Chapter 4 - Telecommunications Infrastructure Fund
The Telecommunications Infrastructure Fund (TIF) is described in the Utilities Code, Title 2. Public Utility Regulatory Act, Subtitle C, Telecommunications Utilities, Subchapter C. This includes Sections 57.041 through 57.051.
The provisions relating to the TIF apply to both telecommunications utilities and commercial mobile service providers. In Section 57.043, the Telecommunications Infrastructure Fund is created as an account in the General Revenue Fund, funded by an annual assessment which is described in Section 57.048.
The annual assessment is described in Section 57.048 of the Utilities Code. The assessment is imposed on each telecommunications utility and each commercial mobile service provider doing business in this state. The assessment is imposed at the rate of 1.25 percent of the taxable telecommunications receipts of the telecommunications utility or commercial mobile service provider. Taxable telecommunications receipts" means the taxable telecommunications receipts reported under Chapter 151, Tax Code.
When the fund was first created on September 1, 1995 , the Comptroller was to assess and collect a total annual amount of $75 million from telecommunications utilities, and a total annual amount of $75 million from commercial mobile service providers (a total of $150 million each fiscal year.) Each telecommunication utility and each commercial mobile service provider paid an annual assessment based upon the result of their annual taxable telecommunications receipts reported for sales tax (Chapter 151, Tax Code) divided by the total annual taxable telecommunications receipts reported by all telecommunications providers under Chapter 151. In order to collect $75 million annually from each group, the Comptroller had to determine the tax rate per quarter and notify the companies what the tax rate for the next quarter would be. Consequently, the TIF rate varied every quarter from 954 through 972, when the statute was amended to establish the flat rate of 1.25% of taxable telecommunications receipts.
Repealed: In the 80th Legislative Session, House Bill 735 repealed Subchapter C, Chapter 57, Utilities Code. It also provided that the assessment for the calendar quarter ending in September 2008 is due on the last day of October 2008, and the assessment may not be imposed after the end of the calendar quarter ending in September 2008. However, Section 57.048, Utilities Code, is continued in effect for the collection of the assessment and enforcement of that liability. That means that although the assessment will not be collected and remitted for periods after September 2008, the audit responsibility will continue until those periods are out of statute.
- Tax types:
- Telecommunications Utilities = 24
Commercial Mobile Service Providers = 25
- Utilities Code, Title 2, Subtitle C, Telecommunications Utilities
Chapter 57, Distance Learning and Other Advanced Services
Subchapter C, Telecommunications Infrastructure Fund
- Tax Code, Chapter 111:
- General Provisions of the Tax Code apply, which includes the right to a DRO conference, redetermination hearing, and all collection action. The statute of limitations is also imposed.
- Rule 3.1101. Telecommunications Receipts, Assessment Determination, Due Date for Assessment Report and Payment, Auditing, Records, and Assessment.
Assessment Rate — Rule 3.1101:
|963, 964, 971
- For all periods due on or after 1-1-2000, the interest rate fluctuates annually at prime +1%, the same interest rate as on sales and use tax. Credit interest will be allowed on credits for periods due on or after 1-1-2000, at the same rate as the delinquent interest.
- If 1-30 days late, penalty is 5% of the tax due. If more than 30 days late, penalty is 10% of the tax due.
- Due Date:
- Quarterly: Assessment is payable quarterly with payments due on January 31, April 30, July 31 and October 31 of each year. (Rule 3.1101.)
Initial report: Due date was extended from October 31, 1995, to January 31, 1996. The initial report covered the period September 1, 1995, through December 31, 1995. The period used to base the initial assessment included September 1, 1994, through August 31, 1995.
- Reported Data:
- All information is maintained on the mainframe computer under tax codes 24 and 25. A history of reported information can be ordered using XIRPTS, Audit History.
- Any information provided to the Comptroller by a telecommunications utility or commercial mobile service provider under this section is confidential and exempt from disclosure under Chapter 552, Government Code. (Utilities Code, Section 57.048)
- Agreement to Extend Period of Limitation:
- For ""Type of Tax"" use:
- "Telecommunications Infrastructure Fund - Utility Companies, Utilities Code, Chapter 57" or
- "Telecommunications Infrastructure Fund - Commercial Mobile Service Providers, Utilities Code, Chapter 57."
"Telecommunications utility" means:
- a public utility;
- an interexchange telecommunications carrier, including a reseller of interexchange telecommunications services;
- a specialized communications common carrier;
- a reseller of communications;
- a communications carrier who conveys, transmits, or receives communications wholly or partly over a telephone system;
- a provider of operator services as defined by Section 55.081, unless the provider is a subscriber to customer-owned pay telephone service; and
- a separated affiliate or an electronic publishing joint venture as defined in Chapter 63.
Utilities Code, Title 2, Subtitle C,Sec. 51.002(11).
"Telecommunications provider" means:
- a certificated telecommunications utility;
- a shared tenant service provider;
- a nondominant carrier of telecommunications services;
- a provider of commercial mobile service as defined by Section 332(d), Communications Act of 1934 (47 U.S.C. Section 151 et seq.), Federal Communications Commission rules, and the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66);
- a telecommunications entity that provides central office based PBX-type sharing or resale arrangements;
- an interexchange telecommunications carrier;
- a specialized common carrier;
- a reseller of communications;
- a provider of operator services;
- a provider of customer-owned pay telephone service;
- another person or entity determined by the commission to provide telecommunications services to customers in this state; and
Communications carrier: a person that provides communications circuits
Reseller of communications: person who purchases telecommunications services (e.g., telephone numbers, minutes, or phone lines) and sells them, in part or in full, in the form acquired. For the purposes of this section, the term does not include a service provider who only provides electronic reception and retrieval of telephone messages even if that service is subject to sales tax as a telecommunications service. The term does include sellers such as hotels or motels that purchase basic local exchange telephone service or long-distance telecommunications service for resale to customers (e.g., charges for local or long-distance telephone calls)."
The term "telecommunications utility" does not include:
- a provider of enhanced or information services, or another user of telecommunications services, who does not also provide telecommunications services; or
- a state agency or state institution of higher education, or a service provided by a state agency or state institution of higher education. (Utilities Code, Title 2, Subtitle C, Section 51.002(10))
Examples of activities or businesses that may be subject to the TIF assessment:
(A) Telecommunications Utilities
- local exchange carriers
- long distance carriers
- resellers of local or long distance telecommunications services (9911888L)
- fax services
- separately stated charges for electronic filing of tax returns or other reports using a modem
- hotels or motels that charge for local calls, mark up long distance calls or charge for fax services
- owners or lessors that pay for telecommunications services for resale to guests or tenants
- electronic answering services (phone mail boxes)
- two-way radio service
(B) Commercial Mobile Service Providers
- cellular phone service providers
- paging companies
- mobile radio service providers that connect with the phone system
- companies that resell paging or mobile radio services
- specialized mobile radio service providers (Omnibus Budget Reconciliation Act of 1993)
- private carrier paging companies (Omnibus Budget Reconciliation Act of 1993)
Reimbursement of the TIF
The TIF assessment is levied against the telecommunications providers, not the customers. The statute does not authorize the sellers to act as collection agents on behalf of the state.
Section 57.048, Utilities Code, as amended by Senate Bill 1863, 79th Regular Session, 2005, allows the utility to recover from their customers a reimbursement of the assessment imposed on the utility after the total amount deposited to the credit of the fund is equal to $1.5 billion (excluding interest and loan payments). The statute also provides that the utility may only recover the amount of the assessment imposed after the total amount deposited to the fund is equal to $1.5 billion (excluding interest and loan payments).
Section 57.048 (h) requires the utility that wants to recover the assessment from their customer to file with the Public Utility Commission, by February 15 of each year, an affidavit of affirmation stating the amount that the utility paid to the comptroller during the previous calendar year and the amount the utility recovered from its customers in cumulative payments during that year.
Tax Code Section 111.016 requires that any monies represented and collected as a "tax" must be paid to the state in full; therefore, any TIF reimbursement collected from the customers must not be styled as a "tax" or "fee." It must be clearly labeled as a "reimbursement" of a portion of the service provider's liability for the TIF assessment. (200409887H)
If the utility or mobile service provider is collecting an amount for the TIF from their customer, the following procedures are to be followed:
- Regardless of the label used to collect a TIF amount from the customer, the amount collected from the customer for TIF is to be included in the taxable receipts bases for both sales tax and the TIF tax. See Example #1 below.
- If the utility company is collecting a TIF amount from an exempt customer which should be excluded from taxable receipts, the TIF amount collected from the exempt customer should be scheduled as error tax in the sales tax audit (regardless of how it is labeled). (200202792L, 200103615L) See Example #2 below.
- If the utility company collects a TIF amount from the customer in excess of the amount paid to the state, the excess amount is to be scheduled as error tax in the sales tax audit (regardless of how it is labeled). (200103615L) See Example #2 below
- If the utility company has been collecting a TIF amount from the customer which has not been labeled as a "reimbursement", the auditor is to
- schedule the TIF amounts on a separate audit exam for error tax in the sales tax audit, and
- ask the taxpayer to sign the TIF Reimbursement Agreement form.
- If the taxpayer refuses to sign the agreement or refuses to change their billing procedures to reflect the amount collected as a "reimbursement", the auditor is to include the exam for error tax in the sales tax audit and process the audit with the exam included.
- If the taxpayer agrees to sign the form and change their billing procedures within 90 days of the date of the document, the auditor is to hold the sales tax audit for the 90 day period, and then verify if the billing procedures have been changed. If so, the sales tax audit should be processed without the exam for the error tax. If not, the sales tax audit should be processed with the exam for error tax included.
- If the utility company has been collecting a single amount from the customer as a reimbursement for taxes, and the charge does not identify the taxes included in the single charge (i.e., sales, TIF, and others), any amount that exceeds sales tax paid to the Comptroller should be set up as error tax.
Calculation Example #1 (amount to be included in taxable revenue base):
Quarterly Assessment Rates
|Amount subject to tax
Calculation Example #2 (with Error tax):
Quarterly Assessment Rates
|Total tax due
If a local exchange company (LEC) does billing and collection on behalf of a long distance carrier, the LEC can do one of two things:
(1) The LEC may, by contract, agree to pay the TIF assessment on behalf of the long distance carrier for which it provides the billing and collection services, and then bill them for the expense, or
(2) The LEC may contract with those long distance carriers, agreeing that the long distance carriers will remit the TIF assessment directly to the state. The LEC would then be responsible for providing the Comptroller with the names and addresses of the individual long-distance carriers entering into this agreement.
The LEC may remit sales tax on behalf of the long distance carrier, or pass it through to the long distance carrier for them to remit. The TIF assessment is based on telecommunications receipts reported by the utility under Chapter 151 of the Tax Code. Accordingly, the LEC will be responsible for payment of the TIF assessment if a long distance carrier for whom the LEC remits sales tax fails to remit the TIF assessment. When the LEC passes through the sales tax to the long distance carrier, the long distance carrier is responsible for payment of the TIF.
Generally, TIF can only be refunded to the taxpayer that remitted the TIF to the Comptroller.
- Permitted taxpayer requesting refund of TIF. The taxpayer should make request for refund to the Comptroller and provide detailed information on the amount of refund, periods involved, and reason for refund. They are only allowed to request a refund for TIF they remitted, not for TIF they paid to another provider/vendor.
- If the permitted taxpayer feels that they have paid TIF in error to their provider, they must seek a refund from the telecom provider. Even thought the taxpayer is permitted for sales and use tax, they have no standing to request a refund from the Comptroller for the TIF they paid to the telecom provider. They must either get the refund from the provider or obtain a refund assignment from the provider which can be presented to the Comptroller. (200508264L, 200508291L), 200307075H)
- Non-permitted taxpayer requesting refund of TIF paid to provider/vendor: The non-permitted taxpayer must request refund of TIF directly from the telecom provider. If telecom provider gives the taxpayer a Refund Assignment, we must verify that the permitted provider/vendor paid the tax to the Comptroller and had not previously received a refund for this portion.
A reseller of telecommunications services may issue a resale certificate to the telecommunications provider in lieu of paying them sales tax. Then the reseller is responsible for paying the sales tax on the telecommunications service, and, as a provider of telecommunications service, is also responsible for paying the TIF assessment on taxable telecommunications services. Since the TIF assessment is on the provider rather than the consumer, and is imposed on receipts subject to sales tax, a provider is not required to pay the TIF on receipts from a customer who provided a resale certificate.
The decision to charge the customer the reimbursement of the TIF tax is a business decision of the provider. If they do so, they must collect sales tax on the charge for the TIF reimbursement because it is part of the total sales price regardless of how it is labeled. The TIF billed to the customer becomes a part of the sales price of the service, whether it's hidden in the price of the service or separately identified as a reimbursement, tax or other overhead expense. (9911888L, 9706571L)
Hotels and motels purchase telecommunications services from the telecom utilities. Some hotels/motels charge their hotel guests for making local or long distance phone calls.
If the hotel/motel is paying sales tax and TIF reimbursement to their telecom provider, and charging guests for telecom services, the hotel/motel owes sales tax and TIF on any mark-up charged on those phone calls. The hotel/motel should be permitted for both sales tax and TIF.
Option 1: The hotel/motel should pay TIF on the marked-up portion only. They are not allowed to take a credit on their tax return for the TIF paid to the telecom provider. (9601855L)
Option 2: The hotel/motel issues a resale certificate to the telecom utility. They should report TIF on the entire amount charged to the hotel guest. (9601855L)
Option 3: Hotels that do not use dedicated lines and that pay sales tax on all purchases of basic local exchange service must be able to accurately compute the cost of basic local exchange service resold to guests on which sales tax was paid in order to take a deduction from the TIF assessment base. This is the same manner in which sales tax is treated. (9601855L)
TIF Assessment Base
(references italicized in parentheses refer to documents on STARS)
Note:If the particular activity should be reported under a Telecommunication Utility only (tax code 24), the notation "(24)" will be shown on the activity. If the particular activity should be reported only for a Commercial Mobile Service Provider under tax code 25, the notation "(25)" will be shown. If neither tax code is noted, the activity could be reported under either tax code 24 or 25 as appropriate to the taxpayer.
Telecommunications utilities and commercial mobile service providers, including resellers, shall pay the assessment on charges for any of the following:
- Accounting code charges, i.e., for use by a customer to identify individual users and allocate the cost of long distance service
- Account initiation fees, new or existing
- Administrative charges, i.e., for system engineering and consultation, network analysis reporting, or access coordination
- Answering services, human operator, effective October 1, 1991 (9111L1138F12)
- Automated receiving and relaying of telephone messages if charged by the utility company (i.e., centralized voice mail service where incoming calls are recorded and stored for subsequent retrieval by subscribers who pay a flat periodic fee for use of the system) (9612928H)
- Auxiliary services (call waiting, call forwarding, etc.)
- Bad debt deductions for taxable receipts on which TIF was previously paid
- Bad debt recoveries related to taxable receipts
- Bandwidth, sold as a separately stated charge from web hosting or internet (200209314L)
- Basic feature charges, i.e., fees for services of call arrangement, call allocation, message referral, and time interval routing
- Basic local exchange telecommunications service (24)
- Caller mail box provided by newspaper to advertisers, where parties can call the mail box and respond to an ad (9504136L)
- Charges for call detail and traffic analysis (8911L0962D07)
- Coin-operated telephone receipts (excluding private pay/customer-owned pay telephones) (24) (9202L1162B08, 9603034L)
- Commercial mobile telephone service, including roaming charges (25)
- Charges relating to access to or actual usage of a computer communications network, including:
- slots dedicated to certain customers to assure usage during peak times
- fixed prices for use of a virtually private network with a mesh configuration
- charges for usage of the network based on time and data volume. (9703143H)
- Connect, Disconnect, and Reconnect fees for service to ultimate consumer
- Directory assistance charges (9702548H)
- Directory listings
- Dispatch service for truck radios if connected to public switch network (9709332L)
- Electronic transmission of recorded messages (9911915L)
- Electronic tax return filing (24) (8802L0864A11, 9011L1059D08, 9201L1157B08, 9606615L)
- Email, if it originates in Texas and is billed to a telephone number, billing, or service address in Texas (24) (9703143H, 9701189L, 200208399L)
- Email only IDs (24) (9909669L)
- Enhanced services (i.e., metro service, extended area service, multi-line hunting, PBX trunk, etc.) (200505180H)
- Equipment sales, leases, rentals of telecommunication equipment provided to a customer as part of the telecommunications service, including separately stated charges for installation, maintenance and repair. (9902257L)
- Separately stated charges for labor to install wiring will not be taxable if the wiring is installed in new structures or residences in such a manner as to become a part of the realty.
- Separately stated charges for labor to install wiring in existing nonresidential real property are taxable.
- If charges for wiring and equipment are not separated, the total charge will be treated as a sale and installation of tangible personal property.
- Equipment sold to customers and invoiced separately from telecommunications services is excluded. Separately stated charges for maintenance or repair of customer-owned equipment are excluded.
- Expedite charges, i.e., for the expedited processing a customer's service order
- FAX service (24) (9709807L, 200001015L)
- Hotels/motels' charges to hotel guests for telecommunications services (200307997L)
- If the hotel pays sales and TIF tax to their telecommunications provider, and they also charge their hotel guests for any telecommunications services, i.e., marked-up long distance calls, the hotel owes sales tax and TIF on the marked-up portion of the long distance calls.
- If the hotel issues a resale certificate to their telecommunications provider, the hotel should not pay sales tax or TIF to the provider. The hotel will then owe sales tax and TIF on all telecommunications services used and charged to guests, including local, long distance, fax, etc.
- If the hotel issues a resale certificate to their telecommunications provider, and pays TIF tax to the provider but not sales tax, the hotel owes sales tax and TIF on all telecommunications services used and resold. No credit can be allowed for TIF taxes paid to the telecomm provider. Since TIF tax follows sales tax, the resale certificate issued is in lieu of both sales and TIF taxes.
- Installation of telecom services (service connection fees)
- Interest earned on security deposits (200204035L)
- Internet telephony billed on a bulk basis
- LAN: charges for connecting local area networks in different locations (9703143H)
- Lease or sale charges by the public utility for any service, product, or commodity described in the PURA
- Long distance charges, intrastate and interstate, which are both originated from and billed to a telephone number or billing or service address within Texas. If a call originates in Texas and is billed to a Texas service address, the charge is taxable even if the invoice, statements, or other demand for payment is sent to an address in another state.
- Maintenance and repair of equipment, charges in connection with telecom service, including pagers (9902257L)
- Minimum billing charges (200204035L)
- Minimum usage charges, i.e., a charge to customers who fail to meet their network commitment for a specified period of time (9703143H)
- Mobile radio repeater service, where a signal from a two-way radio is received, amplified, and re-transmitted to other radios for communication with each other (9505133L)
- Monthly fees for 800 or 900 telephone number service (flat rate) (8911L0962D07)
- Motor vehicle GPS tracking systems using cellular telephone service purchased for resale (9706571L)
- Move/change charges for telecommunications equipment
- Paging services, including airtime fees, pager equipment and accessories provided to a customer as part of a telecommunications service (25) (9902257L). Revenue from equipment and accessories sold to customers and invoiced separately from the telecom service is not subject to TIF. Separately stated charges for maintenance or repair of customer-owned equipment are also excluded from TIF.
- "Patching" service, where phone lines are connected allowing the callers to talk directly. May be done by live operators or with the use of "patching" equipment.
- charges for both labor and equipment are taxable.
- If the charge for the "patching" is not separated from the charge for the live answering service, the entire charge is taxable. (8912L0970G02)
- Penalties and forfeited customer deposits (200204035L)
- Prepaid calling cards sold before September 1, 1997. (24) (200106332L, 9709750L)
Revenue from services provided through rechargeable telephone prepaid calling cards sold prior to 9-1-97 are subject to the TIF assessment until the value purchased prior to that date is consumed. The TIF assessment is not due on cards sold on or after September 1, 1997. (200106332L, Tax Policy News - Sept/Oct 1997, Tax Policy News - July 1998, 9904357L)
- Prepaid calling cards sold through a vending machine for $1 or less (24) (200106332L, 9801270L)
- Prepaid paging cards, separately stated (prepaid telecommunications services) (24) (9910771l)
- Private line services, including charges for related equipment. Taxable receipts include:
- channel termination charge imposed at each channel termination point within the state
- total channel mileage charges imposed between channel termination points or relay points within the state
- an apportionment of the interoffice channel mileage charge that crosses the state border. An apportionment on the basis of the ratio of the miles between the last channel termination point in Texas and the state border to the total miles between the channel termination point and the next channel termination point in the route will be accepted. Other methods may be used if first approved in writing by the comptroller.
- Radio signal booster service (8509L0663D03)
- Receipts from long distance carriers for handling the billing of the customers' end user charges for intrastate charges.
- Reimbursements: charges that represent taxes or assessments levied on a utility and that are passed on to its customers. These charges become a part of the sales price of the telecom service and are subject to tax in the same manner as the service itself, when passed through to the customer: (9908626L, 200204037L) These include:
- municipal franchise fees
- Texas Universal Service Fund assessment (TUSF) (9805729L)
- Federal Universal Service Fund assessment (FUSF) (200202792L, 9805729L)
- Expanded local calling service surcharges (ELCS)
- Local number portability service charges (LNP)
- FCC approved customer line charges
- Telecommunications Infrastructure Fund fee (TIF) amounts collected from the customer (regardless of how it is labeled)
- PUC Gross Receipts Assessment
- Federal presubscribed interexchange carrier charges (PICC)
- Extended Area Service Fee (EAS)
- FCC Subscriber Line Charge (SLC)
- Satellite transmission service to transmit signals from one location to another, including video uplink and downlink (200010834L, 9810843L, 8906L0944F10)
- Special service charges, i.e., for special reports and information provided for customers with services such as 800 numbers
- Teleconferencing service charges (9002L0978E02)
- Telegraph services (24)
- TIF Reimbursement: Any amount collected from the customer as a TIF reimbursement (regardless of the exact name used) which exceeds the actual tax rate remitted to the Comptroller, including all TIF amounts collected from exempt entities.
- Transmittal of information between automated clearing houses and merchants (9910803L, 9809821L)
- Two-way radio service (9505133L, 9206L1176F03, 8910L0964G07, 8509L0663D03, 9006L1025D12)
- Tower access in connection with telecommunications services (9709332L)
- Transmission of signals (not provided by commercial radio or television stations licensed or regulated by the FCC) (9004L1019F12, 9103L1095D08, 9105L1115A07)
- VOIP: Voice over Internet Protocol, if the call originates in Texas (200205077L)
(references italicized in parentheses refer to documents on STARS)
- Access charges paid by interexchange carriers to other carriers for access to local telephone networks, if the local access charges are passed through to their subscribers (Attorney General Opinion JM-1280)
- Assessments and fees imposed upon the telecommunications customer rather than the telecommunications service provider: (9102L1155A01, 8902L0921F14, 200204037L
- 911 Emergency Service fees and surcharges
- Federal Excise Tax
- Broadcasts by commercial radio or television stations licensed or regulated by the FCC.
- Coin-operated telephones which are privately owned (9603034L)
- Deposits for telecommunications equipment or service (8911L0962D07)
- Directory advertising or sales
- Directory listings, if charges are separately stated
- Revenue from equipment and accessories sold to customers and invoiced separately from telecommunications services. (9902257L)
- Telecommunications services sold to exempt organizations and persons exempted from paying sales tax under Chapter 151, Tax Code, if used for the exempt purpose (9107L1122B11, 9110L1151C11, 20002792L
- Separately stated finance charges and late fees collected from customers. (9902257L)
- Insurance for repair of telecom equipment
- Internet access service that enables users to access the internet or email. The first $25 of the monthly charge is exempt from sales tax regardless of the billing period used by the service provider or whether the internet access service is bundled with another service. Effective 10-1-99. (9809821L)
- Long-distance telecommunications services which are not both originated from and billed to a telephone number or billing or service address within Texas.
- Maintenance or repair of customer-owned equipment if separately stated and invoiced (9902257L)
- Telephone prepaid calling cards sold on or after September 1, 1997. (Sec. 151.01032, Tax Code) (200106332L)
- Prepaid cards for downloading music, videos, ring tones, etc.
- Returned check charges
- Sales for resale where resale certificate was validly issued. (9911888L, 200106332L, 200508291L, 200505180H)
- Storage of data or information for subsequent retrieval or the processing, or reception and processing of data or information intended to change its form or content.
- Telegraph service that originates outside Texas.
- Unlisted phone number, a separately stated charge for non-published number
 House Bill 2128, 74th Legislative Session, 1995.