Texas – Exemptions for Multistate Services

SALT Report 1621 – The Texas Comptroller’s latest issue of Tax Policy News discusses the multistate benefit sales tax exemption.  Generally, taxable services performed for use in Texas are subject to tax, however because some services are performed for use both in and out of Texas, legislation was created to provide an exemption for the portion of the taxable services performed for use outside of Texas.
The exemption is limited to the following services that became taxable on or after September 1, 1987:
  • Credit reporting services
  • Debt collection services
  • Insurance services
  • Information services
  • Real property services
  • Real property repair and remodeling services
  • Telephone answering services, and
  • Internet access services

Services that became taxable before September 1, 1987, such as maintenance of canned software or the repair of construction equipment, do not qualify for the multi-state benefit exemption.

When determining whether a taxable service qualifies for the multi-state benefit exemption the following criteria must be met:

  • The taxable service must be included in the list of services that became taxable on or after September 1, 1987. If the service became taxable before that date then the exemption may not be claimed.
  • The customer must prove that the taxable service will be used in a separate, identifiable segment of the customer’s business and that the separate, identifiable segment is located both in and out of Texas.

An “identifiable segment” is defined as a part of a business that has its own identity and performs a function that is separate from the general operation of the company.

For Further Information:

Texas Comptroller of Public Accounts – Tax Policy News