For a Dallas-based mobile radio repeater service whose customers are located throughout the Dallas area and suburbs, should local sales tax be charged at the Dallas rate or at the various suburban rates based on each customer's location?

Plain-English summary

This letter responds to a Dallas-area mobile radio repeater service ("Company A") that asked the Texas Comptroller's Tax Policy Division how to source local sales tax on its services. All of the company's repeaters are located at a single site in Dallas, Texas, but its customers — who use two-way radios that transmit a signal into the repeaters, which then amplify and rebroadcast the signal — are located throughout the Dallas area, including suburbs like Plano, Mesquite, Richardson, and Colleyville. The company had been charging the Dallas local tax rate (8.25%) on all its bills and asked whether it should instead bill each customer at their own suburban jurisdiction's rate.

The Comptroller confirmed the company was doing it correctly: local taxes on mobile radio repeater services are sourced to the location of the telecommunications device — the repeater — that originates the amplified signal for transmission, not to the customer's location. Because all of the company's repeaters sit in Dallas, it should continue collecting 6.25% state sales tax, 1% Dallas city sales tax, and 1% Dallas MTA (metropolitan transit authority) sales tax, for a combined 8.25% rate, on all of its repeater services — regardless of where any individual customer's office or radio is located. The letter points to Comptroller Rule 3.374(i) (city sales tax on telecommunications services) and Rule 3.424(i) (MTA sales tax on telecommunications services) as governing this sourcing rule.

What this means for you

Mobile radio repeater or similar telecommunications service providers

If you operate repeater equipment or similar telecommunications infrastructure in Texas, local sales tax on your services is sourced to where your transmitting equipment is located — not to where your individual customers are billed or based. You don't need to track each customer's city/suburb and apply a patchwork of local rates; you apply the local tax rate(s) for the jurisdiction where the originating device sits.

Businesses with customers spread across multiple local tax jurisdictions

Even though your customer base may span many cities and suburbs with different combined local tax rates, that doesn't change your collection obligation if the taxable event is sourced to your equipment's location rather than the customer's. Confirm which sourcing rule applies to your specific service type, since sourcing rules can differ by service (e.g., Rule 3.374 for city tax vs. other rules for other local taxing entities).

Accountants and tax professionals advising telecom-adjacent businesses

When reviewing a client's local tax collection practices for telecommunications-type services, check where the "originating" device or equipment is located under the applicable Comptroller rule (here, Rules 3.374(i) and 3.424(i)) rather than assuming a customer-address-based sourcing method that may apply to other types of transactions.

Common questions

Q: Should local sales tax on mobile radio repeater service be based on the repeater's location or the customer's location?
A: The repeater's location. Local tax is sourced to the location of the telecommunications device that originates the amplified signal for transmission.

Q: What tax rate applies if all of a company's repeaters are located in Dallas, even though customers are in Dallas suburbs like Plano or Richardson?
A: The Dallas rate applies to all repeater services: 6.25% state sales tax, 1% Dallas city sales tax, and 1% Dallas MTA sales tax, for a total of 8.25%.

Q: What rules govern local tax sourcing for this type of telecommunications service?
A: Rule 3.374(i) addresses city sales tax on telecommunications services, and Rule 3.424(i) addresses MTA sales tax on telecommunications services.

Citations and references

Regulations:

• 34 Tex. Admin. Code Rule 3.374(i) (city sales tax on telecommunications services)
• 34 Tex. Admin. Code Rule 3.424(i) (MTA sales tax on telecommunications services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9505L1349G04

Original ruling text

May 24,1995

Dear **:

Thank you for your May 11, 1995, letter concerning local tax on
mobile radio repeater services.

Situation: Company A is a mobile radio repeater service. All your
repeaters are located at ** in Dallas, Texas. Your
customers are located throughout the Dallas area including many
suburbs (i.e., Plano, Mesquite, Richardson, Colleyville, etc.). As
customers use their two-way radios, they transmit a signal into your
repeaters. The repeater then amplifies the signal and sends it back
out to other radios so they can communicate with each other.

Question: Since your repeaters are located in Dallas, you have been
charging the Dallas tax rate (8.25%) on your monthly bills. Should
you continue to bill the Dallas tax rate or bill the various suburban
rates to customers based on their office location?

Response: Local taxes on mobile radio repeater services are collected based
on the location of your telecommunications device (i.e., repeater) that
originates the amplified signal for transmission. Collect 6.25% state sales
tax, 1% Dallas city sales tax, and 1% Dallas MTA sales tax on your repeater
services (8.25%). Rule 3.374(i) has information regarding city sales tax on
telecommunications services and enclosed Rule 3.424(i) has information on MTA
sales tax on telecommunications services.

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

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9505133L