Sales Tax State Activity Update - October 2005

Texas Digs Into the Taxability of Free Information

The Taxpayer gathers and maintains information that it provides for free to excavators. Although the type of information provided by the Taxpayer might be within the scope of the statute and rule relating to taxable information services, the service is not taxable because the information provided is not paid for by those who receive it.

Facts
Underground Facility Damage Prevention and Safety Act of 1999 ("Safety Act"), Chapter 251 of the Texas Utilities Code, established standards and created a regulated practice for notifying utility operators of intended excavations. Under the Safety Act, excavators and anyone digging at least 16 inches must contact a notification center, like one that is run by the Taxpayer, to allow the utility operators whose communication, water, power, or other lines that might be affected to mark their lines.

The Taxpayer's mission is to prevent damage, promote public safety, and protect the environment through education and communication. The utility companies provide the Taxpayer with information about the location of their lines and the Taxpayer provides this information to any excavator who calls.

Under the Safety Act, there is no charge to the excavators for the information provided by the Taxpayer. Instead, the utility companies are charged a fee by the Taxpayer on a per call basis to cover the cost of the Taxpayer's responsibilities and activities.

A taxable information service is defined in relevant part as the furnishing of general or specialized news or other current information, financial information, and electronic data retrieval or research. The 1995 and 2000 versions of Comptroller Rule 3.342 apply to the period in question, and both provide in relevant part that a taxable information service consists of 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." See Tex. Admin. Code 3.342(a) (6).

View the full text at the Texas State Comptroller's website.

( Texas Comptroller of Public Accounts, Administrative Ruling Accession No. 200509266L, 9/19/2005)

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