Tax Type
Communications Sales and Use Tax
Description
Some items that are and are not included for Communications Sales and Use Tax
Topic
Subtractions and Exclusions
Taxability of Persons and Transactions
Date Issued
03-26-2007
March 26, 2007
Re: Ruling Request: Communications Sales and Use Tax
Dear *****:
This is in response to your letter requesting a ruling on the communications sales and use tax.
FACTS
You request a ruling concerning the application of Code of Virginia § 58.1-648 B vi to the purchase of communications services by a communications service provider from an unaffiliated communications service provider. The purchasing provider uses the communications services in the administrative support functions of its business of providing communication services to retail customers. These administrative support functions include, but are not limited to, its retail stores (which sell wireless calling plans and wireless telephones and accessories), engineering offices, switching centers, customer call centers and corporate support functions. You ask whether or not these purchases of communications services are excluded from the communications sales and use tax under Code of Virginia § 58.1-648 B vi.
You also request a ruling concerning the application of Code of Virginia § 58.1648 B vi to the purchase of communications services by a corporation that is not a communications services provider. The purchaser is a member of a consolidated group of corporations that provides a wide range of retail and wholesale services that include sales of communications services and non-communications services. Some of the members of the group are communications services providers and others are not. The parent company of the consolidated group created the purchaser as a separate legal entity to provide administrative support services to the other members of the consolidated group. These administrative support services include seamless network engineering, customer care, revenue billing, marketing, accounting and human resource services. None of the administrative support services are provided to any business outside of the consolidated group. The costs of providing the administrative support services, including purchases of communications services, are allocated through normal intercompany charges to the other members of the consolidated group based on various burden levels. The communications services are predominately purchased from a communications services provider that is under the control of the common parent. You ask whether or not these purchases of communications services are excluded from the communications sales and use tax under Code of Virginia § 58.1-648 B vi.
DETERMINATION
Effective January 1, 2007, 2006 House Bill 568 (Acts of Assembly 2006, Chapter 780) replaces many of the current state and local communications taxes and fees with a centrally administered communications sales and use tax.
Code of Va. § 58.1-648 A imposes "a sales or use tax on the customers of communications services." Code of Va. § 58.1-648 B viii provides that the sales price on which the tax is levied shall not include charges for sales for resale. Code of Va. § 58.1-648 B vi provides that the sales price on which the tax is levied shall also not include charges for a communications services provider's internal use of communications services in connection with its business of providing communications services.
In response to your first question; it is my determination that purchases of communications services by a communications services provider for use in the administrative support functions listed by you would qualify for exclusion from the communications sales and use tax under Code of Virginia § 58.1-648 B vi because the communications services are purchased by a communications services provider for its internal use in connection with its business of providing communications services.
In response to your second question, it is my determination that purchases of communications services by the corporation created to provide administrative support services to related communications services providers would not qualify for exclusion from the communications sales and use tax under Code of Virginia § 58.1-648 B vi because the communications services are not purchased by a communications services provider.
CONCLUSION
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library section of TAX's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Office of Policy and Administration, Policy Development, at *****.
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- Sincerely,
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Janie E. Bowen
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- Tax Commissioner
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PDO/1-1099958413
Rulings of the Tax Commissioner