FIRST LETTER

I am writing to ask for clarification on the Mobile Telecommunications Sourcing Act. COMPANY has been remitting tax collected from wireless customers for nearly four years. This remittance was reported on Schedule B/D and was based on a tax district determined when the customer established service. The wireless tax district was based on the local calling area for that wireless exchange. For example the ### prefix has the ability to call the CITY area locally therefore it is considered to be in the CITY tax district, ### can call the CITY area locally and is considered to be in the CITY tax district, etc. This may not be the correct method, but we were consistent in the application.

With the recent request pertaining to the Mobile Telecommunications Sourcing Act we have had some questions arise. First, the information I have read advises taxes to be collected based on the billing address being the primary place of use. In our serving territory we have several areas where there is no wireless service available. One example is CITY, where we have approximately thirty wireless customers who purchased their phones knowing that they could not use them in their hometown. They use the mobile phone only when they travel, and they have to travel at least 45 miles to get to any area where they have wireless signal. The second example is the business owner who purchases the phone for business use and does mot, if not all, of their business in CITY and CITY, but live in a small community where they is no wireless signal.

My point is not to argue what is fair or right, but I would like to know that we are not doing something wrong. From our discussion on the phone last week, I wonder if we were doing things right before. If you can give me any further advice please call me at PHONE.

SECOND LETTER

First, thanks for taking the time to attempt to help me understand. Second, I had one of our wireless employees help me find a few customers who fit the scenario we discussed earlier. We only spent a few minutes finding the following, so you can see that this issue is not a small one.

One customer is a finance company with a local office, but the billing address is in CITY, STATE. Another is a local employee of a company based in CITY, STATE, which is where the billing address is. We also found another news correspondent who lives in CITY but the bill goes to CITY, as well as several other similar situations.

The other issue I wanted to address is the customers who live in CITY, STATE. This community is not in our wireless licensed area, but has limited service due to signal leakage. In many cases the customers are only hundreds of feet from the area boundary, but the billing address is not within that area. The town of CITY, STATE is the location of our tower and is separated from CITY by a street. My question remains how to consistently treat customer accounts in these scenarios. I hope this is an acceptable explanation of the concerns we are faced with.

Please don't hesitate to call me at PHONE if I can be of any further help or if you have any other questions for me.

Sincerely,

NAME

RESPONSE LETTER

January 14, 2003

NAME

ADDRESS

PHONE

RE: Private Letter Ruling – Mobile Telecommunications Sourcing Act

Dear NAME,

We have received your request for clarification concerning the taxation of mobile telecommunications services under Utah Code Ann. §59-12-103(1)(b)(iii). Specifically, you ask how to source the taxes you collect on such services. Pursuant to S. B. 153, recently enacted by the 2002 Utah Legislature, the taxes collected on mobile telecommunications services are subject to the federal sourcing rules provided in the Mobile Telecommunications Sourcing Act, 4 U.S.C. Sec 116 et seq. (“MTSA”). Utah Code Ann. §59-12-207(4).

Section 117(b) of the MTSA provides that charges for mobile telecommunications services are subject to taxation by those taxing jurisdictions whose territorial limits encompass the customer’s “place of primary use.” The “place of primary use” is defined in Section 124(8) of the MTSA to mean the:

Street address representative of where the customer’s use of the mobile telecommunications service primarily occurs, which must be –

(A) the residential street address or the primary business street address of the customer; and

(B) within the licensed service area of the home service provider.

Accordingly, you should source the taxes collected on each account to the customer’s place of primary use, which is either the residential or business address that is located in your company’s licensed service area. To assist in the proper sourcing of taxes collected on charges for mobile telecommunications services, the Tax Commission sent you a data CD in July 2002 that should enable you to match your customers’ nine-digit zip codes to the appropriate taxing jurisdiction area, in accordance with the MTSA. Please contact Taxpayer Services Division if you encounter any problems in applying this information or using the CD.

You have asked how to determine the proper taxing jurisdiction area given a number of different fact scenarios, which we address as follows.

1. A mobile telecommunications customer is an out-of-state finance company with a local office, yet the billing address is in STATE. In this situation, the “place of primary use” is the address of the local office, in accordance with Section 117(b) of the MTSA. The taxes should be sourced to the jurisdictions comprising the taxing area that corresponds to the nine-digit zip code of the local office address.

2. Another customer is a local employee of a company that is headquartered in STATE. The bill is sent to STATE. The “place of primary use” is either the residential or business address of the local employee. Taxes should be sourced to this address.

3. A customer lives in CITY, but his or her bill is sent to an employer in CITY. As this situation is similar to Scenario #2, the taxes are sourced to the customer’s CITY address.

4. Some of your customers live in CITY. CITY is in your wireless licensed area, but you do not yet provide coverage there. Some of these customers only use the cell service when they travel. Others work in CITY and use the service there for business. If a customer who lives in CITY has a non-CITY residential or business address within your wireless licensed area where coverage is available, the taxes should be sourced to this address. For example, if an CITY resident has an apartment or office in CITY, the taxes should be sourced to the CITY address. If the CITY resident has no other address to which the taxes can be sourced, the taxes should be sourced to the CITY address. Otherwise, in accordance with Section 117(b) of the MTSA, the taxes should be sourced to the customer’s address in CITY, even though coverage is not yet available there.

5. Some of your customers live in CITY, STATE, which is outside your wireless licensed area. These customers can use your services because of “signal leakage” from towers located in nearby CITY, STATE, which is in your wireless licensed area. The “place of primary use” for customers who live in CITY, STATE and do not have a residential or business address in your licensed service area would be their street address in CITY, STATE. In this situation, your sale of mobile telecommunications services to such customers is a sale in the course of interstate commerce, not a Utah sale. Accordingly, these sales are not subject to Utah taxation.

Please contact us if you have any other questions.

For the Commission,

Marc B. Johnson

Commissioner

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