Current through Register 1531, September 27, 2024
(1)
Statement of Purpose; Effective Date; Outline of
Topics.
(a)
Statement of purpose. The purpose of 830 CMR 64H.1.6
is to explain the sales and use tax treatment of sales of telecommunications
services under M.G.L. c. 64H and 64I, respectively.
(b)
Effective date.
830 CMR 64H.1.6 applies to sales of telecommunications services on or after
September 1, 1990 except that in the case of residential telecommunications
services, as defined in 830 CMR 64H.1.6(5), the tax only applies to services
that are provided on or after September 1, 1990, and that are billed in the
regular course of the vendor's business on or after October 1, 1990. See St.
1990, c. 150, § 372.
(c)
Outline of Topics. 830 CMR 64H.1.6 is organized as
follows:
1. Statement of Purpose; Effective
Date; Outline of Topics.
2.
Definitions.
3. General
Rule.
4. Sale or Use of
Telecommunications Services in Massachusetts; Interstate
Telecommunications.
5. Residential
Telephone Service Exemption.
6.
Sales for Resale of Telecommunications Services.
7. Services Sold in Conjunction with
Telecommunications Services.
8.
Collection of Tax.
(2)
Definitions. For
the purpose of 830 CMR 64H.1.6 the following terms have the following meanings,
unless the context requires otherwise:
Commissioner, the Commissioner of
Revenue or the Commissioner's duly authorized representative.
Home Service Provider, the
facilities-based carrier or reseller with which the retail customer contracts
for the provision of mobile telecommunications service.
Interstate Telecommunications
Services, includes both telecommunications that cross state
borders within the United States and telecommunications that cross
international borders. The term "state," as used in 830 CMR 64H.1.6, includes
both foreign states and states within the United States, as well as the
District of Columbia, and U.S. territories, including Guam, Puerto Rico, and
the U.S. Virgin Islands.
Local Access and Transport Area, a
"local access and transport area" (LATA) is a geographic region in which a
local telephone operating company provides services after the AT&T
divestiture. As of the date of promulgation of 830 CMR 64H.1.6, Massachusetts
is serviced by two LATAs, which cover the 413 and 617/508 area codes.
Mobile Telecommunications Service,
commercial mobile radio service, as defined in
47
CFR §
20.3 in effect on June 1,
1999.
Person, an individual, partnership,
trust or association, with or without transferable shares, joint stock company,
corporation, society, club organization, institution, estate, receiver,
trustee, assignee, or referee, and any other person acting in a fiduciary or
representative capacity, whether appointed by a court or otherwise, and any
combination of individuals acting as a unit.
Place of Primary Use, the street
address representative of where the customer's use of the mobile
telecommunications service primarily occurs, which shall be the residential
street address or the primary business address of the customer and which shall
be within the licensed service area of the home service provider. The place
shall be determined in accordance with
4 U.S.C.
§§
121 and
122.
Post-paid Calling Service, a
telecommunications service obtained by making a payment on a call-by-call basis
either through the use of a credit card or payment mechanism such as a bank
card, travel card, credit card, or debit card, or by charge made to a telephone
number that is not associated with the origination or termination of the
telecommunications service.
Prepaid Calling Arrangement, the right
to access exclusively telecommunications services, which must be paid for in
advance and which enables the origination of calls using an access number or
authorization code, whether manually or electronically dialed, and that is sold
in predetermined units or dollars of which the number declines with use in a
known amount.
Retail Sale, a sale of services or
tangible personal property or both for any purpose other than resale in the
regular course of business.
Service Address, a service address is
the location of the telecommunications equipment from which a taxpayer
originates or at which a taxpayer receives a telecommunication. In the event
that this equipment may not be at a defined location, as in the case of mobile
phones, paging systems, maritime systems, etc., the service
address is generally the location of the taxpayers' primary use of the
telecommunications equipment as determined by the telephone number,
authorization code, or location where the bills are sent. In the case of
post-paid calling services, the service address is the origination point of the
telecommunications service first identified by either the seller's
telecommunications system or in information received by the seller from its
service provider, where the system used to transport such signals is not that
of the seller.
Tax, the excise tax imposed under
M.G.L. c. 64H or c. 64I.
Telecommunications Services, any
transmission of messages or information by electronic or similar means, between
or among points by wire, cable, fiber-optics, laser, microwave, radio,
satellite, or similar facilities, but not including cable television. St. 1990,
c. 121, § 42. In general, telecommunications include telephone and other
transmissions between or among specific parties or specific locations, but do
not include public broadcasts.
Vendor, a retailer or other person
selling services or tangible personal property the gross receipts from the
retail sale of which are required to be included in the measure of the tax
imposed by M.G.L. c. 64H or c. 64I.
(3)
General Rule.
The sales tax on telecommunications services under M.G.L. c. 64H and 64I
applies to the retail sale or use of telecommunications services in
Massachusetts, by individuals or businesses, including small businesses, as
defined in 830 CMR 64H.6.11. The tax on sales of
telecommunications services under M.G.L. c. 64H does not apply to sales for
resale within the meaning of M.G.L. c. 64H, § 8. Refer to 830 CMR
64H.1.6(6)(b) for rules pertaining to sales of telecommunications services for
resale.
(4)
Sale or Use
of Telecommunications Services in Massachusetts; Interstate
Telecommunications. The sales tax on telecommunications services
applies to all telecommunications services provided between or among points in
the Commonwealth. The sales tax on telecommunications services applies to
interstate telecommunications services if the sale of the services occurred in
Massachusetts. M.G.L. c. 64H, § 1, as amended by St.
1990, c. 121, § 42.
(a)
Sales
Occurring in Massachusetts. Sales of interstate telecommunication
services, except as provided in 830 CMR 64H.1.6(4)(c), 830 CMR 64H.1.6(4)(d)
and 830 CMR 64H.1.6(4)(e), are deemed to occur in Massachusetts if the
telecommunication either originates or is received at a location within
Massachusetts and the service is charged to a service address in Massachusetts.
However, if a particular telecommunication that originates or is received in
Massachusetts is charged to neither the service address where the
telecommunication originates nor a service address where the telecommunication
is received, the telecommunication service is deemed to be sold within
Massachusetts if it is paid for in the Commonwealth. In general, a
telecommunication is paid for in the Commonwealth if it is billed to an address
within the Commonwealth. However, the Commissioner will disregard a billing
address that a taxpayer has adopted for the purpose of avoiding tax.
(b)
Credit for Taxes Paid to
Other States. In order to avoid the multi-state taxation of a sale
of interstate telecommunications services that is subject to tax under M.G.L.
c. 64H, any taxpayer that demonstrates that it has paid to another state a tax
that was properly due on the sale may claim a credit against the tax imposed
under M.G.L. c. 64H. The amount of the credit is the amount of the tax paid to
the other state, provided that the credit may not exceed the tax imposed on the
sale under M.G.L. c. 64H. M.G.L. c. 64H, § 1.
(c)
Mobile Telecommunications
Services. For customer bills issued after August 1, 2002, the sale
of intrastate and interstate mobile telecommunications services, except as
provided in 830 CMR 64H.1.6(4)(d) and 830 CMR 64H.1.6(4)(e), shall be deemed to
be provided by the customer's home service provider and shall be considered a
sale within the Commonwealth if the customer's primary place of use is located
in the Commonwealth.
(d)
Post-paid Calling Services. Sales of post-paid calling
services on or after September 1, 2005, including air-to ground
telecommunications services, are deemed to occur in Massachusetts if the
origination point of the telecommunications service is in Massachusetts, as
first identified by either:
1. The seller's
telecommunications system, or
2.
The information received by the seller from its service provider, where the
system used to transport such signals is not that of the seller.
(e)
Prepaid Calling
Arrangements. Sales of prepaid calling arrangements on or after
April 1, 2003 are deemed to occur in Massachusetts if the transfer for
consideration physically takes place at a retail establishment in the
commonwealth. In the absence of such physical transfer for consideration at a
retail establishment, the sale or recharge shall be deemed a retail sale in
Massachusetts if the customer's shipping address is in Massachusetts or, if
there is no item shipped, if the customer's billing address or the location
associated with the customer's mobile telephone number, as applicable, is in
Massachusetts. The sale is deemed to occur on the date of the transfer for
consideration. For purposes of reporting the sale or recharge of prepaid
calling arrangements, the sale shall be considered a taxable sale of tangible
personal property unless the vendor is otherwise required to report sales of
telecommunications services.
(5)
Residential Telephone Service
Exemption.
(a)
General Rule. The tax on telecommunications services
under M.G.L. c. 64H and 64I extends to any retail sale to, or use of
telecommunications services by individuals or businesses, including small
businesses as defined in
830 CMR
64H.6.11, in Massachusetts. A limited
exemption is available for residential telephone services under M.G.L. c. 64H,
§ 6(i), as amended by St. 1990, c. 150, § 360. The
amount of the exemption is limited to $30 per month. If the residential service
exceeds the $30 exemption limit, the amount over $30 is subject to tax. The tax
on residential telephone services, as defined in 830 CMR 64H.1.6(5)(b) applies
only to services that are provided on or after September 1, 1990, and that are
billed in the regular course of the vendor's business on or after October 1,
1990. See St. 1990, c. 150, § 372.
(b)
Residential Telephone
Service. Residential telephone service generally includes service
provided to an individual for personal use at his or her residential address,
including an individual dwelling unit such as an apartment. In the case of
institutions where individuals reside, such as schools or nursing homes,
telephone service is considered residential if it is provided to and paid for
by an individual resident rather than the institution. Telephone service
provided to a business is not residential service even if the business is
located in an individual's home. If an otherwise residential telephone is used
for business purposes, the business must file a use tax return and pay tax on
the services that it used.
(c)
Services Eligible for Residential Exemption. The
residential exemption includes the following telephone services, when provided
to a residential purchaser, up to a total of $30 per month:
1. recurring basic monthly service charges,
including recurring end user common line charges imposed by the Federal
Communications Commission and recurring charges for auxiliary services such as
call waiting and touch tone service;
2. message units or similar unitemized per
message/per minute charges for calls placed within the purchaser's local
calling area;
3. recurring monthly
charges for unlimited calling within all or a specified portion of the
purchaser's LATA;
4. recurring
monthly charges for a pre-determined number of minutes of telephone service
within all or a specified portion of the purchaser's LATA.
(d)
Services Not Eligible for
Residential Exemption. Services that do not qualify for the
residential telephone exemption include, but are not limited to:
1. any call to or from a point outside of the
purchaser's LATA other than calls within the purchaser's local calling
area;
2. toll calls within the
purchaser's LATA that are not billed on a recurring monthly basis, including
charges for minutes in excess of any time limit on an intra-LATA calling plan,
to the extent that such excess minutes are attributable to toll
calls;
3. non-residential telephone
service, including service from mobile telephones and public telephones, and
including service billed to a purchaser's residential account through a credit
card, calling card, or similar device, if the service is not actually provided
at the purchaser's residence;
4.
any residential telecommunications services other than exempt telephone
services.
(6)
Sales for Resale of Telecommunications Services
(a)
General Rule.
The tax on sales of telecommunications services under M.G.L. c. 64H applies to
retail sales and not to sales for resale within the meaning of M.G.L. c. 64H,
§ 8 as amended by St. 1990, c. 121, § 53.
See also St. 1990 c. 150, § 372.
(b)
Criteria for Determining
Which Services are Purchased for Resale. In general, a purchaser
of telecommunications services purchases the services for resale only if both
of the following criteria are met:
1. The
purchaser does not itself use or consume the telecommunications services;
and
2. The purchaser sells such
telecommunications services in the regular course of business.
A purchaser consumes a telecommunications service if it is a
participant in the telecommunication, such as the originator or recipient of a
telephone call, or purchases telecommunications services in connection with the
provision of information services or Internet access services not subject to
tax under M.G.L. c. 64H, § 1, or M.G.L. 64I, § 1.
See 830 CMR 64H1.6(7)(b).
3.
Examples. The
following examples include, but are not limited to, instances where purchasers
may be in the business of reselling telecommunications services:
a. Highlife Hotel, a large hotel with
telephones located in each hotel room, separately charges guests for telephone
calls placed by the guests while renting the rooms. Highlife Hotel is a
purchaser of telecommunications services for resale, since it does not itself
consume the services and because it regularly sells telecommunications services
to others as part of its business. See also830 CMR
64H.1.6(6)(e) for rules pertaining telecommunications services originally
purchased for resale but subsequently consumed, in whole or in part, by a
purchaser, rather than resold.
b.
Now U See It, Inc. is a commercial facsimile transmission service that handles
a large volume of facsimile transmission for its customers. Now U See It is a
purchaser of telecommunications services for resale, since it does not itself
consume the telecommunications services and because it regularly resells
telecommunications services to its customers as part of its business.
See also830 CMR 64H.1.6(6)(e) for rules pertaining to
telecommunications services originally purchased for resale but subsequently
consumed, in whole or in part, by a purchaser, rather than resold.
c. Yack University is a major educational
institution that purchases telecommunications services in bulk and resells
those services to individual students, faculty members, and other retail
purchasers for their personal use. Because Yack does not itself consume the
services and because it regularly sells telecommunications services to others,
it is a purchaser of telecommunications services for resale. See
also830 CMR 64H.1.6(6)(e) for rules pertaining to telecommunications
services originally purchased for resale but subsequently consumed, in whole or
in part, by a purchaser, rather than resold.
(c)
Services not Purchased for
Resale. In general, a purchaser of telecommunications services
does not purchase the services for resale if the purchaser itself consumes the
services and is not in the business of selling telecommunications services. A
purchaser is also not in the business of selling telecommunications services
and is therefore not a reseller of telecommunications services if its only
sales of telecommunications services are casual and isolated sales within the
meaning of M.G.L. c. 64H, § 6(c), and
830 CMR
64H.6.1.
1.
Examples. The following examples include, but are not
limited to, instances where purchasers of telecommunications services are not
selling such services for resale.
a. Lawrence
Law is an attorney who, while working on behalf of a client, uses the telephone
to request information or to schedule a meeting. The attorney is the
consumer of the telecommunications service and therefore does
not purchase the service for resale, even if the attorney bills the client for
the cost of the call.
b. Bob
Badluck, whose automobile breaks down on a rural road, uses Sally Savior's
telephone to make a long distance call to a repair service located 40 miles
away. Upon leaving, Bob pays Sally $2.00 for the cost of the telephone call.
Sally is not in the business of reselling telecommunications services to
visitors to her home. The sale of these services to Bob qualifies as a casual
and isolated sale under M.G.L. c. 64H, §
6(c).
(d)
Access Charges. The payment of access charges by a
long distance carrier to a local operating company generally constitutes a sale
for resale of telecommunications services, provided that the access charges are
included in the amount that the long distance carrier bills its retail customer
for long distance telecommunications service. A vendor of telecommunications
services must presume that its sales are retail sales and must collect tax
accordingly unless it takes a Resale Certificate (Form ST-4) in good faith from
the purchaser.
(e)
Reseller's Obligations. Any vendor that purchases
telecommunications services for resale must provide its wholesale vendor with a
resale certificate (Form ST-4) and must collect tax from its retail customers
on the sales price that it charges those retail customers for the
telecommunications services. If a purchaser that has given a resale certificate
to its wholesale telecommunications vendor itself consumes some of the
telecommunications services that it purchased tax free under the resale
certificate, it must file use tax returns and pay tax on the sales price of the
telecommunications that it consumes. For example, a hotel that gives a resale
certificate to a telecommunications vendor must pay use tax on all
telecommunications services that it purchases with the certificate but that it
does not resell to its guests (or others).
(7)
Services Sold in Conjunction
with Telecommunications Services.
(a)
General Rule. In
general, any amount paid for services that are part of a sale of
telecommunications services are included in the sales price subject to tax.
M.G.L. c. 64H, § 1. Thus, where telecommunications services are purchased
in conjunction with other services, the entire sales price is taxable as a sale
or use of telecommunications services,
unless the sales price
of the telecommunications portion of the services is separately stated from the
sales price of the other services being provided on the invoice or other
evidence of the sale. If the two amounts are separately stated, the tax is
assessed only on the sales price of the taxable telecommunications services,
provided that such separately stated charges are:
1) determined in a manner that reasonably
reflects the value of the telecommunications services in relation to the other
services,
2) set in good faith,
and
3) supported by records
sufficient to document the charges. If all of these conditions are not met, the
entire transaction is taxable.
(b)
Information and Internet
Access Services. The tax on the sale or use of telecommunications
services under M.G.L. chs. 64H and 64I, is a tax on the "transmission" of
messages or information by various electronic or similar means. Generally, it
is not a tax on the sale or use of information itself. In some transactions,
such as telephone calls to "900" number pay-per-call services, database or
electronic information services available to multiple subscribers, or Internet
access services, an information vendor or Internet access provider may purchase
telecommunications services (i.e., the telephone call or other
transmission) from another vendor in order to provide non-taxable information
services, database access, or Internet access to its retail customers. Under
such circumstances, the telecommunications services purchased by the
information vendor or Internet service provider are not purchased for resale
and are subject to tax when they are sold in or purchased for use in
Massachusetts. See830 CMR 64H.1.6(4).
(c)
Information Delivery
Services. Charges for Information Delivery Services provided by a
local telephone operating company within Massachusetts area codes are taxable
when sold to customers in Massachusetts. Effective June 1, 2003, the local
telephone company shall only collect and remit tax on the tariffed "transport
charge" for the telecommunications service, not the total charge to the party
making the call to a "976" or "940" pay-per-call number, regardless of whether
the telecommunications charge is separately stated from the information charge
on the invoice to the party making the call.
(8)
Collection of
Tax. For purposes of collection of the tax imposed by M.G.L. chs.
64H and 64I on telecommunications services, the sale of such services is deemed
to occur on the date that the bill for such services is first issued by the
vendor in the regular course of its business.
