The Comptroller determined that the Taxpayer’s services are taxable as follows:
Data processing services, which include data storage, manipulation, computer time for data processing, and data retrieval are taxable under Tax Code Section 151.0035. However, Tax Code Section 151.351 exempts the first 20% of charges for data processing services.
Incidental usage fees and transfer fees that are charged to a customer when the customer moves files or data within the data center network, or retrieves data from the network are taxable as data processing services.
Fees for bulk and transactional email services that filter content and notify the customer of bounce backs, failed deliveries, and spam as well as fees for the storage of all outgoing messages across multiple data centers are taxable telecommunications service under Rule 3.344(b)(4).
The Comptroller also discusses the taxability of information services, such as gathering data from the Web and making it available to customers in the form of lists and searchable data; sourcing of data processing and information services; and how to determine the local sales tax rate in the event a sales office, technology development office, or data center is created in the state.
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