TX: Taxable Services – Data Processing
TX: Understanding the “taxable services” concept in Texas is essential for businesses and service providers. These services cover various categories, each with specific details and exemptions. Data processing services are taxable services in Texas.
What is Taxable Data Processing?
Taxable data processing services in Texas are defined in Tax Code Section 151.0101. This category includes various services where computers are used for word processing, data entry, production, compilation, storage, or manipulation. It’s important to note that 20% of the charge for data processing services is exempt from tax, providing some relief for businesses and consumers.
Examples of Taxable Data Processing Services:
- Check Preparation: Services related to preparing checks for various financial transactions fall under taxable data processing. This includes payroll and accounts payable checks.
- Accounts Payable or Receivable Preparation: Any data processing related to accounts payable or receivable, such as invoice generation and tracking, is considered taxable.
- Web Hosting, Site Creation, and Maintenance: Services associated with creating, hosting, and maintaining websites are taxable data processing services.
- Data Storage, Including Offsite Backup: Storing electronic files, including offsite backup services, is subject to taxation.
- Conversion of Data: Any service that involves converting data from one medium to another, such as digitizing paper documents or videotapes, falls under taxable data processing.
Additionally, certain activities, such as the transcription of medical dictation by medical transcriptionists and internet advertising provided through various online formats, are not subject to sales tax when displayed on an internet website owned by another person.
For further guidance on data processing services and their tax implications in Texas, refer to Rule 3.330, Data Processing Services, and Publication 94-127, Data Processing Services are Taxable.
About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.