Tax Type
Corporation Income Tax
Description
Telecommunications companies; Internet service provider's minimum tax
Topic
Computation of Income
Date Issued
08-25-1999
August 25, 1999
Dear ****
This will reply to your letter which you request a ruling regarding telecommunications companies.
FACTS
Code of Virginia Sec. 58.1-400.1 imposes an alternative minimum tax on telecommunications companies. The tax is calculated by multiplying all of the telecommunications company's gross receipts by 0.5%. If a telecommunications company's minimum tax is greater than the tax it would pay under the corporate income tax laws, then it is required to pay the minimum tax in lieu of the corporate income tax.
The Taxpayer has requested a ruling as to the treatment of gross receipts of Internet service providers for the purposes of the minimum tax on telecommunications companies. Specifically you ask:
Code of Virginia Sec. 58.1-400.1 defines gross receipts of a telecommunications company as "all revenue from business done within the Commonwealth, including the proportionate part of interstate revenue attributable to the Commonwealth.' The same section defines a telecommunications company as:
The second question turns on whether the subsidiary providing the Internet service meets the definition of a telecommunications company as stated above. The revenues of a subsidiary that does not meet the definition of a telecommunications company would not be used to calculate the minimum tax under Code of Virginia Sec. 58.1-400.1. That subsidiary would be subject to the corporate income tax. If the subsidiary does meet the definition of telecommunications company, its gross receipts would be included in the computation of the minimum tax.
I hope that this information is useful to you. If you have any further questions, feel free to contact ***** in the Office of Tax Policy at *****.
Dear ****
This will reply to your letter which you request a ruling regarding telecommunications companies.
FACTS
Code of Virginia Sec. 58.1-400.1 imposes an alternative minimum tax on telecommunications companies. The tax is calculated by multiplying all of the telecommunications company's gross receipts by 0.5%. If a telecommunications company's minimum tax is greater than the tax it would pay under the corporate income tax laws, then it is required to pay the minimum tax in lieu of the corporate income tax.
The Taxpayer has requested a ruling as to the treatment of gross receipts of Internet service providers for the purposes of the minimum tax on telecommunications companies. Specifically you ask:
-
- 1. If a telecommunications company provides Internet access services, are the gross receipts from the Internet service included with all other gross receipts from the telecommunications company when calculating its minimum tax?
2. Would the treatment be different if the Internet service is provided through a subsidiary of the telecommunications company?
- 1. If a telecommunications company provides Internet access services, are the gross receipts from the Internet service included with all other gross receipts from the telecommunications company when calculating its minimum tax?
Code of Virginia Sec. 58.1-400.1 defines gross receipts of a telecommunications company as "all revenue from business done within the Commonwealth, including the proportionate part of interstate revenue attributable to the Commonwealth.' The same section defines a telecommunications company as:
-
"A telephone company or other person holding a certificate of convenience and necessity granted by the State Corporation Commission authorizing telephone service; or a person authorized by the Federal Communications Commission to provide commercial mobile service as defined in Sec. 332(d)(1) of the Communications Act of 1934, as amended, where such service includes cellular mobile radio communications services or broadband personal communications services; or a person holding a certificate issued pursuant to Sec. 214 of the Communications Act of 1934, as amended, authorizing domestic telephone service and belonging to an affiliated group including a person holding a certificate of convenience and necessity granted by the State Corporation Commission authorizing telephone service; or a telegraph company or other person operating the apparatus necessary to communicate by telegraph. The term `affiliated group' shall have the meaning given in Sec. 58.1-3700.1.'
The second question turns on whether the subsidiary providing the Internet service meets the definition of a telecommunications company as stated above. The revenues of a subsidiary that does not meet the definition of a telecommunications company would not be used to calculate the minimum tax under Code of Virginia Sec. 58.1-400.1. That subsidiary would be subject to the corporate income tax. If the subsidiary does meet the definition of telecommunications company, its gross receipts would be included in the computation of the minimum tax.
I hope that this information is useful to you. If you have any further questions, feel free to contact ***** in the Office of Tax Policy at *****.
Rulings of the Tax Commissioner