Texas – GPS Signals are Taxable Telecommunications Services

SALT Report 3023 – The Texas Comptroller issued guidance regarding a Taxpayer’s sales of GPS services to Farmers.  In this case, the Taxpayer sells the actual GPS systems and provides the GPS signal from one of the many towers it has constructed throughout Texas.  Generally, the Farmers pay a subscription fee to receive the transmission signal in the GPS system located in their tractor.  The system is used to tell the Farmer if they are plowing in the correct location.  The Taxpayer requested guidance as to whether the GPS service and the GPS infrastructure qualified for the agriculture exemption.

In its response, the Comptroller stated that under the provisions of Section 151.316, the GPS signal that the Taxpayer provides to the Farmers is a taxable telecommunications service.  Therefore, Farmers cannot use the agricultural exemption because it is limited to purchases of tangible personal property and does not apply to taxable services. However, Farmers can use the exemption on their purchases of GPS systems because the system itself is tangible personal property and is used to assist the Farmers in cultivating, harvesting, applying chemicals, and planting.

As for the transmission towers and concrete pads that the Taxpayer builds to send the signal to the GPS systems, these are considered an improvement to real property because the Taxpayer has a 99 year lease on the property and the tower only has a 25 year lifespan. However, any GPS electronic equipment that is installed at a tower location is considered tangible personal property since it can be easily removed without damaging the tower or the equipment.

Lastly, the Comptroller stated that the Taxpayer cannot claim an agricultural exemption on its purchases of repeaters, base units, and electronics equipment because the Taxpayer does not use the property directly in the production of agricultural or timber products for sale. Instead, the Taxpayer uses the property to perform a taxable service.

For Further Information

Texas Comptroller of Public Accounts – Letter No. 201302744L


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