Texas: Internet Access Charges – Non Taxable
Texas: Beginning July 1, 2020, Texas will no longer impose sales tax on separately stated internet access charges due to the Internet Tax Freedom Act (ITFA) of 2016.
Federal law included a grandfather clause for those state and local governments, including Texas, who imposed a tax on internet services prior to October 1, 1998. This clause expires on June 30, 2020.
Bundled Charges
Effective July 1, 2020, when a service provider bundles the internet access with another taxable service, such as telecommunications service or cable television service, the service provider should not collect tax on the amount allocated to internet access if the service provider can establish through their books and records a reasonable allocation for the taxable service and for the nontaxable internet access. See Texas Tax Code Section 151.025(d) and Rule 3.313(b)(2), Cable Television Service and Bundle Cable Service. Rule 3.366, Internet Access Services, Rule 3.334 Telecommunication Services and Rule 3.313 are being amended to reflect this change in the taxability of internet access services.
If the service provider cannot establish a reasonable allocation for the nontaxable internet services, the entire charge for the bundled services is taxable.
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