Is a child identification/registration service (videotape and photo registration in case a child goes missing) taxable under Texas sales/use tax?

Subject

Child Identification And Registration Services (Videotape, Photo, Blood Sample Storage And Retrieval) — Not Taxable, But Supplies Used Are

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9309175L

Plain-English Summary

A company asked the Comptroller whether Texas sales/use tax applies to its Videotape Registration Service and Photo Registration Service, both marketed to parents of children of all ages as a way to help locate a child who becomes lost, missing, or stolen.

Under the facts described in the letter, for $20 a parent receives a kit explaining how to produce a properly prepared videotape of their child, which the company then stores. If the child is reported lost, missing, or stolen within two years of the company receiving the videotape, the company distributes it through what the letter calls a "unique distribution network" — first to local and state law enforcement, then to neighboring states, and finally to the F.B.I. and law enforcement agencies in all fifty states, as well as to national missing-persons organizations and nationally syndicated and network television news programs.

For an additional $5, parents can also enroll in the Photo Registration Service, which provides two hundred posters bearing the child's picture and identifying statistics (height, weight, eye color, where last seen, clothing worn, etc.). The company also prints one hundred additional posters that accompany each videotape sent to law enforcement, media, and missing-persons organizations.

The Comptroller's response states plainly: the services described are not taxable. However, the letter draws a distinction for the company's own cost inputs — the supplies, materials, and equipment the company uses to provide the services are taxable.

What This Means For You

If you run a child-identification or safety-registration service: This letter indicates that a service consisting of producing, storing, and (if needed) distributing identification materials such as videotapes and photo posters of a registered child is not itself a taxable sale under this ruling's facts. You would not charge sales tax to parents on the $20 videotape registration fee or the $5 photo registration fee described here.

Watch your own purchases of supplies and equipment: Even though the service charged to the parent is not taxable, the letter specifically states that supplies, materials, and equipment the company uses to provide the service are taxable. That means the company should expect to pay sales/use tax on the items it buys to produce and distribute the videotapes and posters (e.g., blank tapes, poster paper, printing/duplicating equipment), rather than treating those purchases as tax-exempt because the end service is nontaxable.

Facts matter — this is a facts-specific letter. The letter itself cautions that it "is based on the facts presented" and that "different facts, though similar, may result in different answers." A business offering a similar but not identical service (for example, one that also sells a taxable tangible product to the customer as part of the package) should not assume this same nontaxable treatment automatically applies.

Q&A

Q: Is the $20 Videotape Registration Service taxable in Texas?
A: No. The letter states: "The services as described above that are offered by COMPANY are not taxable."

Q: Is the additional $5 Photo Registration Service taxable?
A: No — the letter's response covers "the services as described above," which includes both the Videotape Registration Service and the Photo Registration Service, and concludes they are not taxable.

Q: If the services themselves aren't taxable, does the company owe any sales/use tax at all?
A: Yes, on its inputs. The letter states: "Supplies, materials, and equipment used to provide the services are taxable."

Q: What triggers distribution of the videotape under this program?
A: Per the facts in the letter, if "the child registered with the service becomes lost, missing, or stolen within two years" of the company's receipt of the videotape, the company distributes it through its network to law enforcement, the F.B.I., missing-persons organizations, and media.

Q: Can another business rely on this exact letter for its own similar service?
A: The letter itself cautions that its conclusion "is based on the facts presented" and that "different facts, though similar, may result in different answers," so a business with different service details would need its own ruling.

Original ruling text

September 15, 1993

Dear **:

This is in response to your letter dated August 25, 1993, regarding sales/use
tax as it applies to the sale of the Videotape Registration Service and the
Photo Registration Service as provided by COMPANY.

FACTS: The services are marketed to parents of children of all ages. For $20,
they receive a kit that explains how to produce a properly prepared videotape
that is sent to and stored by COMPANY. In the event that the child registered
with the service becomes lost, missing, or stolen within two years of our
receipt of their- - videotape, we provide thorough coverage by our unique
distribution network. Videotapes are sent to local and state law enforcement
agencies, then to neighboring states, and finally to the F.B.I. and law
enforcement agencies in all fifty states. Videotapes are also provided to
several national missing persons organizations and a variety of nationally
syndicated and network television news programs.

For an additional $5, the parent can register their child with our Photo
Registration Service. This service provides the parents with two hundred
posters of their child including the child's picture, as well as statistics
such as height, weight, eye color, where last seen, clothing worn, etc. We also
print one hundred additional posters to be sent with each videotape sent out to
law enforcement agencies, media, and missing persons organizations.

RESPONSE: The services as described above that are offered by COMPANY are not
taxable. Supplies, materials, and equipment used to provide the services are
taxable.

This opinion is based on the facts presented. Different facts, though similar,
may result in different answers. If you have any questions or need more
information, please write or call me at 1-800-531-5441, extension 50330, or
512- 475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division