State law provides that telecommunications services are subject to the state sales tax, but are exempt from all local sales taxes.
The governing body of a city, county, transit authority, or other special purpose district may vote to impose sales tax on these services. The local sales tax is limited to telecommunications services occurring between locations within Texas.
The local sales tax is collected based on where the call originates. If the origin of the call cannot be determined, then the local sales tax collected is based on where the call is billed. Local sales tax on mobile telecommunications services is determined differently.
While telecommunications services are subject to state sales tax, local sales tax is optional. A city, county, transit authority, or special purpose district can impose local sales tax on telecommunications services that occur between locations within Texas. A call from Austin to Dallas is subject to local tax, for instance, while a call from Austin to Chicago is not.
For mobile telecommunications services, the local sales tax rate is determined by the customer's place of primary use, generally the residential or primary business street address. For example, a salesman based in Austin will pay Austin city and transit sales tax on a cellular call from San Antonio to Corpus Christi, since Austin is the place of primary use.
For telecommunication services billed call-by-call or per transmission, the local sales tax rate is determined by where the call or transmission originates. If a visitor in Houston calls someone in Beaumont and charges the call to their home phone in El Paso, Houston local tax is due.
For telephone calls not billed call-by-call, the local sales tax rate is determined by the customer's place of primary use. For example, a subscriber to voice over Internet protocol (VOIP) pays $39.95 per month for unlimited local and long-distance calls. Charges for calls are not itemized. If the subscriber's home is in Austin, the $39.95 charge is subject to Austin city and transit tax.
Effective January 1, 2011, the following jurisdictions have imposed local sales tax on telecommunications services.
For the complete article, click here (http://www.window.state.tx.us/taxinfo/taxpubs/tx96_339.html).
