Tax Type
Retail Sales and Use Tax
Description
Telecommunications; Reseller of telecommunications services
Topic
Taxability of Persons and Transactions
Date Issued
03-17-1995
See 2007 updated Tax Code 58.1- 602
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will respond to your request for a ruling regarding the tax status of various
telecommunication services your company,***********(the "Taxpayer", intends to offer in Virginia.
The Taxpayer is a reseller of long distance telephone services located outside Virginia. It intends to sell its services by having employees in its home state solicit business or have "agents" sell these services in Virginia. The Taxpayer will lease lines from and purchase various services for resale from telephone companies in order to provide the long distance services. You seek a ruling on the applicability of the sales and use tax to various transactions. You also seek an opinion as to any state income tax reporting requirements in Virginia.
The Taxpayer will offer the following telephone services, for the listed charges, to customers.
Telecommunications services are generally exempt from the sales and use tax in Virginia under Code of Virginia §58.1-609.5(1) which provides an exemption from the retail sales and use tax for "[p]rofessional, insurance, or personal service transaction which involve sales as inconsequential elements for which no separate charges are made...." Accordingly, charges for the above services, regardless of where a call originates or terminates, are not subject to the tax. Furthermore, the fact that the Taxpayer may mark up the cost of the service has no bearing on its tax status. See P.D. 92-137 (8/10/92), copy enclosed.
The charges by telephone companies, interexchange carriers or others from whom the Taxpayer purchases services, including, but not limited to, charges for the installation of access or lines; monthly fees for the use of various "leased", 1-800 or other lines; charges per minute; charges for special features; and "per work" second for a manual operator to process calls made with a calling card, are nontaxable charges for services. The Taxpayer essentially is purchasing services for resale. See P.D. 90160 (916190) and P.D. 94-325 (10/24/94), copies enclosed, regarding long distance services generally and prepaid long distance cards, respectively.
However, the charges for the plastic calling cards by the interexchange carrier generally are taxable to the extent that they are provided to Virginia customers. In Virginia, service providers are deemed to be the users and consumers of all tangible personal property used in the rendition of their services.
If the Taxpayer will be using agents in Virginia to solicit business, income derived in the state from the provision of its long distance services generally would be subject to the corporation income tax. (See Virginia Regulation (VR) 630-3-441, copy enclosed.)
I trust this answers your questions, but should you have any others, please contact*************.
March 17, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will respond to your request for a ruling regarding the tax status of various
telecommunication services your company,***********(the "Taxpayer", intends to offer in Virginia.
FACTS
The Taxpayer is a reseller of long distance telephone services located outside Virginia. It intends to sell its services by having employees in its home state solicit business or have "agents" sell these services in Virginia. The Taxpayer will lease lines from and purchase various services for resale from telephone companies in order to provide the long distance services. You seek a ruling on the applicability of the sales and use tax to various transactions. You also seek an opinion as to any state income tax reporting requirements in Virginia.
RULING
The Taxpayer will offer the following telephone services, for the listed charges, to customers.
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- Switched Services
- Intrastate and interstate long distance services (charge per minute)
- Intrastate and interstate long distance by cellular phone
- Special long distance features (monthly fee)
Dedicated (Private) Line Services - Installation of private lines for specific services - Monthly leases of a private line - Charges for each minute of usage
1-800 Services - Initial installation fee for a 1-800 line - Monthly fee for the use of the 1-800 service - Charges for each minute of usage
Calling Card Services - Charges per minutes of usage
Debit Card Services
- Charges for prepaid long-distance cards which are priced in advance represents a prepayment of long-distance service.
- Switched Services
Telecommunications services are generally exempt from the sales and use tax in Virginia under Code of Virginia §58.1-609.5(1) which provides an exemption from the retail sales and use tax for "[p]rofessional, insurance, or personal service transaction which involve sales as inconsequential elements for which no separate charges are made...." Accordingly, charges for the above services, regardless of where a call originates or terminates, are not subject to the tax. Furthermore, the fact that the Taxpayer may mark up the cost of the service has no bearing on its tax status. See P.D. 92-137 (8/10/92), copy enclosed.
The charges by telephone companies, interexchange carriers or others from whom the Taxpayer purchases services, including, but not limited to, charges for the installation of access or lines; monthly fees for the use of various "leased", 1-800 or other lines; charges per minute; charges for special features; and "per work" second for a manual operator to process calls made with a calling card, are nontaxable charges for services. The Taxpayer essentially is purchasing services for resale. See P.D. 90160 (916190) and P.D. 94-325 (10/24/94), copies enclosed, regarding long distance services generally and prepaid long distance cards, respectively.
However, the charges for the plastic calling cards by the interexchange carrier generally are taxable to the extent that they are provided to Virginia customers. In Virginia, service providers are deemed to be the users and consumers of all tangible personal property used in the rendition of their services.
If the Taxpayer will be using agents in Virginia to solicit business, income derived in the state from the provision of its long distance services generally would be subject to the corporation income tax. (See Virginia Regulation (VR) 630-3-441, copy enclosed.)
I trust this answers your questions, but should you have any others, please contact*************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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Rulings of the Tax Commissioner