34 Tex. Admin. Code § 3.342 - Information Services
(a) Definitions.
The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Data processing services -- Processing,
reformatting, or manipulating data provided by the customer is data processing
and is not included in the definition of information services.
(2) Information services -- Furnishing
general or specialized news or other current information, including financial
information, by printed, mimeographed, electronic, or electrical transmission,
or by utilizing wires, cable, radio waves, microwaves, satellites, fiber
optics, or any other method now in existence or which may be devised, and
electronic data retrieval or research. The term information services does not
include Internet access service or information services that are provided in
conjunction with and merely incidental to the provision of Internet access
service when provided for a single charge.
(3) Internet -- collectively the myriad of
computer and telecommunications facilities, including equipment and operating
software, that comprise the interconnected worldwide network of networks that
employ the Transmission Control Protocol/Internet Protocol, or any predecessor
or successor protocols to the protocol, to communicate information of all kinds
by wire or radio.
(4) Internet
access service -- a service that enables users to access content, information,
electronic mail, or other services offered over the Internet and may also
include access to proprietary content, information, and other services as part
of a package of services offered to consumers. Internet access service does not
include any other taxable service, unless the taxable service is provided in
conjunction with and is merely incidental to the provision of Internet access
service. Individuals providing Internet access should refer to §
3.366 of this title (relating to
Internet Access Services).
(5)
Nontaxable information services.
(A) The sale
of information that is gathered or compiled on behalf of a particular client is
not subject to tax if the information is of a proprietary nature to that client
and may not be sold to others by the person who gathered or compiled the
information. Any subsequent sale of such information by the client for whom the
information was gathered or compiled is subject to tax. Examples include
opinion polls and management consultant reports.
(B) Any sale of information primarily derived
from laboratory, medical, or exploratory testing or experimentation or any
similar method of direct scientific observation of physical phenomena is not
subject to tax. Examples include, but are not limited to, geophysical survey
information, polygraph test, and medical test results.
(C) Information required to be furnished
pursuant to the Open Records Act is not subject to sales tax. See §3.341
of this title (relating to Sales of Governmental Publications, Records, or
Documents). Fees paid when obtaining these documents may be excluded from the
tax base if separately stated when the documents are furnished to clients. Tax
will only be due on the amount over and above the cost of the
documents.
(6) Taxable
information services. Information that is gathered, maintained, or compiled and
made available by the provider of the information service to the public or to a
specific segment of industry for a consideration is subject to sales tax.
Examples of taxable information services include, but are not limited to, the
following:
(A) newsletters;
(B) scouting reports and surveys, including
those used in sports and the oil and gas and related industries;
(C) mailing lists, and bad check lists (only
that percentage which represents names of persons located in Texas is
taxable);
(D) real estate
listings;
(E) financial,
investment, stock market, or bond rating, or financial reports, other than
charges to a person by a financial institution for account balance
information;
(F) news clipping
services and wire services; and
(G)
abstracts of title and other information provided by title plants.
(b) Hold permits. All
providers of information services must obtain Texas sales and use tax permits
and collect tax on charges for information services, or accept properly
completed resale, exemption, or direct payment permit certificates in lieu of
collecting tax. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale); §
3.287 of this title (relating to
Exemption Certificates); §
3.288 of this title (relating to
Direct Payment Procedures and Qualifications). Effective October 1, 1999, 20%
of the total amount charged for information services is exempted from sales and
use tax. The exemption applies to services performed on or after October 1,
1999. The exemption does not apply to services performed before the effective
date and billed or paid for after the effective date of the
exemption.
(c) Exempt information
services. Sales tax is not due on information services sold to a newspaper or
to a radio or television station licensed by the Federal Communications
Commission, if an exemption certificate is obtained. The exemption certificate
must state that the purchaser is a newspaper with a general circulation
published at least as frequently as weekly, or is a station licensed by the
Federal Communications Commission.
(d) Resale certificates.
(1) Providers of information service may
issue a resale certificate in lieu of tax to suppliers of tangible personal
property only if care, custody, and control of the property will be transferred
to the service provider's client. For example, an information provider
purchases magnetic tape to transfer information to customers. The tape is
transferred to the customer, and the customer owns and uses the tape to review
the information. The information provider may purchase the tape tax free by
issuing a resale certificate. Tax is due on the total amount charged the
customer, including amounts for the tape and for the services.
(2) A resale certificate may be issued for a
service if the buyer intends to transfer the service as an integral part of
taxable services. A service will be considered an integral part of a taxable
service if the service purchased is essential to the performance of the taxable
service and without which the taxable service could not be rendered.
(3) A resale certificate may be issued for a
taxable service if the buyer intends to incorporate the service into tangible
personal property which will be resold. If the entire service is not
incorporated into the tangible personal property, it will be presumed the
service is subject to tax and the service will only be exempt to the extent the
buyer can establish the portion of the service actually incorporated into the
tangible personal property. If the buyer does not intend to incorporate the
entire service into the tangible personal property, no resale certificate may
be issued, but credit may be claimed at the time of sale of the tangible
personal property to the extent the service was actually incorporated into the
tangible personal property.
(e) Unrelated services.
(1) A service will be considered as unrelated
if:
(A) it is not an information service nor
a service taxed under other provisions of the Tax Code, Chapter 151;
(B) it is of a type which is commonly
provided on a stand-alone basis; and
(C) the performance of the unrelated service
is distinct and identifiable. Examples of an unrelated service which may be
excluded from the tax base include consultation, training, expedited filing
charges, escrow fees, or charges for proprietary information.
(2) Where nontaxable unrelated
services and taxable services are sold or purchased for a single charge and the
portion relating to taxable services represents more than 5.0% of the total
charge, the total charge is presumed to be taxable. The presumption may be
overcome by the information provider at the time the transaction occurs by
separately stating to the customer a reasonable charge for the taxable
services. However, if the charge for the taxable portion of the services is not
separately stated at the time of the transaction, the service provider or the
purchaser may later establish for the comptroller, through documentary
evidence, the percentage of the total charge that relates to nontaxable
unrelated services. The information provider's books must support the
apportionment between exempt and nonexempt activities based on the cost of
providing the service or on a comparison to the normal charge for each service
if provided alone. If the charge for exempt services is unreasonable when the
overall transaction is reviewed considering the cost of providing the service
or a comparable charge made in the industry for each service, the comptroller
will adjust the charges and assess additional tax, penalty, and interest on the
taxable services.
(3) Charges for
services or expenses directly related to and incurred while providing the
taxable service are taxable and may not be separated for the purpose of
excluding these charges from the tax base. Examples would be charges for meals,
telephone calls, hotel rooms, or airplane tickets.
(f) Service benefit location. If both the
information service provider and the customer are located in Texas, Texas tax
is due.
(g) Service benefit
location - multistate customer.
(1) To the
extent information service is used to support a separate, identifiable segment
of a customer's business (other than general administration or operation of the
business) the service is presumed to be used at the location where that part of
the business is conducted.
(2) If
that part of the business is conducted at locations both within and outside the
state, the service is not taxable to the extent it is used outside Texas. A
multistate customer may use any reasonable method for allocation which is
supported by business records.
(3)
A multistate customer purchasing information services for the benefit of both
in-state and out-of-state locations is responsible for issuing to the
information service provider an exemption certificate asserting a multistate
benefit, and for reporting and paying the tax on that portion of the charge for
information which will benefit the Texas location. An information provider that
accepts such a certificate in good faith is relieved of responsibility for
collecting and remitting tax on transactions to which the certificate
relates.
(4) The customer's books
must support the assignment of the service to an identifiable segment of the
business, the determination of the location or locations of the use of the
service, and the allocation of the taxable charge to Texas.
(5) To the extent the use of the service
cannot be assigned to an identifiable segment of a customer's business, the
service is presumed to be used to support the administration or operation of
the customer's business generally. The service is presumed to be used at the
customer's principal place of business. The principal place of business means
the place from which the trade or business is directed or managed.
(h) Local taxes.
(1) For local sales tax purposes, city,
county, transit authority, and special purpose district sales taxes are due if
an information provider has only one place of business (the location where
clients request service) within the boundaries of a local taxing entity. Local
sales tax must be collected based on the tax rate at that location, except that
no MTA or CTD sales tax is due on services provided at a location outside the
boundaries of the transit area. In the case of multiple locations, if an order
for service is placed at one location but the service is provided at another
location, the place of business from which the service is provided will
determine to which local taxing entity the tax is allocated.
(2) If a place of business is outside the
boundaries of a local taxing entity, the information provider will be required
to collect local use tax if the client is within the local taxing entity and
the information provider has representation in the local taxing entity as
outlined in §
3.286 of this title (relating to
Seller's and Purchaser's Responsibilities). Even if the information provider is
not required to collect local use tax, the client is still liable for the tax
if the service is performed or a benefit is derived from the service within the
boundaries of a local taxing entity.
(A) An
in-state customer purchasing information services for the benefit of locations
in more than one local taxing entity is responsible for issuing to the
information provider an exemption certificate asserting a multi-city benefit
and for determining the extent of benefit for each entity. The local tax for
each entity must be reported, allocated, and paid by the customer. An
information provider that accepts in good faith an exemption certificate
claiming a multi-city benefit is relieved of responsibility for collecting and
remitting local tax on transactions to which the certificate relates.
(B) A multistate customer purchasing
information services for the benefit of both in-state and out-of-state
locations is responsible for issuing an exemption certificate and for reporting
and paying local tax as provided by subsection (f)(3) and (4) of this
section.
(i)
Use tax. If an information provider is not doing business in Texas or in
specific local taxing jurisdictions and is not required to collect Texas state
or local tax, it is the Texas customer's responsibility to report the state and
local use tax directly to this office.
Notes
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