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A BILL TO BE ENTITLED
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AN ACT
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relating to the exclusion of certain payment processing services |
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from the definition of "data processing service" for purposes of |
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sales and use taxes. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 151.0035, Tax Code, is amended to read as |
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follows: |
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Sec. 151.0035. "DATA PROCESSING SERVICE". (a) "Data |
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processing service" includes: |
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(1) word processing, data entry, data retrieval, data |
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search, information compilation, payroll and business accounting |
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data production, and other computerized data and information |
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storage or manipulation; |
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(2) the performance of a totalisator service with the |
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use of computational equipment required by Subtitle A-1, Title 13, |
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Occupations Code (Texas Racing Act); and |
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(3) [, and other computerized data and information |
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storage or manipulation. "Data processing service" also includes] |
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the use of a computer or computer time for data processing whether |
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the processing is performed by the provider of the computer or |
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computer time or by the purchaser or other beneficiary of the |
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service. |
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(b) "Data processing service" does not include: |
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(1) the transcription of medical dictation by a |
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medical transcriptionist; |
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(2) services exclusively to encrypt electronic |
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payment information for acceptance onto a payment card network |
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described by Subdivision (3)(E) to comply with standards set by the |
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Payment Card Industry Security Standards Council; or |
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(3) settling of an electronic payment transaction by: |
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(A) a downstream payment processor or point of |
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sale payment processor that routes electronic payment information |
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to an entity described by Paragraph (C) or (E); |
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(B) a person who is engaged in the business of |
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money transmission and required to obtain a license under Section |
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151.302(a), Finance Code; |
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(C) a federally insured financial institution, |
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as defined by Section 201.101, Finance Code, that is organized |
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under the laws of this state, another state, or the United States, |
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or an affiliate of the institution; |
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(D) a person who has entered into a sponsorship |
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agreement with an entity described by Paragraph (C) for the purpose |
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of settling that entity's electronic payment transactions through a |
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payment card network; or |
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(E) a payment card network that allows a person |
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to accept a specific brand of debit or credit card by routing |
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information and data to settle an electronic payment transaction. |
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(c) For purposes of Subsection (b)(3): |
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(1) "Downstream payment processor" means a person |
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described by 7 T.A.C. Section 33.4(c), as that provision existed on |
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January 1, 2021. |
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(2) "Point of sale payment processor" means a person |
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described by 7 T.A.C. Section 33.4(d), as that provision existed on |
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January 1, 2021. |
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(3) "Settling of an electronic payment transaction" |
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means the authorization, clearing, or funding of a payment made by |
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credit card, debit card, gift card, stored value card, electronic |
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check, virtual currency, loyalty program currency such as points or |
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miles, or a similar method. The term does not include charges by a |
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marketplace provider, as that term is defined by Section 151.0242. |
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(d) "Data storage," as used in this section, does not |
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include a classified advertisement, banner advertisement, vertical |
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advertisement, or link when the item is displayed on an Internet |
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website owned by another person. |
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SECTION 2. The changes in law made by this Act do not affect |
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tax liability accruing before the effective date of this Act. That |
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liability continues in effect as if this Act had not been enacted, |
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and the former law is continued in effect for the collection of |
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taxes due and for civil and criminal enforcement of the liability |
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for those taxes. |
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SECTION 3. This Act takes effect October 1, 2021. |