| (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.
Cont'd... |
