded" flag.

Common questions

Q: Does a Texas billing address make all 1-800 call charges taxable for Texas sales tax?
A: No. Per this letter, only the calls that actually originate within Texas are taxable; calls originating outside Texas are not, even though they're billed to a Texas address.

Q: What determines whether a call is taxable — where the call is billed, or where it's placed from?
A: Where it's placed from. The letter states: "The originating number is the location where the call is placed from and not the business location of the 1-800 number," and confirms this is the correct basis for sales tax.

Q: Does the Public Utility Commission Gross Receipts Tax apply the same way?
A: Yes, on the facts in this letter. Only the intrastate portion of the 1-800 service (Texas-originated calls) is subject to the PUC Gross Receipts Tax; interstate calls originating outside Texas are not.

Q: Can I rely on this letter for my own toll-free billing setup?
A: Only if your facts genuinely match. This letter can be used as the basis for a detrimental-reliance claim only by the taxpayer it was issued to, and it's now over 30 years old — current Comptroller policy may have evolved. Ask a licensed Texas tax professional or request your own ruling if you need certainty.

Citations and references

No statutes or rules are cited in the body of this letter; the Comptroller answered by directly confirming the taxpayer's own stated facts and conclusions.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9304L1234G06

Original ruling text

April 16, 1993

Dear *****:

Thank you for your recent letter which is restated in part with responses
below. Facts: Company A provides 1-800 telecommunication services to business
(Subscribers) within Texas. The business location and billing address is in
Texas. The 1-800 telecommunication services allow callers to telephone or call
from anywhere within the continental U. S. to the Subscribers place of
business. The cost of all calls are billed to the Subscriber by Company A at a
rate based on the amount of time used.

Please confirm the following. The calls, (1-800 telecommunications)
which originate within Texas and are billed to the Subscriber's billing address
within Texas are subject to Texas state sales tax. Calls (1-800
telecommunications), which originate outside Texas and are billed to the
Subscriber's billing address within Texas, are not subject to Texas state sales
tax. The originating number is the location where the call is placed from and
not the business location of the 1-800 number.

Response: You are correct. The intrastate portion of the 1-800 service
will be the only part of the 1-800 charges subject to the Public Utility
Commission Gross Receipts Tax, the interstate calls (that originate outside of
Texas) will not be subject to the Public Utility Commission Gross Receipts Tax.

Response: You are correct.

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

If you have questions or need more information, please call or write. You
may reach me by calling toll free (800) 531-5441 (ext. 34680). My direct
line number is (512) 463-4680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 93050107.L03