Sales Tax Articles
Sales Tax State Activity Update - January 2007
Texas Talks Taxability of Internet Employment Services
The petitioner offered three services all of which were found to be taxable as either a data processing service or an information service. One service had a component which would be exempt but it was bundled with a taxable service and therefore the entire charge was taxable.
Background
Petitioner provided various services to its customers. Service A was an Internet employment service that created a Web Site on which employers posted a company profile and job postings. The company profile and the right to post an unlimited number of job openings was billed as a package, with no allocation of the cost between the two services.
On some occasions the client merely filled out a template that it uploaded on Petitioner's Web Site, while at other times Petitioner would obtain information from the client or its Web Site, enter the data, design the presentation, and work through revisions with the client.
Service B was a product that included a search package to find those prospects who expressed a willingness to relocate.
Service C provided market information designed to assist companies in technology workforce decisions.
Taxpayer's Position
Petitioner contends that all three of the services were not subject to sales or use tax because by definiton they were not taxable data processing of information services.
Comptroller's Position
Rule 3.330(d) (2) provides that when nontaxable unrelated services and taxable services are sold for a single charge, the charge must be allocated between the services or the entire charge is taxable.
The creation of the company profiles was completed through the Service A by obtaining the information from the customer, entering the data on its Web Site, designing the presentation, and revising it to meet the requirements of the customer. All of these activities were found to be taxable data processing services.The Tax Division agrees that the uploading on its website of a template filled out by the customer is not a taxable data processing services. Petitioner has not provided documentation to allocate the percentage of the charge between the taxable and nontaxable services. As a result the entire charge is taxable. "Information service" is defined by Section 151.0038 as "furnishing general or specialized news or current information, including financial information," or "electronic data retrieval or research."
Rule 3.342 provides that the sale of information gathered or compiled on behalf of a particular client is not subject to tax (Rule 3.342(a)(5)), whereas the sale of information that is gathered, maintained or compiled and made available to the public or to a specific segment of industry for consideration is subject to sales tax (Rule 3.342(a)(6)). In both the Service B, and Service C, Petitioner gathers, maintains, and compiles information that is made available to the public, specifically technology workers, for which it charges its customers. This is a taxable information service for which Petitioner was required to collect and remit sales tax.
The full text may be accessed on the Texas State Tax Automated Research System (STAR).
(Texas Comptroller of public Accounts, Hearing No. 45,694, 8/30/2006)
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