Is electronic mail (e-mail) service taxable under Texas sales tax?

Subject

Electronic Mail (E-Mail) Services Taxable as Telecommunications

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310L1263E04

Plain-English Summary

A taxpayer wrote to the Comptroller asking about the taxability of Electronic Mail. The response is short and direct: electronic mail is a telecommunications service and has been subject to Texas sales tax since 1985. The letter further explains that interstate telecommunications services that originate in Texas have been subject to sales tax since October 1, 1987.

The letter also points out that this kind of tax is not unique to Texas — "Many states impose such a tax" — and notes that a similar telecommunications tax statute in Illinois was challenged all the way to the U.S. Supreme Court and was upheld in Goldberg, et al. v. Sweet, 1989.

The letter is signed by Al Van Allen of the Tax Administration Division, and includes a note referencing a previous accession number (9308139L.2 and/or 9308139L), indicating this ruling restates or follows up on an earlier letter addressing the same question.

What This Means For You

If you provide e-mail or similar messaging services in Texas: This letter treats electronic mail as a taxable telecommunications service, not as an exempt data-processing or information service. Sales tax exposure under this letter's reasoning would apply to e-mail service charges just as it applies to other telecommunications services.

If your e-mail service crosses state lines: The letter specifically flags interstate telecommunications services that originate in Texas as taxable since October 1, 1987 — so an interstate element does not, by itself, take the service out of the Texas tax base under this letter.

If you're weighing whether a state telecommunications tax is even permissible: The letter cites Goldberg, et al. v. Sweet (1989) as Supreme Court precedent upholding a state's telecommunications tax (in that case, Illinois's), which the letter offers as support that such taxes generally withstand legal challenge.

Q&A

Q: Is electronic mail (e-mail) taxable in Texas?
A: Yes. The letter states that "Electronic mail is a Telecommunications service and has been subject to sales tax since 1985."

Q: Since when has e-mail been subject to Texas sales tax?
A: The letter says electronic mail, as a telecommunications service, has been taxable since 1985.

Q: Does it matter if the e-mail service is interstate?
A: The letter notes that "Interstate telecommunications services that originate in Texas have been subject to sales tax since October 1, 1987," indicating interstate origination in Texas does not exempt the service.

Q: Is Texas alone in taxing telecommunications services like e-mail?
A: No — the letter states "Many states impose such a tax," and mentions Illinois's statute as an example.

Q: Was a state telecommunications tax like this ever challenged in court?
A: Yes, per the letter, the Illinois statute "was challenged to the U.S. Supreme Court and upheld in Goldberg, et al. v Sweet, 1989."

Original ruling text

October 12, 1993

Dear *****:

Thank you for your recent letter regarding the taxability of
Electronic Mail.

Electronic mail is a Telecommunications service and has been subject
to sales tax since 1985. Interstate telecommunications services that
originate in Texas have been subject to sales tax since October 1,
1987.

Many states impose such a tax. The Illinois statute was challenged to
the U.S. Supreme Court and upheld in Goldberg, et al. v Sweet, 1989.

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 9308139L.2 and/or 9308139L