1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Basic local exchange telephone service--The provision by a telephone company of each access line and each dial tone to a fixed location for sending and receiving telecommunications in the telephone company's local exchange network. Services will be considered to be basic whether the customer has access to a private line or party line or whether the customer has limited or unlimited access. It does not include long-distance telecommunication service.
   2. (2) Internet--collectively the myriad of computer and telecommunications facilities, including equipment and operating software, that comprise the interconnected worldwide network of networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocols to the protocol, to communicate information of all kinds by wire or radio.
   3. (3) Internet access service--a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. The term does not include telecommunications services.
   4. (4) Long-distance telecommunication--A service which both originates from and is billed to a telephone number or billing or service address within Texas.
   5. (5) Private line--A telephone circuit dedicated for use between specific locations.
   6. (6) Seller--Any person selling telecommunications services including a hotel, motel, owner or lessor of an office, residential building or development that contracts and pays for telecommunications services for resale to guests or tenants.
   7. (7) Taxable service--Telecommunications services.

   8. (8) Telecommunications services--The electronic or electrical transmission, conveyance, routing, or reception of sounds, signals, data, or information utilizing wires, cable, radio waves, microwaves, satellites, fiber optics or any other method now in existence or that may be devised, including but not limited to long-distance telephone service. The term does not include:

      1. (A) the storage of data or other information for subsequent retrieval or the processing, or reception and processing, of data or information intended to change its form or content;
      2. (B) the sale or use of a telephone prepaid calling card; or
      3. (C) Internet access service.
   9. (9) Telephone company--A person who owns or operates a telephone line or telephone in this state and charges for its use.
   10. (10) Telephone prepaid calling card--a card or other item, including an access code, that represents the right to make one or more telephone calls for which payment is made in incremental amounts and before the call is initiated. The term "telephone prepaid calling card" does not include a card sold by mechanical means for consideration of one dollar or less.

2. (b) Services taxable. Sales tax is due on a charge for the following:

   1. (1) basic local exchange service;
   2. (2) enhanced services (metro service, extended area service, multiline hunting, PBX trunk, etc.).
   3. (3) auxiliary services (call waiting, call forwarding, etc.);
   4. (4) long-distance telecommunications services that are both originated from, and billed to, a telephone number or billing or service address within Texas; therefore, if a call originates in Texas and is billed to a Texas service address, the charge is taxable even if the invoice, statement, or other demand for payment is sent to an address in another state;
   5. (5) paging and mobile telephone services;
   6. (6) telegraph services that are both originated from, and billed to, a person within Texas;
   7. (7) a taxable service paid for by the insertion of coins or tokens into a coin-operated telephone;
   8. (8) sale, lease, or rental charges for telecommunication equipment including separately stated installation charges. Separately stated charges for labor to install wiring will not be taxable if the wiring is installed in new structures or residences in such manner as to become a part of the realty. Separately stated charges for labor to install wiring in existing nonresidential real property are taxable. See §3.291 and §3.357 of this title (relating to Contractors; Real Property Repair and Remodeling) for additional information. If charges for wiring and equipment are not separated, the total charge will be treated as a sale and installation of tangible personal property.
   9. (9) installation of telecommunications services (service connection fee); and
   10. (10) private line services, including charges for related equipment. Taxable receipts include the channel termination charge imposed at each channel termination point within this state, the total channel mileage charges imposed between channel termination points or relay points within this state, and an apportionment of the interoffice channel mileage charge that crosses the state border. An apportionment on the basis of the ratio of the miles between the last channel termination point in Texas and the state border to the total miles between that channel termination point and the next channel termination point in the route will be accepted. Other methods may be used if first approved in writing by the comptroller.
3. (c) Sellers of telecommunications services on which sales tax must be collected and remitted will owe a telecommunications infrastructure fund assessment and should refer to §3.1101 of this title (relating to Telecommunications Receipts, Assessment Determination, Due Date for Assessment Report and Payment, Auditing, Records, and Assessments).

4. (d) Services not taxable. Sales tax is not due on charges for:

   1. (1) long-distance telecommunications services that are not both originated from, and billed to, a telephone number or billing or service address within Texas. Records must clearly distinguish between taxable and exempt long-distance services;
   2. (2) broadcasts by commercial radio or television stations licensed or regulated by the FCC. See §3.313 of this title (relating to Cable Television Service) for the tax status of cable television service;
   3. (3) telecommunications services purchased for resale;
   4. (4) telegraph services which are not both originated from and billed to a person within Texas.
5. (e) Charges separately stated. Charges for items listed in subsection (b) of this section must be separately stated from those charges listed in subsection (c) of this section.
6. (f) Resale of tangible personal property. Tangible personal property transferred by the provider of the taxable service to the care, custody, and control of the customer will be considered to be resold, and may be purchased tax free by the provider of the taxable service. Sales tax must be collected by the provider of the taxable service from the customer on the charge for such items. See §3.285 of this title (relating to Resale Certificate; Sales for Resale).
7. (g) Resale of a service. Sales tax is not due on the charge by one telephone company to another for providing access to a local exchange network. Sales tax must be collected from the final consumer on the total charge for the service including the charge for access. See §3.285 of this title (relating to Resale Certificate; Sales for Resale).
8. (h) Taxable purchases. Sales or use tax is due on all tangible personal property used to provide the taxable service but not transferred to the care, custody, and control of the customer. See §3.346 of this title (relating to Use Tax), §3.281 of this title (relating to Records Required; Information Required), and §3.282 of this title (relating to Auditing Taxpayer Records).

9. (i) Local tax.

   1. (1) City, county, special purpose district, Metropolitan Transit Authority (MTA), and city transit department (CTD) taxes on telecommunications services are allocated to the location from which the call originates. If the point of origin cannot be determined, the local tax is allocated to the address to which the call is billed. See §3.372 and §3.422 of this title (relating to Requirements for Adopting or Abolishing City Tax; Requirements for Adopting or Abolishing MTA Tax) for information on how a city, county, or authority may impose local tax on telecommunications services. (Note: The local sales tax exemptions on interstate long-distance telecommunications services may not be repealed.)
   2. (2) The governing board of a taxing entity created under the Transportation Code, Chapter 451, may not repeal the application of the exemption on telecommunications services unless the repeal is first approved by a majority of the members of the governing body of each municipality that created the taxing entity. A reinstatement of the exemption must be approved in the same manner.

Source Note:The provisions of this §3.344 adopted to be effective December 30, 1985, 10 TexReg 4810; amended to be effective April 1, 1988, 13 TexReg 1342; amended to be effective April 18, 2000, 25 TexReg 3289.