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Texas sales taxation of payment card management programs

By September 1, 2022March 27th, 2024Texas Sales Tax

Texas Sales Taxation of Payment Card Management Programs

Texas Sales Taxation of Payment Card Management Programs

The Texas Comptroller of Public Accounts has provided guidance on the sales and use taxability of payment card management programs. The taxpayer offers customers, such as food delivery services, the ability to manage and customize debit and prepaid cards used in their businesses. In Texas, “data processing” services are taxable services including: word processing, data entry, data retrieval, data search, information compilation, payroll and business accounting data production, and other computerized data and information storage or manipulation; and the processing of information for the purpose of compiling and producing records of transactions, maintaining information, and entering and retrieving information. However, processing of an electronic payment transaction is not data processing. Here, the taxpayer’s services are nontaxable because it maintains sponsorship agreements with issuing banks and card networks to facilitate its program. The taxpayer does not have regulatory authority to issue payment cards and must maintain the agreements with the banks who issue the cards to the taxpayer’s customers. Because the taxpayer is sponsored by issuing banks to settle electronic transactions and authorizes payment card transactions, the taxpayer’s program is a nontaxable payment processing service. (Texas Private Letter Ruling No. 202204028L, 04/29/2022 (released June 2022).)

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Ansari Law Firm

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