<# 00-038 #> <T Sales T> <K Intrastate Telephone Service K>

<S A taxpayer asks if it should still remit sales tax on its one-way paging and voicemail services, given the recent Supreme Court decision. S>

REQUEST LETTER

00-038

Response February 2, 2001

October 16, 2000

RE: Request for an Advisory Opinion bases on the Supreme Court decision between Industrial Communications vs. Utah State Tax Commission

To Whom It May Concern:

My attorney recently informed me of a Supreme Court decision between Industrial Communications and Utah State Tax Commission. It was ruled that Industrial Communications did not have to charge sales tax on one-way paging service since they are not a telephone company.

I am not a telephone company, but I have been charging sales tax on all paging services since I began operation. I am wondering if that is necessary since this ruling. I have also been charging sales tax on voicemail services, but am wondering if that too should be excluded since I am not a telephone company.

Could you please advise me on how I should proceed? Please call me if you have questions, or need further information.

Much Thanks,

NAME

RESPONSE LETTER

February 2, 2001

RE: Sales Tax on Paging and Voicemail Services

Dear Ms. NAME,

You indicate in your letter and by telephone that your company currently provides one-way pager and voicemail services, but not two-way services. In Industrial Communs, Inc., v. State Tax Comm=n, 2000 Utah Lexis 122 (2000), the Utah Supreme Court found that a company that only provided one-way pager services was not required to charge sales tax on this service. Because of this decision, you request the Commission to determine whether your company should continue to charge sales tax on its pager and voicemail services.

Your company provides its pager and voicemail services, as follows:

1) Pager service only. With this service, the client is given a telephone number by which he can be paged. When a caller phones the client=s pager number, she types in a number at which she can be reached. The caller=s number is then displayed on the client=s pager.

2) Pager service with an Aadd-on@ voicemail service. In addition to the pager service described under 1), the client may also receive voicemail service for an additional fee. In this case, when the caller phones the client=s pager number, she is given either the option to type in her own telephone number or to leave a recorded voicemail message. If she types in her own telephone number, her number is displayed on the client=s pager. If she records a message, the client=s own pager number is displayed on the pager, alerting the client to call his pager number and access the recorded message.

3) Voicemail service only. The client is given a telephone number at which callers can leave recorded messages. Though not alerted when messages are recorded, the client may retrieve his messages by calling his voicemail number and accessing them.

The application of sales tax on intrastate telephone services is administered pursuant to Utah Admin. Rule R865-19S-90 (ARule 90") (copy enclosed). While the current rule provides that both one-way and two-way pager services are subject to sales tax, we will soon revise the rule to eliminate the taxation of one-way pager services in accordance with the Industrial Communs decision. Thus, you are no longer required to collect sales tax on the one-way pager services described above.

On the other hand, you should continue to collect sales tax on your voicemail services. Section A.5.c. of Rule 90 provides that automated digital telephone answering services are subject to sales tax. The only telephone answering services exempt from taxation are those where messages are received or relayed by a human operator (Section C.3.) One of your services combines one-way pager service with a voicemail add-on. While the charge for the pager service is not subject to sales tax, the additional cost for the voicemail service is taxable. Accordingly, you should invoice these charges separately and collect sales tax only on the voicemail charge. Should you invoice both the taxable pager service and the nontaxable voicemail service as a combined charge, the entire charge is taxable.

We will send you a copy of the proposed amendments to Rule 90 once they are published in January, along with the date of the public hearing related to the amendments. Please feel free to send in any comments you would like us to consider prior to the hearing. Should you have any other questions, please contact us.

For the Commission,

Pam Hendrickson

Commission Chair

enc.

PH/KC

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