Tax Type
Communications Sales and Use Tax
Description
The sale or recharge of prepaid calling services are exempted
Topic
Exemptions
Date Issued
05-19-2008
May 19, 2008
Re: Ruling Request: Communications Sales and Use Tax
Dear *****:
This is in response to your letter requesting a ruling on the application of the Communications Sales and Use Tax to the content services provided by ***** (the "Taxpayer") to customers via cellular telephones and to the long distance telecommunication services offered by the Taxpayer.
FACTS
The Taxpayer provides traditional long distance telecommunication services to its customers. The services are sold on a per minute basis and may be paid for on either a prepaid or post paid basis.
The Taxpayer also plans to offer its customers access to audio-visual content ("content services") via cellular telephones. The content services include news, songs, ring-tones, sports live video, sports scores, astrology, stock information, recipes, travelogue, short stories, exam results, reality shows, and humorous content. The customer will dial a toll free number and enter an authentication code to access the content services. The customer will be charged on a per minute basis for listening to or viewing the content services. There will also be an additional fixed charge to download the content services for future use and reuse. The content services may be paid for on either a prepaid or post paid basis.
The Taxpayer requests a ruling regarding the application of the Communications Sales and Use Tax to these transactions.
DETERMINATION
Effective January 1, 2007, House Bill 568 (Acts of Assembly 2006, Chapter 780) replaced many of the state and local communications taxes and fees with a centrally administered Communications Sales and Use Tax. On November 1, 2006, the Department of Taxation ("TAX") issued Guidelines and Rules for the Virginia Communications Taxes ("Guidelines") to provide guidance to taxpayers and local governments regarding the new law.
Va. Code § 58.1-648(A) imposes "a sales or use tax on the customers of "communications services." Va. Code § 58.1-647 broadly defines "communications services" as:
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- the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals, including cable services, to a point or between or among points, by or through any electronic, radio, satellite, cable, optical, microwave, or other medium or method now in existence or hereafter devised, regardless of the protocol used for the transmission or conveyance.
The Guidelines set forth a non-exclusive list of communications services meeting this definition that includes landline, wireless and satellite telephone services, and access (excluding Internet access service charges) and line charges. Additionally, the Guidelines list cable television, satellite television and satellite radio as communications services.
As the long distance telecommunications services provided by the Taxpayer meet the definition of communications services set forth in Va. Code § 58.1-647, they would be subject to the Communications Sales and Use Tax unless a specific exemption or exclusion applies.
As the content services offered by the Taxpayer also meet the definition of communications services set forth in Va. Code § 58.1-647, they would also be subject to the Communications Sales and Use Tax unless a specific exemption or exclusion applies.
Digital products delivered electronically, such as software, downloaded music, ring tones and reading materials are specifically excluded from the Communications Sales and Use Tax under Va. Code § 58.1-648(C). Digital products delivered electronically do not include any products that require continued payments from the purchaser or products that are sold without the right of permanent use granted by the seller. If the content services offered by the Taxpayer that are downloaded by the consumer for future use and reuse constitute digital property delivered electronically, they would not be subject to the Communications Sales and Use Tax.
The sale or recharge of prepaid calling services are exempted from the Communications Sales and Use Tax pursuant to Va. Code § 58.1-648(B). Va. Code 58.1-647 defines "prepaid calling service" as the right to access exclusively communications services, which must be paid for in advance and which enables the origination of calls using an access number or authorization code, whether manually or electronically dialed, and that is sold in predetermined units or dollars that decrease in number with use. Accordingly, any of the communications services discussed above would be exempt from the Communications Sales and Use Tax if it meets the definition of a prepaid calling service.
CONCLUSION
The Va. Code sections and regulations cited, along with other reference documents, are available on-line in the Tax Policy Library section of TAX's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Office of Tax Policy, Policy Development Division, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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Note: See P.D. 13-17 for further clarification.
PD/1-1450160178
Related Documents
Rulings of the Tax Commissioner