34 Tex. Admin. Code § 3.344 - Telecommunications 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) Basic local exchange telephone
service--The provision by a telephone company of each access line and each dial
tone to a fixed location for sending and receiving telecommunications in the
telephone company's local exchange network. Services are considered basic
irrespective of whether the customer has access to a private or party line, or
whether the customer has limited or unlimited access. The term does not include
international, interstate, or intrastate long-distance telecommunications
services or mobile telecommunications services.
(2) 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.
(3) 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. The term does not include
telecommunications services. See §
3.366 of this title (relating to
Internet Access Services).
(4)
Interstate long-distance telecommunication service--A telecommunication service
that originates in one state, crosses state lines, and terminates in another
state.
(5) Intrastate long-distance
telecommunications service--A telecommunication service that originates and
terminates within one state, but crosses the boundaries on subdivisions or
jurisdictions within the state.
(6)
Mobile telecommunications service--The provision of a commercial mobile radio
service, as defined in
47
C.F.R. 20.3 of the Federal Communications
Commission's (FCC) regulations in effect on June 1, 1999, under the Mobile
Telecommunications Sourcing Act (4
U.S.C. §§116 -
126). The term
includes cellular telecommunications services, personal communications services
(PCS), specialized mobile radio services, wireless voice over Internet protocol
services, and paging services. The term does not include telephone prepaid
calling cards or air-ground radio telephone services as defined in
47 C.F.R.
22.99 of FCC regulations in effect on June 1,
1999.
(7) Pay telephone coin
sent--Telecommunications service paid for by the insertion of coins into a
coin-operated telephone.
(8) Place
of primary use--The physical street address that is representative of where a
customer primarily uses a mobile telecommunications service. That location must
be either the customer's residential street address or the customer's primary
business street address that is within the licensed service area of the service
provider. The individual or entity that contracts with the service provider is
the customer. If the individual or entity that contracts with the service
provider is not the end user, then the physical street address where the end
user primarily uses the service determines the customer's place of primary use.
For example, a business owner who is located in Austin, Texas establishes
mobile telecommunication service accounts for employees who are located in
other cities. One employee does business from his home in Dallas, Texas. Two
other employees work at an office that is located in Houston, Texas. Another
employee works at an office that is located in New Orleans, Louisiana. The home
street address of the employee in Dallas is the place of primary use for that
cellular phone account. The place of primary use for the two Houston employees
is the street address of the Houston office. The place of primary use for the
employee in Louisiana is the street address of the New Orleans
office.
(9) Prepaid
telecommunications service--A wireless or wire telecommunications service for
which the provider requires a customer to prepay the full amount prior to
provision of the service. The term does not include the sale or use of a
telephone prepaid calling card as defined in paragraph (15) of this subsection.
A card, pin number, access code or similar device that allows a user to access
only a specific network, or that is intended for use with a specific user
account or device (e.g., to add more minutes to an existing account), is a
prepaid telecommunications service and is taxed as the sale of a
telecommunications service. Local sales tax is collected as explained in
subsection (h) of this section.
(10) Private communication service--A
telecommunication service that entitles the customer to exclusive or priority
use of a communications channel or group of channels between or among
termination points, regardless of the manner in which such channel or channels
are connected, and includes switching capacity, extension lines, stations, and
any other associated services that are provided in connection with the use of
such channel or channels.
(A) As it relates to
private communication service, the term "communications channel" means a
physical or virtual path of communications over which signals are transmitted
between or among customer channel termination points.
(B) As it relates to private communication
service, the term "customer channel termination point" means the location where
the customer either inputs or receives the communications.
(11) Seller--Any person who sells
telecommunications services including a hotel, motel, owner or lessor of an
office, residential building or development that contracts and pays for
telecommunications services for resale to guests or tenants.
(12) Taxable service--A telecommunications
service or other taxable service listed in Tax Code, §
151.0101.
(13) Telecommunications services--The
electronic or electrical transmission, conveyance, routing, or reception of
sounds, signals, data, or information utilizing wires, cable, radio waves,
microwaves, satellites, fiber optics, Voice over Internet Protocol (VoIP), or
any other method now in existence or that may be devised, including but not
limited to long-distance telephone service. The term includes mobile
telecommunications services and prepaid telecommunications services. The term
does not include:
(A) the storage of data or
other information for subsequent retrieval or the processing, or reception and
processing, of data or information intended to change its form or
content;
(B) the sale or use of a
telephone prepaid calling card;
(C)
Internet access service; or
(D) pay
telephone coin sent.
(14) Telephone company--A person who owns or
operates a telephone line or telephone in this state and charges for its
use.
(15) Telephone prepaid calling
card--A card or other item, including an access code, that represents the right
to access telecommunications services, other than prepaid telecommunications
services as defined in paragraph (9) of this subsection, through multiple
devices, regardless of the network providing direct service to the device used,
for which payment is made in incremental amounts and before the call or
transmission is initiated. For example, a calling card that allows a user to
access a long distance telecommunications network for the purpose of making
international calls through a pay phone is a telephone prepaid calling card.
The sale of a telephone prepaid calling card is taxed as the sale of tangible
personal property.
(16) Voice over
Internet Protocol (VoIP)--A telecommunication service where a phone call is
transmitted over a data network. The term "Internet Protocol" is a catchall
phrase for the protocols and technologies of encoding a voice call that allow
the voice call to be slotted in between data on a data network, including the
Internet, a company's Intranet, or any other type of data network.
(b) Taxable telecommunications
services. The total amount charged for a taxable telecommunications service is
subject to sales tax. Sales tax is due on a charge for the following:
(1) basic local exchange telephone
services;
(2) enhanced services
such as metro service, extended area service, multiline hunting, and PBX
trunk;
(3) auxiliary services such
as call waiting and call forwarding;
(4) intrastate long-distance
telecommunications services;
(5)
interstate long-distance telecommunications services that are both originated
from, and billed to, a telephone number or billing or service address within
Texas such that if a call originates in Texas and is billed to a Texas service
address, the charge is taxable even if the invoice, statement, or other demand
for payment is sent to an address in another state;
(6) mobile telecommunications services for
which the place of primary use is located in Texas;
(7) telegraph services that are both
originated from, and billed to, a person within Texas;
(8) a telecommunications service paid for by
the insertion of tokens, credit or debit card into a coin-operated telephone
located in Texas;
(9) subject to
subsection (e) of this section, the lease, rental, or other charges for
telecommunication equipment including separately stated installation charges.
Separately stated charges for labor to install wiring will not be taxable if
the wiring is installed in new structures or residences in such manner as to
become a part of the realty. Separately stated charges for labor to install
wiring in existing nonresidential real property are taxable. See §
3.291 and §
3.357 of this title (relating to
Contractors; Nonresidential Real Property Repair, Remodeling, and Restoration;
Real Property Maintenance) for additional information. If charges for the
installation of wiring and charges for the equipment are not separated, the
total charge will be treated as a sale and installation of tangible personal
property. Equipment sold by a telecommunications service provider is subject to
sales or use tax and is not taxed as part of the telecommunications service if
the service provider separately invoices the sale of the equipment. The sale of
equipment is not separately invoiced if it is identified on the same bill,
receipt or invoice as the sale of the telecommunications service, even if it is
identified as a separate line item on the same bill, receipt, or
invoice;
(10) installation of
telecommunications services, including service connection fees;
(11) private communication services. Taxable
receipts include the channel termination charge imposed at each channel
termination point within this state, the total channel mileage charges imposed
between channel termination points or relay points within this state, and an
apportionment of the interoffice channel mileage charge that crosses the state
border. An apportionment on the basis of the ratio of the miles between the
last channel termination point in Texas and the state border to the total miles
between that channel termination point and the next channel termination point
in the route will be accepted. If there is a single charge for a private
communication service in which the customer has channel termination points both
inside and outside of Texas, the apportionment can also be determined by
dividing the number of customer channel termination points in Texas by the
total number of customer channel termination points to establish the percentage
of the charge subject to state sales tax for Texas. Other apportionment methods
may be used by the seller if first approved in writing by the
comptroller;
(12) charges that are
passed through to a purchaser for federal, state, or local taxes or fees that
are imposed on the seller of the telecommunications service rather than on the
purchaser. Such charges are a cost or expense of the seller and are included in
the total price subject to sales tax; and
(13) prepaid wireless telecommunications
services as defined by subsection (a)(9) of this section when the purchase is
made in person at a Texas business or is made by telephone or the Internet and
the purchaser's primary business address or residential address is in
Texas.
(c) Nontaxable or
exempt charges. Sales tax is not due on charges for:
(1) interstate long-distance
telecommunications services that are not both originated from, and billed to, a
telephone number or billing or service address within Texas. Records must
clearly distinguish between taxable and exempt long-distance
services;
(2) broadcasts by
commercial radio or television stations licensed or regulated by the FCC. See
§
3.313 of this title (relating to
Cable Television Service and Bundle Cable Service) for the tax status of cable
television services;
(3)
telecommunications services purchased for resale;
(4) telegraph services that are not both
originated from and billed to a person within Texas;
(5) mobile telecommunications services for
which the place of primary use is located outside of Texas;
(6) charges for federal, state, or local
taxes or fees that are imposed on the purchaser rather than on the seller of
the telecommunications service. For example, no sales tax is due on a
separately stated charge for federal excise tax or for 9-1-1 Emergency Service
Fee and 9-1-1 Equalization Surcharge because these taxes or fees are imposed on
the purchaser and are not a cost of doing business of the seller; and
(7) telecommunications services exclusively
provided or used for the navigation of machinery and equipment exclusively used
or employed on a farm or ranch in the building or maintaining of roads or water
facilities or in the production of:
(A) food
for human consumption;
(B)
grass;
(C) feed for animal life;
or
(D) other agricultural products
to be sold in the regular course of business.
(E) The purchaser must be an agricultural
registrant and provide the seller with an agricultural exemption
certificate.
(F) This paragraph is
effective September 1, 2015, and applies to telecommunication services provided
after this date.
(d) Billing and records requirements. If any
nontaxable charges are combined with and not separately stated from taxable
telecommunications service charges on the purchaser's bill or invoice from a
provider of telecommunications services, the combined charge is subject to tax
unless the service provider can identify the portion of the charges that are
nontaxable through the provider's books and records kept in the regular course
of business. If the nontaxable charges cannot reasonably be identified, the
charges from the sale of both nontaxable services and taxable
telecommunications services are attributable to taxable telecommunications
services. The provider of telecommunications services has the burden of proving
nontaxable charges.
(e) Resale of
tangible personal property. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale).
(1)
Transfer of tangible personal property to the care, custody and control of the
purchaser. A telecommunications service provider may claim a resale exemption
on the purchase of tangible personal property that is transferred by the
telecommunications service provider to the care, custody, and control of the
purchaser. A telecommunications service provider must collect sales tax on
charges for such items.
(2)
Wireless voice communication devices. A person may claim a resale exemption on
the purchase of a cell phone or other wireless voice communication device as an
integral part of a taxable service, regardless of whether there is a separate
charge for the wireless voice communication device or whether the purchaser is
the provider of the taxable telecommunications service, if payment for the
service is a condition for receiving the wireless voice communication device.
For example, if a person signs a contract for the purchase of
telecommunications services at the location of a retailer and the retailer
sells the person a cell phone as a condition of entering the contract for the
telecommunications services that will be provided by someone other than the
retailer, the retailer can purchase the cell phone tax free with a properly
completed resale certificate.
(f) Resale of a telecommunications service.
See §
3.285 of this title.
(1) Sales tax is not due on the charge by one
telephone company to another for providing access to a local exchange network.
The telecommunications service provider must collect sales tax from the final
purchaser on the total charge for the taxable service including the charge for
access.
(2) A telecommunications
service may be purchased tax free for resale if resold by the purchaser as an
integral part of a taxable service. The purchaser must give the service
provider a properly completed resale certificate to purchase the
telecommunications service tax free for resale. A telecommunications service is
an integral part of a taxable service if the telecommunications service is
essential to the performance of the taxable service and without which the
taxable service could not be rendered. For example, an Internet access service
provider (ISP) may give a resale certificate when purchasing the dedicated
dial-up line services to be used by the ISP's customers. However, the ISP must
pay sales tax when purchasing its own personal or business use of
telecommunications services such as charges for its office phone lines, mobile
telecommunications services for its traveling salespersons, or for a customer
service call-center.
(3) A mobile
telecommunications service provider may purchase roaming services from another
mobile telecommunications service provider tax free for resale to its customers
that are using the roaming services. For example, an out-of-state mobile
telecommunications service provider purchases roaming services in Texas for
resale to its out-of-state customers (i.e., persons who have a place of primary
use outside Texas). To be exempt from sales tax, the out-of-state mobile
telecommunications service provider must give the seller of the roaming
services a resale certificate showing either a Texas sales tax permit number or
the sales tax permit number or registration number issued by its home state.
Effective for billing periods that begin on or after August 1, 2002, these
out-of-state customers do not owe Texas sales tax on roaming charges incurred
while visiting or traveling through Texas.
(g) Taxable purchases. Subject to the
provisions of subsections (e) and (f) of this section, a telecommunications
service provider owes sales or use tax on all tangible personal property and
services that are used to provide the service. See §
3.346 of this title (relating to
Use Tax), §
3.281 of this title (relating to
Records Required; Information Required), and §
3.282 of this title (relating to
Auditing Taxpayer Records).
(h)
Local tax.
(1) Subject to the provisions of
paragraph (2) of this subsection, jurisdictions that impose local sales and use
taxes may repeal the local sales tax exemption on telecommunications services.
See Publication 96-339 (Jurisdictions That Impose Local Sales Tax on
Telecommunications Services) for a list of jurisdictions that impose local
taxes on telecommunications services.
(2) Taxable interstate long-distance
telecommunications are only subject to state sales tax. Local taxing
jurisdictions may not repeal the local sales tax exemption on interstate
long-distance telecommunications services.
(3) A seller of taxable telecommunications
services, with the exception of mobile telecommunications services as explained
in paragraph (4) of this subsection and prepaid wireless telecommunications
services as explained in paragraph (6) of this subsection, must collect local
sales taxes based on the location from which the telecommunications service
originates. If the point of origin cannot be determined, the telecommunications
service provider must collect local taxes based on the address to which the
telecommunications service is billed.
(4) A seller of mobile telecommunications
services must collect local sales taxes based on the place of primary use as
defined in subsection (a)(8) of this section and per Tax Code, §
151.061. The location from
which a mobile telecommunications service originates does not determine whether
the service is exempt or is subject to state or local sales tax.
(5) A seller of telephone prepaid calling
cards is not selling a telecommunications service and must collect state and
local sales or use tax on the sale of the cards in the same manner as sales of
other tangible personal property.
(6) A seller of prepaid wireless
telecommunications services as defined in subsection (a)(9) of this section
must collect local tax based on the business address of the seller when the
sale occurs in Texas in person. However, if the sale occurs over the telephone
or Internet, tax is due if the primary business address of the purchaser or
residential address of the purchaser is in Texas.
Notes
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