Tax Type
Retail Sales and Use Tax
Description
Hotel local telephone charges
Topic
Taxability of Persons and Transactions
Date Issued
04-23-1996
April 23, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This will reply to your letter of August 29, 1995 in which you seek correction of the sales and use tax audit of ***** (the "Taxpayer") for the period of July 1992 through May 1995.
FACTS
*******(the "Taxpayer") is in the business of providing motel accommodations for guests. The Taxpayer was audited and assessed sales and use tax on the charge for local telephone calls to guests in accordance with Virginia Regulation (VR) 630-10-48. The charge per call to customers was 50 cents. A review of the Taxpayer's telephone bill reveals an itemized "Message Unit Charge" on each bill. Upon inquiring to the telephone company, the Taxpayer discovered that the "message unit charge" is a charge of 9.6 cents per local phone call. The Taxpayer is of the opinion that since the telephone company charges 9.6 cents per local phone call, the remaining 40.4 cents is considered a mark-up and the tax is applicable to the mark-up only, the same as long-distance telephone charges.
DETERMINATION
VR 630-10-48.C (copy enclosed) specifically provides that charges made in connection with the rental of a room or other accommodations, and more specifically local telephone charges, are subject to the tax. This regulation also specifically exempts toll charges for long-distance telephone calls. This has been the longstanding established policy of the department.
With regard to the "message unit charge" referred to in your letter, it is understood by this office that this charge is in addition to the flat rate monthly service charge levied by the telephone company. In other words, all telephone company customers pay a flat monthly rate for their telephone service. If the customer exceeds the number of allowable calls per month, the telephone company charges an additional message unit charge of 9.6 cents per phone call in excess of the allowable number. The total (50 cents) represents the additional charge by the Taxpayer to its guest for local telephone calls. VR 630-10-48.C provides that the charge made for local telephone calls is taxable.
Based on VR 630-10-48.C and the department's longstanding policy with respect to local telephone charges made in connection with a room or other accommodations, the department finds no basis for revising the audit. If you should have any questions, please contact*** Office of Tax Policy, at******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10279K
Rulings of the Tax Commissioner