Understanding Taxability
Understanding taxability can be confusing! Unfortunately, it’s rare to have a yes or no answer to a taxability question, especially when it comes to digital projects and services.
The devil is in the details! In this Texas case, the taxpayer offered the following services: website development, eCommerce technology, and fulfillment services. None of these services are specifically enumerated as taxable. So if you are going quickly and just looking at the big print, you could say these services are not taxable. However, the state of Texas has long held that data processing services are taxable and that services like this are taxable as data processing services. In this case, the state of Texas said that “the taxpayer’s services included the conversion of customer data into a compatible or electronic format and providing records of transactions that constituted the manipulation of data. Therefore, the staff met its burden to establish that the taxpayer provided taxable services.” Keep in mind that the answers to whether an item or service is taxable are not always in the statute, but in how the statute is being interpreted and implemented. It’s generally good practice to dig a little deeper when determining taxability. The first answer you see in a state statute or website isn’t the only or last answer. Rulings and guidance are often more important. Determining taxability is one of our core services.
By: Priya Sorathia
This blog is intended for educational purposes and not as tax advice. Tax policies and procedures change frequently, so specific information, such as thresholds, rates, etc. included in this blog may have changed since it was originally published. Please request a consultation for more in-depth information.