Texas Gross receipts from services are apportioned based upon customer location

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May 24, 2017

Overview

Receipts from risk and fraud prevention services are sourced to the location of a taxpayer’s customers. Texas sources service receipts to the location where services are performed. The Comptroller interprets where services are performed based on the location of the ‘end-product act,’ which does not include support activities. Under this policy, the Comptroller ruled that receipts from risk and fraud prevention services are sourced to the location of a taxpayer’s customers.

In this letter ruling, the Comptroller found the end-product act is the taxpayer’s response to service requests, which are provided at customer locations. The taxpayer’s processing of information is a support activity and does not determine the apportionment of the taxpayer’s receipts.

Texas service providers - especially those with Texas technology or communication infrastructures with out-of-state customers – should consider whether they should source service revenue consistent with the rationale provided in the Comptroller’s ruling.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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