Tax Type
Retail Sales and Use Tax
Description
Telecommunications; Long distance telephone calling card
Topic
Taxability of Persons and Transactions
Date Issued
04-19-1993
See 2007 updated Tax Code 58.1- 602
Re: Request for Ruling: Retail Sales and Use Tax
Dear***********
This will reply to your letter of January 15, 1993 in which you request a ruling on the applicability of the Virginia retail sales and use tax to certain sales by**********(the "Taxpayer").
The Taxpayer is located outside Virginia and is in the business of providing long distance telephone services. The Taxpayer intends to market a long distance calling card which enables the purchaser of the card to make prepaid long distance telephone calls through the Taxpayer's switching equipment.
You seek a ruling on the application of the sales and use tax to the retail sale of the calling card.
RULING
Va. Code §58.1-603 imposes a sales tax on services which are expressly stated as taxable. Telephone communication services are not among the services enumerated as subject to tax.
In this case, the transaction involves the rendering of a service (telephone communication services) and the provision of tangible personal property (the calling card). Virginia Regulation (VR) 630-10-97.1 provides that in determining whether such a transaction constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined.
Based on the facts presented, the "true object" in purchasing the calling card is the long distance phone service. The card only serves as a medium for securing the telephone service. The amount prepaid by the purchaser entitles the purchaser to long distance telephone service for that same amount. There is no separate charge for the cost of the card; the card is nonrefundable and has no surrender value. Therefore, the retail sale of the calling card is not subject to the sales and use tax.
If you should have any additional questions on this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6659F
April 19, 1993
Re: Request for Ruling: Retail Sales and Use Tax
Dear***********
This will reply to your letter of January 15, 1993 in which you request a ruling on the applicability of the Virginia retail sales and use tax to certain sales by**********(the "Taxpayer").
FACTS
The Taxpayer is located outside Virginia and is in the business of providing long distance telephone services. The Taxpayer intends to market a long distance calling card which enables the purchaser of the card to make prepaid long distance telephone calls through the Taxpayer's switching equipment.
You seek a ruling on the application of the sales and use tax to the retail sale of the calling card.
RULING
Va. Code §58.1-603 imposes a sales tax on services which are expressly stated as taxable. Telephone communication services are not among the services enumerated as subject to tax.
In this case, the transaction involves the rendering of a service (telephone communication services) and the provision of tangible personal property (the calling card). Virginia Regulation (VR) 630-10-97.1 provides that in determining whether such a transaction constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined.
Based on the facts presented, the "true object" in purchasing the calling card is the long distance phone service. The card only serves as a medium for securing the telephone service. The amount prepaid by the purchaser entitles the purchaser to long distance telephone service for that same amount. There is no separate charge for the cost of the card; the card is nonrefundable and has no surrender value. Therefore, the retail sale of the calling card is not subject to the sales and use tax.
If you should have any additional questions on this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6659F
Rulings of the Tax Commissioner