(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
  (1) Bundled cable service--The provision of cable television service and at least one other taxable service by a cable service provider through a cable system for a single price. Other taxable services may include, but are not limited to, telecommunications services, as defined in §3.344 of this title (relating to Telecommunications Services); Internet access services, as defined in §3.366 of this title (relating to Internet Access Services); data processing services, as defined in §3.330 of this title (relating to Data Processing Services); information services, as defined in §3.342 of this title (relating to Information Services); and security services, as defined in §3.333 of this title (relating to Security Services). Services sold to a purchaser by a third party, rather than the cable service provider, are not bundled cable services even if they are provided by means of a cable system.
  (2) Cable service provider--A person who provides cable television service or bundled cable service through a cable system.
  (3) Cable system--The system through which a cable service provider delivers cable television or bundled cable service. A cable system may comprise any or all of the following: tangible personal property; real property; and other media, such as radio waves, microwaves, or any other means of conveyance now in existence or that may be developed.
  (4) Cable television service--The digital distribution of video programming to purchasers by any means now in existence or that may be developed. The term includes, but is not limited to, direct broadcast satellite service (DBS); subscription television service (STV); satellite master antenna television service (SMATV); master antenna television service (MATV); multipoint distribution service (MDS); multichannel multipoint distribution service (MMDS); fixed programming; any audio portion of a video program; streaming video programming provided via the Internet or other technology, regardless of the type of device used by the purchaser to receive the service; video on demand services or subscription services that allow purchasers to choose from a library of available content; and any other video programming provided in exchange for consideration. The term does not include the provision of tangible personal property, such as video content that has been downloaded by the purchaser or is stored on a compact disc or other physical media, or the provision of telecommunications services, as defined in §3.344 of this title.
  (5) Fixed physical connection--The place at a purchaser's residence or business where the cable service provider or its agent, or the purchaser, by agreement with the cable service provider, has installed any materials or equipment that connect the purchaser to the provider's cable system. For example, a coaxial cable connection at a distribution box or an outdoor antenna or dish that connects to a satellite receiver is a fixed physical connection. The connection of equipment, such as a personal computer, Internet-ready television, or other device that allows the purchaser to view content that is not provided directly by the cable service provider, does not create a fixed physical connection.
  (6) Nomadic access--The ability to access cable television service or bundled cable service from multiple locations with or without the use of a fixed physical connection.
  (7) Point of delivery--The physical address of the purchaser's fixed physical connection or, in the absence of such connection, the physical address of the purchaser at which the cable television or bundled cable service is considered to be received, as determined in subsection (g)(3) of this section.
(b) Imposition of tax. The sale of cable television or bundled cable service, and any services or expenses connected to the provision of the service, are subject to sales and use tax.
  (1) Taxable charges include:
    (A) service connection fees. The term "service connection fee" includes terms such as "installation," "connect," or "reconnect;"
    (B) charges for video programming services;
    (C) charges for tangible personal property, such as converters, descramblers, and digital video recorders, transferred to the care, custody, and control of purchasers as an integral part of the services provided;
    (D) amounts billed to purchasers for repairs or maintenance;
    (E) municipal franchise fees; and
    (F) any licensing fees for the right to receive or distribute a satellite signal.
  (2) Unrelated services.
    (A) A service will be considered as unrelated if:
      (i) it is not a cable television service or bundled cable service, nor a service taxed under other provisions of Tax Code, Chapter 151;
      (ii) it is of a type which is commonly provided on a stand-alone basis; and
      (iii) the performance of the service is distinct and identifiable.
    (B) Where nontaxable unrelated services and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the taxable service provider at the time the transaction occurs by separately stating to the purchaser a reasonable charge for the taxable services. If the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. The service provider's books must support the apportionment between exempt and nonexempt activities based on the cost of providing the service or on a comparison to the normal charge for each service if provided alone. If the charge for exempt services is unreasonable when the overall transaction is reviewed considering the cost of providing the service or a comparable charge made in the industry for each service, the comptroller will adjust the charges and assess additional tax, penalty, and interest on the taxable services.
(c) Deposits. A deposit that represents future payment for cable television or bundled cable service is part of the sales price of the service and is taxable when the deposit is used to pay for the service. A deposit paid to receive equipment that is transferred to the care, custody, and control of the purchaser as an integral part of the service, such as a converter that is returned to the cable service provider when the service is terminated, is not taxable.
(d) Sales for resale.
  (1) Taxable services. A cable service provider may issue a resale certificate to purchase a taxable service tax-free in the following circumstances:
    (A) if the service will be transferred as an integral part of the cable television or bundled cable service. For example, if a cable service provider sells a bundled cable service that includes data storage, and the provider purchases data storage capacity from a third party, then the provider may issue a resale certificate to the provider of the data storage capacity; or
    (B) if the service is performed on tangible personal property that the cable service provider will transfer to the care, custody, and control of the purchaser as an integral part of the cable television or bundled cable service. For example, if a cable service provider that provides digital video recorders or converters to purchasers hires a third party to repair a digital video recorder or converter, then the provider may issue a resale certificate to the repair service provider in lieu of paying tax on the repair service. See §3.285 of this title (relating to Resale Certificate; Sales for Resale).
  (2) Tangible personal property. A resale certificate may be used to purchase tangible personal property tax free if care, custody, and control of the property are transferred to the purchaser of the cable television or bundled cable service as an integral part of the service. For example, a cable service provider may issue a resale certificate to the seller of remote controls that are provided to purchasers of the cable television service as part of the sale of the service. See §3.285 of this title.
(e) Taxable purchases.
  (1) Taxable services. A cable service provider owes tax on its purchases of taxable services that are not transferred to purchasers as an integral part of a cable television or bundled cable service, but are instead used by the cable service provider in providing that service.
Cont'd...