Sales/Use/Indirect:
Texas Letter Ruling Says Services Promoting Use of Credit Card Processor to Merchants are Not Taxable
Letter No. 202407021L, Tex. Comptroller of Public Accounts (7/24/24). The Tax Policy Division of the Texas Comptroller of Public Accounts issued a letter ruling involving a taxpayer that provides its clients with various technology-based services and also promotes the services of a third-party credit card processor to clients that accept credit cards as payment for goods and services, holding that the percentage-based “residual fees” the taxpayer receives from the credit card processor for each accepted merchant whose merchant’s agreement was submitted by that taxpayer are not subject to Texas sales and use tax because the taxpayer was not providing an enumerated taxable service under Texas law. Under the facts, the received “residual fee” is a percentage of the credit card processor’s income from fees charged to merchants after subtracting its own costs. The letter ruling explains that, under these facts, this residual fee compensates the taxpayer for promoting the credit card processor’s services and submitting executed merchant agreements to the processor, and that the performance of these activities does not fall under the services listed as taxable under Tex. Tax Code § 151.0101. Please contact us with any questions.
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