| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Bundled cable service--The provision of cable television
service and at least one other taxable service by a cable service
provider through a cable system for a single price. Other taxable
services may include, but are not limited to, telecommunications services,
as defined in §3.344 of this title (relating to Telecommunications
Services); Internet access services, as defined in §3.366 of
this title (relating to Internet Access Services); data processing
services, as defined in §3.330 of this title (relating to Data
Processing Services); information services, as defined in §3.342
of this title (relating to Information Services); and security services,
as defined in §3.333 of this title (relating to Security Services).
Services sold to a purchaser by a third party, rather than the cable
service provider, are not bundled cable services even if they are
provided by means of a cable system.
(2) Cable service provider--A person who provides cable
television service or bundled cable service through a cable system.
(3) Cable system--The system through which a cable
service provider delivers cable television or bundled cable service.
A cable system may comprise any or all of the following: tangible
personal property; real property; and other media, such as radio waves,
microwaves, or any other means of conveyance now in existence or that
may be developed.
(4) Cable television service--The digital distribution
of video programming to purchasers by any means now in existence or
that may be developed. The term includes, but is not limited to, direct
broadcast satellite service (DBS); subscription television service
(STV); satellite master antenna television service (SMATV); master
antenna television service (MATV); multipoint distribution service
(MDS); multichannel multipoint distribution service (MMDS); fixed
programming; any audio portion of a video program; streaming video
programming provided via the Internet or other technology, regardless
of the type of device used by the purchaser to receive the service;
video on demand services or subscription services that allow purchasers
to choose from a library of available content; and any other video
programming provided in exchange for consideration. The term does
not include the provision of tangible personal property, such as video
content that has been downloaded by the purchaser or is stored on
a compact disc or other physical media, or the provision of telecommunications
services, as defined in §3.344 of this title.
(5) Fixed physical connection--The place at a purchaser's
residence or business where the cable service provider or its agent,
or the purchaser, by agreement with the cable service provider, has
installed any materials or equipment that connect the purchaser to
the provider's cable system. For example, a coaxial cable connection
at a distribution box or an outdoor antenna or dish that connects
to a satellite receiver is a fixed physical connection. The connection
of equipment, such as a personal computer, Internet-ready television,
or other device that allows the purchaser to view content that is
not provided directly by the cable service provider, does not create
a fixed physical connection.
(6) Nomadic access--The ability to access cable television
service or bundled cable service from multiple locations with or without
the use of a fixed physical connection.
(7) Point of delivery--The physical address of the
purchaser's fixed physical connection or, in the absence of such connection,
the physical address of the purchaser at which the cable television
or bundled cable service is considered to be received, as determined
in subsection (g)(3) of this section.
(b) Imposition of tax. The sale of cable television
or bundled cable service, and any services or expenses connected to
the provision of the service, are subject to sales and use tax.
(1) Taxable charges include:
(A) service connection fees. The term "service connection
fee" includes terms such as "installation," "connect," or "reconnect;"
(B) charges for video programming services;
(C) charges for tangible personal property, such as
converters, descramblers, and digital video recorders, transferred
to the care, custody, and control of purchasers as an integral part
of the services provided;
(D) amounts billed to purchasers for repairs or maintenance;
(E) municipal franchise fees; and
(F) any licensing fees for the right to receive or
distribute a satellite signal.
(2) Unrelated services.
(A) A service will be considered as unrelated if:
(i) it is not a cable television service or bundled
cable service, nor a service taxed under other provisions of Tax Code,
Chapter 151;
(ii) it is of a type which is commonly provided on
a stand-alone basis; and
(iii) the performance of the service is distinct and
identifiable.
(B) 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 taxable service provider at the time the transaction
occurs by separately stating to the purchaser a reasonable charge
for the taxable services. 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.
(c) Deposits. A deposit that represents future payment
for cable television or bundled cable service is part of the sales
price of the service and is taxable when the deposit is used to pay
for the service. A deposit paid to receive equipment that is transferred
to the care, custody, and control of the purchaser as an integral
part of the service, such as a converter that is returned to the cable
service provider when the service is terminated, is not taxable.
(d) Sales for resale.
(1) Taxable services. A cable service provider may
issue a resale certificate to purchase a taxable service tax-free
in the following circumstances:
(A) if the service will be transferred as an integral
part of the cable television or bundled cable service. For example,
if a cable service provider sells a bundled cable service that includes
data storage, and the provider purchases data storage capacity from
a third party, then the provider may issue a resale certificate to
the provider of the data storage capacity; or
(B) if the service is performed on tangible personal
property that the cable service provider will transfer to the care,
custody, and control of the purchaser as an integral part of the cable
television or bundled cable service. For example, if a cable service
provider that provides digital video recorders or converters to purchasers
hires a third party to repair a digital video recorder or converter,
then the provider may issue a resale certificate to the repair service
provider in lieu of paying tax on the repair service. See §3.285
of this title (relating to Resale Certificate; Sales for Resale).
(2) Tangible personal property. A resale certificate
may be used to purchase tangible personal property tax free if care,
custody, and control of the property are transferred to the purchaser
of the cable television or bundled cable service as an integral part
of the service. For example, a cable service provider may issue a
resale certificate to the seller of remote controls that are provided
to purchasers of the cable television service as part of the sale
of the service. See §3.285 of this title.
(e) Taxable purchases.
(1) Taxable services. A cable service provider owes
tax on its purchases of taxable services that are not transferred
to purchasers as an integral part of a cable television or bundled
cable service, but are instead used by the cable service provider
in providing that service.
(2) Tangible personal property. A cable service provider
owes tax on its purchases of equipment, supplies, and other items
that are not transferred to the care, custody, and control of purchasers
as an integral part of the cable television or bundled cable service,
but are instead used by the cable service provider to provide that
service. For example, a cable service provider owes tax on the satellite
receiving and transmitting equipment, cables, and wiring that it uses
to provide cable television service and that are not located on the
purchaser's premises. Taxable items that a cable service provider
purchases out of state and brings into Texas for use in providing
a cable television or bundled cable service are subject to Texas use
tax. See §3.346 of this title (relating to Use Tax). Credit will
be allowed against the use tax for any sales or use tax legally imposed
and paid to another state. See §3.338 of this title (relating
to Multistate Tax Credits and Allowance of Credit for Tax Paid to
Suppliers).
(3) A cable television service provider may seek an
annual refund of Texas sales and use taxes paid on certain tangible
personal property directly used or consumed in providing cable television
services. See §3.345 of this title (relating to Annual Refund
Program for Providers of Cable Television, Internet Access, and Telecommunications
Services).
(f) Real property rental. An owner of real property,
such as an apartment complex or hotel, that provides cable television
or bundled cable service to its residents or guests must collect sales
tax on any charge it imposes on residents or guests that is attributable
to the cable television or bundled cable service. If the owner does
not charge the residents or guests for the cable television or bundled
cable service, the owner is the consumer of the service and must pay
tax on that service and all services or expenses connected to the
provision of that service, in accordance with subsection (b) of this
section.
(g) Local tax.
(1) Cable service providers are required to collect
all local tax due on the sale of cable television or bundled cable
service, and on all services or expenses connected with the provision
of that service, in accordance with subsection (b) of this section,
based upon the point of delivery to the purchaser. For more information
regarding the calculation of local tax, see Tax Code, Title 3, Subtitle
C.
(2) Direct-to-home satellite. The sale of cable television
or bundled cable service by means of direct-to-home satellite is exempt
from local tax under the Telecommunications Act of 1996, §602.
For purposes of this section, direct-to-home satellite refers to cable
television or bundled cable service that is transmitted directly to
a purchaser's premises, including a residence, hotel, or motel, without
use of ground receiving or distribution equipment, except at the purchaser's
premises or in the uplink process to the satellite. Tangible personal
property transferred to the care, custody, and control of the purchaser
as an integral part of the cable television or bundled cable service
is considered to be part of the service and is also exempt from local
tax. Equipment used by a cable service provider to provide direct-to-home
satellite cable television or bundled cable service is subject to
local sales and use taxes, unless otherwise exempt.
(3) Point of delivery.
(A) Service delivered through a fixed physical connection.
(i) If a cable service provider delivers, or under
its contract with the purchaser is able to deliver, cable television
or bundled cable service, or any portion or element thereof, to the
purchaser by means of a fixed physical connection, then the address
of that fixed physical connection is the point of delivery, even if
the purchaser can access the service both through a fixed physical
connection and by means of nomadic access.
(ii) Two or more fixed physical connections. If fixed
physical connections at two or more locations are associated with
a single account, then the service provider must collect local taxes
for each separately stated charge for cable television or bundled
cable service based upon the location of the fixed physical connection
to which the charge is allocable. For example, if a purchaser's account
is associated with coaxial cable connections in City A and in City
B, and the purchaser incurs a separately stated charge for a pay-per-view
movie that is provided through the coaxial cable connection in City
B, then the service provider should collect local taxes on the pay-per-view
charge using the City B location as the point of delivery. If the
service provider cannot determine the location of the fixed physical
connection to which a charge is allocable, then the point of delivery
is the location of the fixed physical connection designated by the
purchaser prior to or at the time of purchase. Information about a
purchaser's designated point of delivery must be maintained in the
seller's books and records. For example, if Cont'd... |
