For clients residing, or doing business, in Texas, many Internet-related services are subject to Texas sales tax. Here is a list of some of the services we have addressed:
- Charges for providing access to the Internet are taxable. Effective October 1, 1999, the first $25 charged per month for Internet access services is exempt from Texas sales tax.
- Scanning information or data into the net and the creation of “HTML” documents is a taxable data processing service (with the 20% exemption explained below).
- Creating graphics or logos using a drawing program for a client’s homepage is taxable as graphic arts.
- Posting/hosting web pages on a server are taxable data processing services (with the 20% exemption explained below).
- Transmitting information between automated clearing houses and merchants is a taxable telecommunications service.
- Providing access to information (databases maintained by the seller of the service) on the Internet is a taxable information service (with the 20% exemption explained below).
- Separate fees for licensing and completing applications for domain names are not taxable.
- Charges for continuing education classes on the Internet are not taxable.
- Charges for submitting Web site information to search engines are not subject to tax.
- Sales of maps over the Internet are taxed as information services (with the 20% exemption explained below).
- Sales of software over the Internet are subject to sales tax if the software is downloaded to a location in Texas. No tax is due on sales of software downloaded to a location outside of Texas. The retailer must retain records to show the customer’s out-of-state location if the software is downloaded to a point outside of Texas.
Note: 20% of the charge for information services and data processing services is exempt from sales tax. For example, Web page creation and domain hosting are treated as data processing services and 20% of the charge is exempt from Texas sales tax.