Based on the information provided to the Taxpayer by its vendors, 99% of the calling cards were used to call other countries. On the other hand, more than 50% of the Taxpayer's customers, the retail stores, were domiciled in Texas. Consequently, if the calling cards were considered telecommunications services, the Taxpayer's Texas receipts from the calling cards would be 1%. Conversely, if the calling cards were classified as intangibles, the Taxpayer's Texas receipts from the calling cards would be more than 50%.
Finding that the revenue from the calling cards should be considered revenue from telecommunications service, the judge noted that the North American Industry Classification System (NAICS) classifies prepaid calling cards as telecommunication services. In addition, the judge observed that, until the sales tax law was changed to specifically provide otherwise, the Comptroller considered prepaid calling cards to be telecommunication services. Therefore, the revenue from sales of prepaid calling cards was treated as Texas receipts when the calls originated and terminated in Texas.
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TECHNICAL INFORMATION CONTACTS:
Eric L. Stein
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