97-055
Response October 2, 1997
DATE: 04/1 /97
RE: Sales
tax on Phone Service
I want to indicate to you our current practice and
our interpretation of the applicability of sales tax on phone services provided
to clients at the Salt Palace.
The service provided to exhibitors and event
management is for the hook-up of a telephone line in a specific area designated
by the client. The charge for the service is primarily for the labor involved and
defraying the cost of Salt Palace telecommunication infrastructure. We do
provide a handset that represents a negligible portion of the total $$$$$
charge.
During the course of our last sales tax audit the
tax auditors agreed with our interpretation but later questioned it. In order
to prevent any possible confusion on this matter, I would like a written
response verify that our practice is appropriate.
If you have any questions regarding this issue,
please give me a call.
October
2, 1997
NAME
ADDRESS
CITY STATE ZIP
Advisory Opinion - Application of sales tax to
charges for telephone equipment and set up.
Dear NAME,
We
have received your request for sales tax guidance pertaining to charges paid by
exhibitors for the use of telephone equipment in exhibition booths. As we understand the transaction, an
exhibitor requests that the NAME furnish a telephone line which runs to the
exhibitor’s booth. NAME employees run
the phone line from the nearest phone connection to the booth and installs a
handset for the exhibitor’s use. The
exhibitor is charged $$$$$ for this connection.
This
type of transaction constitutes a rental of taxable personal property. Charges for rental of tangible personal
property are taxable, including any amount charged to deliver or set up the
item rented. Therefore, the entire
$$$$$ is a taxable charge.
We
understand that the issue of telephones came up in a recent sales tax
audit. The Auditing Division informs us
that the manner in which the phones were installed and the service provided
suggested that the COMPANY A was selling telephone service rather than renting
telephone equipment. The outcome is the
same, however, because charges for intrastate telephone service are also
taxable. Taxable charges include
charges for installing lines, special features (such as voice mail), access to
telephone lines, and intrastate telephone calls. Any charges for interstate long distance calls are non-taxable if
separately stated on the bill.
If
you are merely renting telephone equipment, we suggest that the transaction be
characterized on the customer invoice or bill as an equipment rental. If you are also charging for telephone calls
or special telephone features, please indicate on the invoice or bill that the
transaction is a sale of telephone service.
Please
contact us again if you have additional questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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