Tax Type
Communications Sales and Use Tax
Description
Application of the communications sales and use tax to exempt government agencies.
Topic
Communications Sales and Use Tax
Exemptions
Payment and Refund
Date Issued
04-16-2012
April 16, 2012
Re: Request for Ruling: Communications Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of the ***** (the "Town") in which you request a ruling on the application of the communications sales and use tax to exempt government agencies.
FACTS
The Town is a political subdivision of the Commonwealth. The Town was provided communications services by ***** (the "Provider"). The Provider charged and collected the communications sales tax, the E-911 tax, and the federal excise tax from the Town. On September 7, 2011, the Town presented its exemption certificate to the Provider, and requested a refund from the Provider for all taxes paid since January 1, 2007. The Town states that the Provider maintains that the Town is only owed a 90-day refund. The Town requests a ruling regarding the application of the communications sales and use tax to the charges for communications services provided by the Provider. The Town also requests a ruling regarding its rights to a refund from the Provider.
DETERMINATION
Communications Sales and Use Tax
Virginia Code § 58.1-648 A imposes "a sales or use tax on the customers of communications services in the amount of 5% of the sales price of each communications service that is sourced to the Commonwealth in accordance with § 58.1-649."
Pursuant to Va. Code § 58.1-648 B ix, "[t]he sales price on which the tax is levied shall not include ...charges for communications services to the Commonwealth, any political subdivision of the Commonwealth, and the federal government and any agency or instrumentality of the federal government ...."
Public Document (P.D.) 06-138 (11/1/06) further provides:
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- Charges for communications services provided to the Commonwealth, any political subdivision of the Commonwealth, and the federal government and any agency or instrumentality of the federal government are not subject to the communications sales tax. As this governmental exemption is the same as the governmental exemption applicable to the repealed taxes, providers should allow a communications sales tax exemption for charges to any governmental customers that were exempt from the repealed local consumer utility taxes.
Virginia Code § 58.1-657 A provides:
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- All sales are subject to the tax until the contrary is established. The burden of proving that a sale of communications services is not taxable is upon the communications services provider unless he takes from the taxpayer a certificate of to the effect that the service is exempt under this chapter.
Virginia Code § 58.1-657 B states, in pertinent part, “[t]he exemption certificate mentioned in this section shall relieve the person who obtains such a certificate from any liability for the payment or collection of the tax, except upon notice from the Tax Commissioner that the certificate is no longer acceptable ...."
Pursuant to P.D. 06-138, “[a] provider is required to collect the communications sales tax unless the provider receives a properly executed exemption certificate from the purchaser stating that the service is exempt from the communications sales tax."
Virginia Code § 58.1-652 governs remedies for billing errors with respect to the communications sales tax. When it is determined that an error in billing has occurred, "the communications service provider shall correct the error and refund or credit the amount of the tax erroneously collected from the customer for a period of up to two years.
In P.D. 09-178 (11/19/09), a City in the Commonwealth requested a ruling regarding the application of the communications sales and use tax to exempt government entities. On June 20, 2008, the City requested a refund from the communications service Provider for the tax paid by the City since January 1, 2007, when the tax was first imposed in the Commonwealth. The City provided exemption certificates dated January 1, 2007, to the Provider on January 22, 2009. During the discussions regarding the refund, the Provider discovered that at least one of the City's accounts had been properly coded as exempt from the communications tax and had been since January 1, 2007. The provider also verified that it had received at least one properly executed exemption certificate from the City as of July 29, 2008. The Provider refused to refund the communications sales and use tax paid by the City prior to the date the exemption certificates were presented. The City was a political subdivision of the Commonwealth on or before January 1, 2007. Accordingly, the City was never subject to the communications sales and use tax. Upon receipt of a properly executed exemption certificate from the City for at least one of its accounts, the Provider should have coded all of the City's accounts as exempt from the tax. Based upon these factors, it was ruled that the Provider should have refunded any communications sales and use tax paid by the City since the inception of the tax on January 1, 2007.
In this instance, the Town requested a refund on September 7, 2011. At that time, the Town presented exemption certificates dated September 7, 2011. The Provider maintained that the Town was only entitled to a 90-day refund. Pursuant to Va. Code § 58.1-648, the Town, as an instrumentality of the Commonwealth, is not subject to the communications sales tax. In accordance with Va. Code §§ 58.1-652 and 58.1-657, the Town is entitled to a refund of communications sales tax paid for the period two years prior to the date of its refund request.
E-911 Tax
Virginia Code § 58.1-1730 B imposes "a monthly tax of $0.75 on the end user of each access line of the telephone service or services provided by a communications service provider. However, no such tax shall be imposed on federal, state, or local government agencies or on consumers of CMRS, as that term is defined in § 58.1-484.12.”
Pursuant to P.D. 06-138, customer remedy procedures for billing errors for the E-911 tax are the same as those for the communications sales tax. Accordingly, the Town is entitled to a refund of the E-911 tax paid for the period two years prior to the date of its refund request.
Federal Excise Tax
The federal excise tax is not administered by the Department. The Taxpayer should contact the Federal Communications Commission with regard to this tax.
I trust this responds to your inquiry. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4923311341.P
Rulings of the Tax Commissioner