96-143
Response September 30, 1996
Request
September 16, 1996
XXXXX
Utah State Department of Revenue
Tax Division
210 North 1950 West
Salt Lake City, UT 84134
Dear XXXXX
XXXXX will soon be launching our PCS service in your
state!
XXXXX referred me to you to receive an Advisory
Opinion. XXXXX needs information on how
to calculate taxes concerning PCS services.
PCS is very similar to cellular service. However, XXXXX does not offer cellular service. Therefore we are looking to you for
guidance. I am requesting an Advisory
Opinion based upon the services XXXXX will be providing. A list of the services and products we will
be offering is enclosed.
Please call me if you need more information or have
any questions. I can be contacted at
XXXXX.
Thank you for your prompt assistance.
Sincerely,
XXXXX
Services & Features:
XXXXX
Features:
XXXXX
Minimum Usage Program:
Monthly
Fee: 19.95
Free
Minute Allocation: 15 min
Rate
per minute after 15: .33
Medium Usage Program:
Monthly
Fee: 34.95
Free
Minute Allocation: 60 min
Rate
per Minute after 60: .25
Large Volume Usage Program:
Monthly
Fee: 49.95
Free
Minute Allocation: 120 min
Rate
per Minute after 120: .19
XXXXX
Advisory Opinion - Taxation of sales of private
communications services
Dear XXXXX,
We have
received your request for information pertaining to the application of sales
tax to telephone services offered by your company. We find as follows:
Intrastate
telephone service sold to Utah customers is subject to sales tax. §59-12-103 (1) Utah Code Ann. Telephone service is defined as transmission
of signs, signals, writings, images, sounds, messages, data or information of
any nature by radio, light waves, or other means. Utah Administrative Rule R865-19S-90.
As
we understand private communications service (PCS), it is a communications
service provided to subscribers and entitling them to the use of particular
communications lines or channels. Your
subscribers purchase a contract which provides for a fixed amount of airtime at
no charge and allows the purchase of additional airtime at a rate set by the
contact. In this respect, the PSC is
similar to cellular phone service contracts.
In addition, your subscribers may purchase the optional features listed
in your letter. On the basis of that
assumption, the following items are subject to Utah sales tax:
1. The
sale of any phone equipment or apparatus that retains its character as tangible
personal property. Therefore,
telephones, telephone handsets, cigarette lighter adapters, and computer chips or modules (SIM cards) are
taxable. If your company sells and
installs hard wiring in the subscriber’s home or building, and that wiring is
converted to real property owned by the subscriber, your company is responsible
for the sales tax on the items installed.
Your letter did not mention anything of this nature, but if you have
questions about this point, let us know.
2. Taxable
telephone service includes:
a. the subscriber activation fee to establish
or reconnect service;
b. the service contract;
c. charges for air time used for intrastate
calls (calls originating and ending in Utah); and
d. charges for optional features, including
caller ID, call waiting, call hold, numeric messaging, voice messaging, voice mail,
call forwarding, mobile to mobile air time, roaming, and short messaging.
Among
the features listed, you mention “first minute free on incoming calls” and
“weekend minutes free.” If there is no
charge for this airtime, this use is not subject to tax. However, if the subscriber pays some type of
fee or charge for these features, that fee or charge is taxable.
3. Non-taxable
charges are charges for returned checks and charges for interstate phone
calls. The non-taxable charges must be
separately stated on the bill or invoice.
With
regard to tax situs (tax jurisdiction), we offer the following guidelines. For sales of equipment delivered to or
installed in a fixed location in Utah, that location determines the point of
sale tax situs and tax rate applied to charges for the equipment. For other taxable charges, such as air time
charges, the tax situs shall be the service location. By “service location” we mean the business location from which
the cellular user is employed, dispatched or based, or in the case of
non-business accounts, the residence address of the user. The billing address may be used if it fairly
represents the service location as that is defined here.
As
a vendor who is responsible for collecting and remitting Utah sales and use
tax, your company must have a sales tax license. You may use the enclosed form to make application for the
license. Sales tax return forms will be
mailed to you. If you have questions
about either of these forms, please contact our Customer Service Division for
assistance. You can contact the
Customer Service Division at (801) 297-7741 or (801) 297-3257.
For
the Commission,
Alice
Shearer,
Commissioner