Document Number
18-209
Tax Type
Communications Sales and Use Tax
Description
Internet Access Fees and Internet Tax Freedom Act
Topic
Appeals
Date Issued
12-18-2018

 

December 18, 2018

 

 

Re:     § 58.1-1821 Application:  Communications Sales and Use Tax

 

Dear *****:

 

This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek correction of the communications retail sales and use tax assessment issued for the period December 2013 through October 2016.  I apologize for the delay in responding to your appeal.

 

FACTS

 

The Taxpayer provides local telephone service and high speed Internet access to its customers located in Virginia.  Relying on Public Document (P.D.) 14-64 (5/14/14), the Taxpayer contests the assessment of the communications sales tax on the broadband recovery fee, the service activation fee, and the early termination fee (the “Fees”) charged to its customers.  The Taxpayer states that the Fees are imposed only in conjunction with the purchase of Internet access services by its customers.  The Taxpayer was assessed tax in the audit on the Fees because the Fees were determined to be communications services that are subject to the tax in accordance with the Virginia Communications Sales and Use Tax Act.

 

DETERMINATION

 

Virginia Communications Sales and Use Tax

 

In the prior audit, for the period September 2010 through November 2013, the Taxpayer was assessed communications sales tax on the same Fees that are at issue in the audit addressed herein.  The Taxpayer appealed the assessment and the Department issued a determination letter on December 8, 2015 to the Taxpayer.  See P.D. 15-217 (12/08/2015).  In accordance with Virginia Code § 58.1-647 (definitions of Internet access service and communications services), P.D. 06-138 (11/1/06), P.D. 12-148 (9/17/12) and P.D. 14-131 (8/7/14), it was determined in P.D. 15-217 that the Fees at issue were for taxable communications services, and the assessment was upheld.  It was further determined that the ruling in P.D. 14-64 did not apply to the facts presented in the Taxpayer’s prior appeal because the fees at issue were not for the activation of communications services as considered in Virginia Code § 58.1-647.  The facts presented in the current appeal are the same as those addressed by the Department in the prior appeal.  Based upon the determination in P.D. 15-217, the Fees at issue in the current audit, are likewise deemed to be for taxable communications services.  Accordingly, the assessment is upheld as issued.

 

Internet Tax Freedom Act (the “Act”)

 

The Taxpayer also maintains that the communications sales tax assessment is barred by the Act, in that the Fees are imposed solely for the subscribers’ ability to access the World Wide Web or public Internet.  In the appeal for the prior audit period, the Taxpayer likewise contended that the prior assessment was barred by the Act.

 

In P.D. 15-217, it was determined that while the Act bars the application of the state tax on Internet access service, the Act does not prohibit the Commonwealth from deeming the connectivity charges subject to the communications sales tax.  The determination further provides that the Commonwealth is authorized by the Act to apply the communications sales tax to communications services, as long as such application does not violate the provisions of the Act.  As determined in P.D. 15-217, the Commonwealth operated well within the confines of the Act by enacting law that applies the communications sales tax to the sale of communications services related to the provision of Internet access services, as well as other communications services.  In accordance with the determination issued in P.D. 15-217, the communications sales tax assessed in this instance is not barred by the Act.

 

CONCLUSION

 

Based on the analysis and determination in P.D. 15-217, the assessment at issue is upheld.  A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer.  No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill.  Please remit payment to: Virginia Department of Taxation, 600 E. Main Street, 15th Floor, Richmond, Virginia 23219, Attn: *****.  If you have any questions concerning payment of the assessment, you may contact ***** at *****.

 

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site.  If you have any questions about this determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.

 

Sincerely,

 

Craig M. Burns
Tax Commissioner

 

AR/1543P

 

 

Rulings of the Tax Commissioner

Last Updated 01/22/2019 15:49