Internet Access Service Charges Exempt in Texas Beginning July 1, 2020

Effective July 1, 2020, separately stated charges for internet access are no longer subject to Texas sales tax. This change correlates with legislation enacted in 2016 that permanently extended the Internet Tax Freedom Act. The legislation established an end date of June 30, 2020 for seven states that imposed a tax on internet access at the time.

Effective July 1, 2020, if a service provider bundles internet access with a taxable service (e.g. telecommunications service or cable television service), the service provider should not collect tax on the amount allocated to internet access if they can establish through their books and records a reasonable allocation for the taxable service and for the exempt internet access. If the service provider cannot establish a reasonable allocation for the exempt internet access charges, the entire charge for the bundled services is taxable. (Tax Policy News, May 2020, Texas Comptroller of Public Accounts)

Posted on June 29, 2020