Texas Ruling: Cryptocurrency Mining Machine Hosting Not Taxable

Texas Comptroller of Public Accounts issued a Private Letter Ruling (Ruling) regarding the case that involves a company that charges its customer an all-inclusive fee based on power usage to host cryptocurrency mining hardware machines in its Texas facility.

The Ruling was necessary because the company requested an answer regarding whether it is subject to Texas sales and use tax.

Facts of the Case and the Ruling

The company provides hosting services for cryptocurrency mining machines at its facility in Texas. The customer owns the machine, not the company. Customers have complete control over the machines remotely, and the company does not have access to any data or internal operations within the machine.

The company charges fees for services that include providing electricity and temperature control, installing the customer’s machines in the facility, providing internet access for machines, assisting them with the distribution of mined digital currency to third-party pools, maintaining and repairing the customer’s machines, and providing physical security for the facility.

If needed, and for an additional fee, the company provides technical services for more complex diagnosis, repair, and replacement of machines.

After reviewing the request for a private letter ruling, examining the consent of a hosting agreement, and based on information gathered during a video teleconference with the company, the Texas Comptroller of Public Accounts ruled that machine hosting is not taxable. In contrast, any repair services provided to customers are considered taxable repairs of tangible personal property.

Conclusion

The ruling distinguishes machine hosting services from website hosting services and qualifies them as non-taxable. However, the Texas Comptroller of Public Accounts noted that the company's machine repair services are taxable repairs under Texas sales and use tax laws.

The ruling is important for all companies involved in these services, especially given the increasing number of hosting facilities and cryptocurrency users.

Source: Texas Comptroller of Public Accounts - Private Letter Ruling