Is a paging service, where the pager device has a built-in transmitter that sends a location-verification signal back to the transmission equipment (but no voice or message back to the sender), subject to Texas sales tax?

Plain-English summary

A paging company asked the Comptroller about the tax treatment of "VoiceNow," a paging product it planned to introduce. The company described two relevant facts: (1) VoiceNow transmits the human voice, and (2) the VoiceNow device has a built-in transmitter that sends a signal to the transmission equipment to verify where the pager is located, so the transmission equipment can broadcast the page from the closest transmitter — but no voice or paging message is ever sent from the VoiceNow device back to the original sender.

The Comptroller's answer: paging services are telecommunications services as defined in Tax Code 151.0103(a). That means Texas sales tax is due on charges for all pages received in Texas by the firm, no matter where those pages are ultimately re-transmitted. Local sales tax is due based on the location where the firm receives and re-transmits the incoming pages. However, charges for a page that the firm re-transmits to a location outside Texas are exempt from local sales tax. The letter notes that sales tax on telecommunications services is imposed on a local-option basis, and the Comptroller offered to send publications to help determine the applicable local rate.

What this means for you

Paging and telecommunications service providers

If you offer a paging service — even one with added features like a location-verification signal that never carries a voice or paging message back to the sender — it's still classified as a telecommunications service under Tax Code 151.0103(a). State sales tax applies to all pages received in Texas, and local sales tax depends on where you receive and re-transmit the incoming page, not on where the pager itself is located.

Businesses selling new or hybrid device features

The technical detail of how a device verifies location (a built-in transmitter pinging the network) didn't change the tax analysis — the Comptroller focused on the fact that the underlying function is still paging/telecommunications service. Adding technical bells and whistles to a device doesn't automatically create a different tax category.

Accountants and tax professionals

This letter is a useful, concise statement of the local-option sourcing rule for telecommunications/paging services: local tax follows the location where the firm receives and re-transmits the page, and re-transmission to an out-of-state location is exempt from local (but not state) tax.

Common questions

Q: Is a paging service subject to Texas sales tax?
A: Yes. Paging services are telecommunications services under Tax Code 151.0103(a), and Texas sales tax is due on charges for all pages received in Texas.

Q: Does it matter that VoiceNow's device sends a location-verification signal instead of a voice message back to the sender?
A: No — the Comptroller still classified the overall service as taxable telecommunications/paging service based on the facts presented.

Q: How is local sales tax determined for paging services?
A: Local sales tax is due based on the location where the firm receives and re-transmits the incoming pages.

Q: Are pages re-transmitted outside Texas subject to local tax?
A: No. Charges for a page that the firm re-transmits to a location outside Texas are exempt from local sales tax, though state tax still applies to pages received in Texas.

Q: Can this letter be relied on by other paging companies?
A: The letter states it is rendered based on the facts submitted, and other facts, though similar, may yield different results — so it's specific to the requester's situation.

Citations and references

• Tax Code 151.0103(a) (definition of 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/9606L1419G13

Original ruling text

June 21, 1996

Dear ***:

Thank you for your recent letter regarding "VoiceNow" a paging product to be
introduced by your firm. Your facts are restated in part with response below.

1) VoiceNow transmits the human voice, and

2) The VoiceNow device has a built-in transmitter which transmits a signal to
the transmission equipment verifying where the pager is located. The transmission
equipment then broadcasts the page from the closest transmitter. There is no
voice or paging message sent from the VoiceNow device to the original sender
of the message.

Response: Paging services are telecommunications services as defined in Tax
Code 151.0103(a). Accordingly, Texas sales tax is due on charges for all pages
received in Texas by your firm regardless of the location to which they are
re-transmitted. Local sales tax is due based on the location where your firm
receives and re-transmits the incoming pages. Charges for a page that your firm
re-transmits to a location outside Texas are exempt from local sales tax.

Sales tax on telecommunications services is imposed on a local option basis.
I am enclosing two publications to assist you in determining the local sales
tax rate for telecommunications services throughout the state.

This opinion is rendered 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. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public Accounts.
My email address is [email protected].

Sincerely,

Al Van Allen
Tax Policy Division

NOTE: Previous Accession Number 9606368L