By Elizabeth Cha and Charlie Kearns

In Hegar v. CheckFree Serv. Corp., a Texas Court of Appeals affirmed the trial court’s decision and held that the taxpayer’s online bill pay service was not a taxable data processing service for Texas sales tax purposes. Based on the trial court’s uncontested factual findings, the taxpayer provided “a professional service— facilitated by the use of computers and an electronic commerce system—that required the oversight and management of thousands of certified specialists to achieve the goal of paying the [customer’s bills].” The court of appeals noted that any activities the Comptroller labeled as data processing services were incidental to the professional services provided by the taxpayer. Thus, the court of appeals determined that the “essence of the transaction” was the sale of professional services, not data processing services. Hegar v. CheckFree Serv. Corp., No. 14-15-00027-CV (Tex. App. 14th Dist., April 19, 2016).