SALT Report 1681 – The Texas Comptroller issued sales tax guidance regarding web based services provided by a company on behalf of unrelated sellers. The Taxpayer’s company provides vendors the ability to sell goods on the internet through a web-based marketplace that is owned and operated by the Taxpayer. The company also offers internet-based design services that allow sellers to create and operate their own internet store.
Once a vendor makes a sale on the Taxpayer’s website, the Taxpayer collects the sales price, shipping costs and any sales tax that might be due from the buyer and remits the money, less the Taxpayer’s commission, to the vendor.
The Comptroller determined that the Taxpayer’s selling services allow him to act as a broker on behalf of the vendor. A broker is defined in Section 3.311 (a) (3) as “a person who brings other people together to bargain for the sale or purchase of taxable items. As a broker, the referral, closing fees and commission charged by the Taxpayer are non-taxable brokerage fees that cover the cost of the services provided when an item sells.
The Taxpayer’s Internet store services include the electronic infrastructure and tools necessary for the vendor to build and operate their own website stores. These services are taxable as data processing services under Comptroller Rule 3.330 and tax is due on the Internet Store Services fees charged to the vendor. However, under Texas law 20% of the charges for data processing services are exempt from sales tax.
If a bundled transaction involves both non-taxable selling services and taxable Internet store services, tax is due only on the separately stated charge for the Internet store services. If the Taxpayer sells Internet store services and selling services bundled together for a lump sum price, tax is due on the total amount charged, less the 20% exemption allowed for data processing services.
For Further Information:
Texas Comptroller of Public Accounts – Letter No. 201207531L