FAQs on Texas Sales Tax on Digital Advertising Sales
Background:
The State of Texas requires vendors to collect & remit sales tax to the State on taxable sales. In Texas, the state imposes sales tax on certain services, including data processing services. In the Texas tax code data processing is defined relatively broadly to include many digital services, including some digital services that Hearst offers advertising customers.
What is Taxable?
Per Texas State Tax law, the following services are taxable:
- Website Services
- Includes building, hosting, and maintenance.
- SEO
- Video Production
- Elements of native advertising products:
- Elements of that are taxable (web hosting, design & parts of content creation).
- Advertising Services are not taxable.
- We are estimating the taxable % at 20% and will use that across all native advertising sales.
What is the Tax Rate?
- Sales tax rate in most Texas Counties is 8.25%. The tax rate on video production will be 8.25%.
- For those services defined as data processing services, only 80% of the total amount is subject to sales tax, equating to a tax rate of 6.6%. The tax rate on website services, SEO and 20% of the value of Story Studio sales will be 6.6%.
Who will be Charged Sales Tax?
- Any Hearst | localedge customers located in Texas
- Purchasing taxable products (defined above)
- Non-Exempt Customers
- Customers will need to provide an exemption certificate if the transaction is not subject to Texas sales tax.
- Link for Form: https://comptroller.texas.gov/taxes/sales/forms/
- Common exemption reasons from paying sales tax include:
- Nonprofits
- Religious Organizations
- Education Organizations
- Government Entities
- Out of State Customers
- Multi State Customers – A multi-state customer purchasing services for the benefit of both in-state and out-of-state locations is responsible for issuing an exemption certificate asserting a multi-state benefit, and for reporting and paying the tax on that portion of the data processing charge which will benefit the Texas location.
- Guidance from State of Texas on Sales Tax Exemptions: https://comptroller.texas.gov/taxes/publications/96-1045.php
Do Agencies Need to Pay Sales Tax?
When the advertising agency acts as an agent for an exempt entity, the agency can issue the client’s properly completed exemption certificate to the seller in lieu of sales tax.
However, when the advertising agency acts as an agent for a non-exempt client, the agency must pay tax to the supplier on taxable items unless the item is for resale by the agency’s client. In this case, the agency can submit the client’s properly completed resale certificate with the supplier’s name to the supplier in lieu of sales tax. The agency may not issue the agency’s resale certificate in lieu of tax.
Why Change Now?
- We only recently became aware that these products were subject to Texas sales tax (in most states they are not).
- As a credible media partner, we must remain compliant to Texas sales tax laws by collecting sales tax or asking that our partners supply proper exemption documentation.
Who can help with questions?
- Please contact digitalcustomercare@nullhearstmediaservices.com with any questions about the Hearst process.
- Questions specific to the taxable status of your company or broader questions around sales tax should be directed to the State of Texas and / or sales tax professionals.