The Texas Comptroller released a Letter Ruling on January 3, 2023, which found that a taxpayer’s audiovisual and videoconferencing equipment and the related services, both on-site and remote, are taxable under Texas law.
The taxpayer was providing audiovisual and videoconferencing equipment and a variety of services within Texas. The “remote services” included a Cisco Hybrid environment as well as telecommunications services including Voice over Internet Protocol (VoIP). “On-Site Services” were also provided in the form of support and maintenance, and all personnel providing these services perform them at the Customer’s Texas based headquarters. For all of this, customers are provided with a monthly lump-sum amount on their invoice with no distinction between equipment, software, or services, and the taxpayer asserts that it is not possible to determine what equipment exactly was purchased from them or from other vendors.
Letter Ruling 202301018L ruled all the taxpayer’s offerings taxable. Telecommunication services are one of the services which are specifically listed as taxable in the state of Texas, and both software and hardware are taxed as tangible personal property. Though programming services may be tax exempt, to be considered exempt, the company must have also been the seller of the program; the taxpayer was unable to provide documentation they were the original seller of the program and as a result are providing taxable services.
This case again highlights the importance of good record keeping to taxpayers. If the company had evidence they sold the original computer programs, they may have been able to claim exemptions on some of the services offered. In addition, the ruling pointed out the lump sum billing by this taxpayer did not show which services may have been nontaxable, resulting in the entire lump sum being considered taxable under Texas state law. Though the many of the services likely would have been taxable, more thorough invoices and records would have showed exactly which services were nontaxable. (Letter No. 202301018L, Texas Comptroller of Public Accounts, January 3, 2023)