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You've Got Mail, I've Got Tax Liability: Texas Considers Content of Email Transmission for Sales Tax

By Jessica Kerner and Timothy Gustafson

The Texas Comptroller determined that a taxpayer’s email advertisement services were telecommun

June 3, 2013

By Jessica Kerner and Timothy Gustafson

The Texas Comptroller determined that a taxpayer’s email advertisement services were telecommunications services subject to the state’s sales tax. The taxpayer, a producer of real estate television shows for homebuilders, maintained a website through which it offered Internet-based services. The two services at issue were the taxpayer’s “Hot Sheet” and “Broadcast E-mail” services. The Hot Sheet was a weekly email advertisement that was sent to retailers and customers who had registered on the taxpayer’s website. A builder that purchased the Hot Sheet service paid a separate fee to be advertised in the Hot Sheet. The Broadcast E-mail service sent emails regarding upcoming events organized by homebuilders to realtors who had agreed to receive the homebuilder’s emails and who could respond to the event invitation using an RSVP button contained in the email. The Comptroller explained that the “taxability of sales of e-mail transmissions is separate from the taxability of sales to place advertisements in those electronic transmissions.” The Comptroller determined that the sale of the Hot Sheets was a taxable telecommunications service because the taxpayer was merely transmitting a compilation of its customers’ advertisements. The Comptroller also determined that the Broadcast E-mail service was a taxable telecommunications service because there was not sufficient evidence in the record to conclude that the taxpayer was engaged in anything other than electronically transmitting customer-provided advertisements by email. The fact that the customer in both instances was paying to transmit its own information was a key factor in the determination that these particular services were taxable telecommunications services rather than nontaxable, Internet-based advertising services. Tex. Comp. Dec. 105,515 (April 5, 2013).

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