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.