The Texas Comptroller recently issued a private letter ruling addressing whether a taxpayer’s call tracking and monitoring services were taxable data processing services. The taxpayer at issue provided a suite of services focused on call tracking and monitoring for car dealerships, home service businesses, and healthcare providers. The taxpayer’s services included consulting to improve a client’s call-handling processes; setting up phone numbers to help track and monitor inbound calls; evaluating sales calls and whether a lead should be pursued; and providing an online platform that logged, recorded, and mapped calls. Clients were charged a flat, monthly fee for these services.
Under Texas law, “data processing services” are subject to sales and use tax. Word processing, data entry, data retrieval, data search, information compilation, and computerized data storage or manipulation are all considered data processing services. Although the Comptroller determined that the taxpayer’s services contained elements of data processing, such as call tracking, logging, recording, and generating reports viewed using the taxpayer’s online platform, the Comptroller concluded that the “essence of the transaction” was nontaxable consulting services. In short, the data processing activities were performed to facilitate the consulting services. Clients purchased the taxpayer’s services to help them improve the quality of their employees’ interactions with customers via the telephone, not just to record and compile the calls. Therefore, the entire fee was not subject to tax. Please contact Alec Mullee at 202-533-3434 with questions on this private letter ruling.