Twenty percent of the total charge is exempt from sales tax. In the state of Texas, some professional services are taxable. Information, photography and digital security services, for example, are subject to sales tax. Be sure to check if your business is subject to sales tax in the state of Texas.
Legislation in Maryland, Texas and West Virginia deals with the taxation of digital advertising. Satellite television service provided directly to a customer's premises is exempt from local sales and use tax. Telecommunications services involve the electronic or electrical transmission, transport, routing or reception of sounds, signals, data or information using wires, cable, radio waves, microwaves, satellites, fiber optics, or any other method that currently exists or can be devised. On March 22, the Texas Comptroller of Public Accounts determined in a private letter that it ruled the taxation of sales and use of online marketing services.
The creation and execution of an Internet advertising campaign is a tax-free service in the state of Texas if it is performed for a single charge. The Internet access service allows users to connect to the Internet to access information, e-mail and other online content. The bill would prohibit taxpayers subject to the digital advertising tax from passing the cost of the tax directly to their customers via a separate fee, surcharge or item. The term taxable services is defined in Section 151.0101 of the Tax Code, Taxable Services to include 17 broad categories of services.
The simple use of a computer as a tool to help perform a professional service is not a data processing service. Examples of telecommunications services include local and long-distance telephone service, including mobile or satellite telephone service and Voice over Internet Protocol (VoIP), fax service, pager services, text messaging and e-mail services (unless sold in packages with access to Internet). The creation or delivery of a credit report (or any part of a credit report) for a fee or any other consideration is a credit reporting service. The reception and transmission of telephone messages by a human operator is a taxable telephone answering service.
The use of a computer for word processing, data entry, production, compilation, storage or manipulation is a taxable data processing service. A debt collection service is any activity to collect or adjust a delinquent debt, to collect or adjust a claim, or to recover assets subject to a claim. Senate Bill 787 would also redefine “digital advertising services” to exclude services from broadcasters and media entities. However, placing an ad on a website is considered data processing and is taxable if the ad is charged as a fee for the creation of a web page.
Security services include any service for which the Texas Department of Public Safety's Office of Private Security requires a license under sections 1702, 101 or 1702, 102 of the Texas Occupations Code.
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