34 Tex. Admin. Code § 3.343 - Credit Reporting 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) Credit report--Any written, oral or other compilation of any credit history or other information bearing on a person's credit worthiness, credit standing, credit capacity, or insurability, including information concerning character, general reputation and, if an individual, personal characteristics, medical information, or mode of living.

(2) Credit reporting services--The assembly or furnishing, for monetary fees, dues, or other consideration, of a credit report or any part of a credit report.

(b) Responsibilities of persons providing credit reporting services.

(1) Sales tax is due and must be collected on the total charge for credit reporting activities when:

(A) the address of the credit applicant (the subject of the credit report) at the time of the request for a report is in Texas; and

(B) the person who requested the credit report is located in Texas or is doing business in Texas as provided in the Tax Code, § 151.107. Credit card companies are considered to be doing business in Texas if the financial institution issuing the card is doing business in Texas or if the credit card company is otherwise doing business in Texas.

(2) If a seller of a service is not doing business in Texas and is not required to collect Texas tax, it is the Texas customer's responsibility to report the tax directly to this office.

(3) Persons providing credit reporting services must obtain a tax permit and collect tax on the entire sales price of their service.

(c) Resale certificates.

(1) Providers of credit reporting 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 is transferred to the client. For example, a taxpayer purchases magnetic tape to transfer the results of a credit report to customers. The tape is transferred to the customer, and the customer owns and uses the tape to review the results of the credit reporting service. Taxpayer 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.

(4) Persons providing credit reporting services may accept a valid exemption certificate in lieu of tax when performing a taxable service for an exempt entity. See § 3.322 of this title (relating to Exempt Organizations).

(d) Unrelated services.

(1) A service will be considered as unrelated if:

(A) it is not a credit reporting 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, and 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 provider of credit reporting services 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 service 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.

(e) Service benefit location. If both the credit grantor and the credit applicant are located in Texas, Texas sales tax is due.

(f) Service benefit location--multistate customer.

(1) To the extent a credit reporting 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 credit reporting services for the benefit of both in-state and out-of-state locations is responsible for issuing to the credit reporting entity an exemption certificate asserting a multistate benefit, and for reporting and paying the tax on that portion of the credit reporting charge which will benefit the Texas location. A provider of credit reports 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.

(g) Local tax.

(1) For local sales tax purposes, city, county, transit authority, and special purpose district sales taxes are due if a provider of credit reports has only one place of business (the location where clients request service) within the boundaries of a local taxing entity. Local tax must be collected based upon 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) For the purposes of the local use tax, if a place of business is outside the boundaries of a local taxing entity, the service provider will be required to collect local use tax if the client is within the local taxing entity and the service 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 service 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 credit reporting services for the benefit of locations in more than one local taxing entity is responsible for issuing to the provider of credit reporting services an exemption certificate asserting a multi-city benefit and for determining the extent of benefit for each entity. The local use tax for each entity must be reported, allocated and paid by the customer. A provider of credit reporting service 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 credit reporting 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.

(h) Use tax. If a seller of a service is not doing business in Texas or in specific local taxing jurisdictions and is not required to collect Texas tax, it is the Texas customer's responsibility to report and pay the state and local use tax directly to this office.

Notes

34 Tex. Admin. Code § 3.343

The provisions of this §3.343 adopted to be effective March 21, 1988, 13 TexReg 1193; amended to be effective November 13, 1989, 14 TexReg 5787; amended to be effective March 23, 1995, 20 TexReg 1749.