Tax Type
Local Taxes
Description
Subscriber Line Charge or End User Charge subject to Local Utility Tax
Topic
Local Power to Tax
Local Taxes Discussion
Taxability of Persons and Transactions
Date Issued
03-07-1990
[Opinion - Virginia Attorney General: 1990 at 229]
REQUEST BY: Mr. John M. Lohr County Attorney for Highland County P.O. Box 280 Monterey, Virginia 24465
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether the consumer utility tax that a locality is authorized to impose on telephone services pursuant to § 58.1-3812 of the Code of Virginia applies to an "end user charge," commonly referred to as a "subscriber line charge ("SLC"), which you describe as a fee charged to the local consumer to reimburse local telephone companies for the loss of long-distance charges received by these companies prior to the breakup of the American Telegraph and Telephone Company.1
1 The "end user charge," or SLC is described as a charge all telephone subscribers are required to pay, on a per line basis, for that portion of their necessarily incurred local telephone plant costs. National Ass'n of Reg. Util. Com'rs v. F.C.C., 737 F.2d 1095, 1115 (D.C. Cir. 1984).
I. Applicable Statutes
Section 58.1-3812 authorizes the imposition of a local tax upon the consumers of utility services provided by telegraph and telephone companies. §58.1-3812(E) defines "utility service or services" as "any service taxable as local telephone service under the provisions of the Internal Revenue Code of 1954, as amended, relating to federal communications taxes, as such provisions were in force and effect on December 31, 1971."
Section 4251 of the Internal Revenue Code ("I.R.C.") (West 1989) imposes a federal excise tax on "communications services," which includes local telephone service, toll telephone service and teletypewriter exchange service. §4251(b)(1).
The term "local telephone service" is defined in the I.R.C. as
(1) the access to a local telephone system, and the privilege of telephonic quality communication with substantially all persons having telephone or radio telephone stations constituting a part of such local telephone system, and
(2) any facility or service provided in connection with a service described in paragraph (1).
I.R.C. § 4252(a) (West 1989).
II. End User Charge Within Scope of Local Telephone Service Subject to Utility Tax
Utility services upon which a consumer may be taxed pursuant to § 58.1-3812 are limited to those services taxable as "local telephone service" under I.R.C. § 4251 (b)(1)(A). Whether the "end user charge" is subject to the consumer utility tax, therefore, depends upon whether this charge represents a " local telephone service," as that term is used in I.R.C. § 4251(b)(1)(A). A similar issue has been addressed by the Internal Revenue Service. See Rev. Rul. 87-108, 1987-2 C.B. 260.
Revenue Ruling 87-108 describes SLCs as flat-rate monthly charges to subscribers to compensate local telephone companies for the availability of their local exchange facilities for interstate use by long-distance carriers and subscribers. Id. Although the SLC recovers a portion of the fixed costs that the Federal Communications Commission allocates to its interstate jurisdiction, the essence of "local telephone service" in I.R.C. § 4252(a) is access to a local telephone system. Id. at 261. This revenue ruling concludes that the SLC, even though separately stated, is a charge that must be paid in order to obtain access to the local telephone system and, therefore, is included in the definition of "local telephone service" in § 4252(a). Id.
Based on the above, it is my opinion that the SLC, or "end user charge," is within the scope of "local telephone service" as that term is construed for federal communication tax purposes in the I.R.C. It is further my opinion, therefore, that this charge is subject to the tax imposed by § 58.1-3812.
Attorney General's Opinion