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Texas and the Taxation of Bundled Cable Services


 A different kind of bundled cable service.

Remember when watching television meant watching ABC, NBC, CBS, or the PBS station? When adding cable meant expanding options to HBO, C-SPAN, and ESPN? Remember the thrilling moment in 1981 when music videos got a channel of their own? Did life seem simpler then?

Reminiscences aside, cable is a different beast now. Or as the Texas Comptroller of Public Accounts says, “cable television has changed.” Cable service providers now use a variety of means to deliver content, including mobile devices. They also offer numerous services not related to television, such as telephone, internet access, and home security services. To account for change, The Texas Comptroller of Public Accounts has adopted an amendment to §3.313, which takes effect in Texas on February 16, 2014, and is outlined in the February 7, 2014 Texas Register.

The amendment to Texas §3.313 is “intended to clarify the application of existing tax law and policy to the provision of cable television and related services as those services, and the means of providing them, continue to involve.” Its title is no longer “Cable Television Service” but “Cable Television Service and Bundled Cable Service.”

In a nutshell, §3.313 now adds a definition for “bundled cable services,” “cable service provider,” and “cable system.” The definition of “cable television service” is modified to include “all forms of video programming, including streaming video, whether provided via the Internet or other technology.”

As additional services impact billing, the billing practices of cable service providers have also changed. These days, cable television services are often offered “together with other taxable services in a ‘bundle,’ meaning that all of the services are provided for a single monthly charge.” Unless otherwise exempt, bundled transactions are subject to sales and use tax.

The comptroller hopes that these additional and amended definitions “will streamline the application of state and local sales tax to all video programming and to all services sold in a bundle with video programming, thereby simplifying cable service providers’ tax collection responsibilities.”

Sourcing

The amendment also provides guidance for the sourcing of sales of cable services. A new subsection [(a)(7)] defines the previously undefined term “point of delivery.” In brief, “local tax is due on the sale of cable television and bundled cable service based upon the point of delivery to the purchaser.” Basically, you pay the sales tax rate of the town where the cable service comes through to your home or business.

Exemption for direct-to-satellite service providers

Federal law provides for an exemption from sales tax for direct-to-satellite service providers. Therefore, bundled cable services “provided by means of a direct-to-satellite connection is taxed in the same manner as cable television service provided through such a connection.”

This change takes effect on February 16, 2014.

Not detailed enough? Read the Texas Register.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.