The Texas Comptroller issued a private letter ruling in response to an inquiry from a Texas corporation that provides website hosting services. In the ruling, the corporation’s cloud-based website hosting services were deemed taxable as data processing services which are taxable on 80% of the selling price. Texas defines a data processing service to include computerized data and information storage or manipulation – the corporation provides such services. If the website company has customers outside of Texas, it should have the customer provide an exemption certificate asserting either multi-state use or complete outside of Texas use. This will substantiate the exclusion of these customer transactions from Texas sales tax.
The corporation purchases cloud-computing resources from a different company’s cloud-services platform. This third-party company has four regional data centers, including one in Texas. The Comptroller stated that the location of the third-party’s data center that provides the cloud resources was not relevant to determining the taxability of the corporation’s services because the corporation provides the services from Texas.
The corporation’s third-party cloud resource provider charges Texas sales tax to the corporation by default. Because the corporation resells the cloud resources, the corporation could present the third-party company with a resale certificate in order to purchase the cloud resources tax-free under the sale for-for-resale exemption. (Letter No. 201807010L, Texas Comptroller of Public Accounts, July 10, 2018)