Hi folks! Welcome back to the Texas Tax Roundup, September 2023 edition. We got some insurance services, data processing services, and amusement services (a pretty sales tax heavy last month). Let's see what went down!


Battery Sales Fee

34 Tex. Admin. Code § 3.711, 48 Tex. Reg. 5739 (Sept. 29, 2023)—The Comptroller adopted proposed amendments to Rule 3.711, relating to the battery sales fee, without change. These amendments implement S.B. 477, 87th R.S. (2021), which required marketplace providers to collect applicable fees related to the sale of lead-acid batteries.

Notable Additions to the State Tax Automated Research ("STAR") System

Sales and Use Taxes

Insurance Services

STAR Accession No. 202308020L (Aug. 21, 2023)—In this private letter ruling, the Comptroller determined the taxability of various services provided by an employment benefit recordkeeping services provider, retirement plan third-party administrator, and government savings facilitator. The Comptroller found that the taxpayer's flex spending account services (which involved the design, implementation, and administration of employee health reimbursement and flex spending accounts), Omnibus Budget Reconciliation Act (COBRA) administration services, and retire plan administration and 401(k) recordkeeping services were nontaxable services. The taxpayer's Affordable Care Act (ACA) comprehensive and eligibility verification service (which involved evaluating employees' eligibility or qualification for insurance coverage under the ACA) was a taxable insurance service.1 The taxpayer's ACA reporting service (which involved the automated generation, printing, distribution, and filing of IRS Forms 1094-C and 1095-C) was a taxable data processing service.2

Amusement Services

STAR Accession No. 202309029L (Sept. 25, 2023)—In this memo to Audit, Tax Policy states that Comptroller policy is that electronic games and associated content are taxable amusement services.3 This is the case regardless of whether access is purchased through a game's website or a redeemable card. Associated content that is taxable includes:

  • virtual goods, nonphysical objects, or virtual currency purchased for use within the electronic game or game community;
  • additional game content such as expansion packs, bonus levels, and hidden content;
  • game-play enhancements such as new or different objects, powers, or similar items; and
  • aesthetic enhancements such as avatar appearances and clothing.

Large Data Centers

STAR Accession No. 202308018L (Aug. 15, 2023)—In this private letter ruling, the Comptroller determined that a taxpayer that is the sole qualifying owner and qualifying operator of a certified large data center project could expand the project to an adjoining lot that would be owned by an affiliate of the taxpayer. A large data center project may claim a sales tax exemption on certain tangible personal property that is necessary and essential to the operation of the project, including computer hardware and software, electrical systems, cooling systems, and electricity.4 A "large data center project" is defined as a project that is located in Texas and is composed of one or more buildings comprising at least 250,000 square feet of space located on a single parcel of land or on contiguous parcels of land that are commonly owned or owned by affiliation with the qualifying operator.5 While a large data center project is limited to a single qualifying occupant, there is no limit on the number of qualifying owners of the project. Thus, the affiliate could be included as a qualifying owner of the project.

Successor Liability

Comptroller's Decision No. 119,197 (2023)—The administrative law judge found that a corporation that was acquired by its current shareholders after an audit period was still liable for sales and use taxes that the corporation had incurred under its previous ownership.


1. See id. §§ 151.0039 ("Insurance Service"), 151.010 (Taxable Item), 151.0101(a)(9) ("Taxable Services"), 151.051 (Sales Tax Imposed), 151.101 (Used Tax Imposed); 34 Tex. Admin. Code § 3.355(b) (Insurance Services).

2. See Tex. Tax Code §§ 151.0035(a) ("Data Processing Service"), 151.010, 151.0101(a)(12), 151.051, 151.101; 34 Tex. Admin. Code § 3.330(a)(1) (Data Processing Services).

3. Tex. Tax Code § 151.0028(b) ("Amusement Service"); 34 Tex. Admin. Code § 3.298(a)(1)(D) (Amusement Services).

4. Tex. Tax Code § 151.3595(b) (Property Used in Certain Large Data Center Projects; Temporary Exemption).

5. Id. § 151.3595(a)(2).

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