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Our Texas telecom cloud company wants to expand into other states. Are our services taxable in other states? Do we charge TX rate or other?

Full Question: We are a Texas based Telecom Cloud Port VoIP service provider, looking to expand our services to Oklahoma, Louisiana and possibly New Mexico. Would State sales and use taxes be applicable for customer services outside of Texas? If so, what tax rate is to be charges? Texas rates or the other state tax rates?

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Diane Yetter photoThe determination as to whether your services would be subject to tax in other states where you look to do business will be first dependent on whether your company establishes nexus in the other states. If you are not entering the state at all and doing all work remotely from TX, then nexus might not be established. However, this needs to be evaluated closely based on all your activities that may occur in the state include use of independent service or sales personnel, renting of equipment or facilities, or periodic visits into the states by your TX personnel (employees or independent). If it is determined that you do have nexus in these states, then you need to determine how the states will classify your product/service. Many states consider VOIP to be telecommunications and would tax this under their telecommunication taxes. However, if your product/service is a more traditional cloud service that is not a communication service, then it might be considered computer software or a cloud service. Without knowing more about your specifics, we can not provide specific guidance. We do offer consulting services and would be happy to talk to you about whether your activities create nexus and then how the states would classify your products/services to determine taxability in any state where you establish nexus. If you need further assistance with this matter, please feel free to contact us directly.

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