| (i) interest on federal obligations that is excluded
from total revenue; and
(ii) interest that is exempt from federal income tax.
(D) A banking corporation may exclude from its Texas
gross receipts interest that is earned on federal funds and interest
that is earned on securities that are sold under an agreement to repurchase
and that are held in a correspondent bank that is domiciled in Texas,
but the banking corporation must include the interest in its gross
receipts from an entity's entire business.
(13) Internet hosting service. For reports originally
due on or after January 1, 2014, receipts from internet hosting are
Texas gross receipts if the customer is located in Texas.
(A) Internet hosting service means providing to an
unrelated user access over the internet to computer services using
property that is owned or leased and managed by the provider and on
which the user may store or process the user's own data or use software
that is owned, licensed, or leased by the user or provider.
(B) Internet hosting includes real-time, nearly real-time,
and on-demand access over the internet to computer services such as:
(i) data storage and retrieval;
(ii) video gaming;
(iii) database search services;
(iv) entertainment streaming services;
(v) processing of data; and
(vi) marketplace provider services.
(C) Internet hosting does not include:
(i) telecommunications service;
(ii) cable television service;
(iii) internet connectivity service;
(iv) internet advertising service; or
(v) internet access solely to download digital content
for storage and use on the customer's computer or other electronic
device.
(D) The purchase of access over the internet to computer
services is distinguished from the purchase or lease of computer hardware
or digital property (which are sourced under subsection (e)(3) of
this section) by taking into account all relevant factors, the relevance
of which may vary depending upon the circumstances. Some relevant
factors indicating the purchase of access to a computer service rather
than the purchase or lease of computer hardware or digital property
include:
(i) the customer is not in physical possession of the
property;
(ii) the customer does not control the property, beyond
the customer's network access and use of the property;
(iii) the provider has the right to determine the specific
property used in the transaction and replace such property with comparable
property;
(iv) the property is a component of an integrated operation
in which the provider has other responsibilities, including ensuring
the property is maintained and updated;
(v) the customer does not have a significant economic
or possessory interest in the property;
(vi) the provider bears any risk of substantially diminished
receipts or substantially increased expenditures if there is nonperformance
under the contract;
(vii) the provider uses the property concurrently to
provide significant services to entities unrelated to the customer;
(viii) the provider's fee is primarily based on a measure
of work performed or the level of the customer's use rather than the
mere passage of time; and
(ix) the total contract price substantially exceeds
the rental value of the property for the contract period.
(E) The customer location is determined by the physical
location where the purchaser or the purchaser's designee consumes
the service. The location should be determined in good faith using
the most reasonable method under the circumstances, considering the
information reasonably available. Receipts from some services may
be sourced to multiple customer locations or to multiple customers.
Locations that may be reasonable under the circumstances include the
customer's principal place of business, the customer's business unit
that is using the computer services, the delivery addresses for individual
units of service provided to the customer, the primary place or places
of consumption by the customer, the service address of the customer,
the billing address of the customer, or a combination of methods.
(i) Example 1. An individual purchases access to a
dating application. The most reasonable customer location for consumption
of the service may be the billing address of the individual in the
absence of information regarding the individual's physical address.
(ii) Example 2. A benefactor purchases access to a
computer service for a charitable organization. The customer is the
purchaser's designee for consuming the service - the charitable organization.
The most reasonable customer location for consumption of the service
may be the physical address of the charitable organization.
(iii) Example 3. An intermediary purchases access to
a computer service for resale to a third party. The customer is purchaser's
designee for consuming the service - the third party. The most reasonable
customer location for consumption of the service may be the physical
location of the third party, if known.
(iv) Example 4. A law firm purchases access to a database
search program for attorneys in multiple offices. The customers are
the purchaser's designees for consuming the service - its attorneys.
The most reasonable customer locations for consumption of the service
may be physical addresses of each office, with the access fee sourced
proportionately based on the number of attorneys in each office.
(v) Example 5. A retailer with multiple sales outlets
purchases access to point of sales software that reports to the retailer's
central office. The most reasonable customer locations for consumption
of the service may be the physical addresses of the central office
and each designated point of sale, with the access fee sourced proportionately
between the central office and each designated point of sale.
(vi) Example 6. A retailer with multiple sales outlets
purchases access to federal income tax preparation software. The most
reasonable customer location for consumption of the service may be
the principal place of business of the retailer.
(vii) Example 7. An individual pays a fee to an internet
ride-sharing service connecting the individual with a driver at a
particular location. The most reasonable customer location for consumption
of the service may be the physical address of rendezvous point for
the ride.
(14) Leases and subleases.
(A) Gross receipts from the lease, sublease, rental,
or subrental of real property are sourced to the location of the property.
(B) Gross receipts from the lease, sublease, rental,
or subrental of tangible personal property are sourced to the location
of the property. If the property is used both inside and outside Texas,
then lease payments are sourced based on the number of days that the
tangible personal property was used in Texas divided by the number
of days that the tangible personal property was used everywhere. If
the amount due under the lease is based on mileage, then the lease
payments are sourced based on the number of miles in Texas divided
by the number of miles everywhere.
(C) If a lump sum is charged for the lease, sublease,
rental, or subrental of more than one item of property, and the items
are located both inside and outside Texas, the lump-sum is sourced
to Texas based on a ratio of the fair rental value of the items located
in Texas to the fair value of the items located outside of Texas.
(D) Gross receipts from the lease, sublease, rental,
or subrental of a vessel that engages in commerce are sourced to Texas
based on the number of days that the vessel is engaged in commerce
in Texas waters divided by the number of days that the vessel is engaged
in commerce everywhere.
(E) Gross receipts from a lease, sublease, rental,
or subrental of real property or tangible personal property that is
treated as a sale for federal income tax purposes are sourced in the
same manner as a sale. Any portion of the payments that the contracting
parties designate as interest is sourced as provided in paragraph
(12) of this subsection, concerning interest.
(15) Litigation awards. Litigation awards are gross
receipts that are sourced to the location of the payor; however, if
the litigation awards are intended to replace receipts for which another
rule provided in this section applies, then the gross receipts are
sourced in accordance with that rule. For example, if a taxable entity
sues a Delaware corporation to recover on a sale of goods delivered
to a Texas location, then a judgment for the amount of that sale would
not convert the receipts from Texas gross receipts to Delaware receipts.
See subsection (f) of this section, for the sourcing of receipts from
judgments, compromises, or settlements that relate to natural gas
production.
(16) Loan servicing.
Cont'd... |
