Tax Type
Retail Sales and Use Tax
Description
Public service corporations; Minicomputer support systems
Topic
Exemptions
Date Issued
09-27-1985
September 27, 1985
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of February 14, 1985, in which you submit a request for a ruling on the applicability of the sales and use tax to operational support computers charged to subaccount 261.32 of account 261 prescribed by the Federal Communications Commission in its Uniform System of Accounts for Class A and Class B Telephone Companies.
Tangible personal property charged to account 261 is presently deemed taxable under Section 63O-10-87 of the Virginia Retail Sales and Use Tax Regulations. The subaccount in question includes computer equipment which provides direct operational support functions. As noted in the regulation, tangible personal property used in administrative functions such as record keeping is taxable, but tangible personal property "used directly" in the rendition of telephone utility service is not taxable. As stated in subsection D of the regulation, "[i]tems of tangible personal property that are used directly in the rendition of a public utility service are those which are both indispensable to the actual provision of a utility service and used or consumed immediately in the performance of such service. The fact that a particular item may be considered essential to the rendering of a public utility service because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly in the rendition of a public utility service."
Following is the application of the tax to the minicomputer support systems described in the documents submitted by ***** of your office on June 10, 1985:
1. Telecommunications Alarm Surveillance and Control (TASC) System. TASC permits centralized surveillance and remote control of buildings and equipment. The system is used directly in the rendition of public utility service to the extent used to exercise remote control over exempt equipment such as transmission and switching equipment. In addition, TASC is exempt to the extent used in repair functions to respond to alarms or analyze failures in exempt equipment. However, the system is used indirectly in the rendition of public utility service when used to log events, retrieve information from logs, and other administrative tasks. Other taxable functions include surveillance of buildings and equipment, responding to alarms except as noted above, and the remote control of non-exempt equipment.
2. Network Service Center System (NSCS). NSCS provides analysis of operator trouble reports and machine detected failures as well as related record keeping functions. This system is used in an exempt manner to the extent it is used to identify repair and maintenance needs. However, the system is taxable to the extent used in administrative functions such as the generation of management reports, record keeping of referrals to maintenance crews, and the correlation of data on trouble patterns.
3. Remote Memory Administration System (RMAS). RMAS is a support system for various changes in a customer's telephone service. This system primarily carries out a record keeping function, the input and maintenance of data on changes in telephone service. As the system apparently is used merely to record service data rather than to dispatch service personnel, RMAS is used indirectly in the rendition of public utility service and is therefore taxable in full.
4. Switched Access Remote Testing System (SARTS) SARTS permits one-person remote access and testing of private line circuits. This system is used in an exempt manner to the extent used to provide maintenance service and testing of telephone lines to keep the lines in operation.
5. Loop Maintenance Operations System (LMOS). LMOS is primarily a record keeping system used to manage customer line card records and produce management reports. While this system was deemed to be totally exempt under my March 4, 1985 ruling, the information now before me supports a change in that ruling. To the extent used in record keeping and report production, LMOS is taxable; however, to the extent used in the analysis of customers' trouble reports, the system is exempt.
6. Mechanized Loop Testing (MLT) System. As alluded to in my March 4, 1985 ruling, the use of this system in the testing of customer telephone lines and the printing of test results at repair facilities for the dispatching of repair personnel constitutes direct usage in the rendition of public utility service.
7. Automated Repair Service Bureau (ARSB). ARSB performs loop testing and provides data base administration (retention of up-to-date customer information) and cable plant administration (retention of up-to-date information on cable placements) services. ARSB's loop testing function is used directly in the rendition of public utility service, but its data base administration and cable plant administration functions constitute taxable usage. While the information contained on those data bases is useful to service and repair personnel, the data bases themselves serve taxable record keeping functions.
8. Engineering and Administrative Data Acquisition System (EADAS). EADAS collects traffic data from switching equipment for analysis by engineering and other personnel. While the collection of such data is useful for engineering and management purposes, it is not an integral part of the rendition of public utility service; thus, EADAS is taxable in full.
9. Data Base Administration System (DBAS). DBAS links service order procedures to customer service related data bases, including billing data bases. As this system is used for administrative purposes, it is taxable in full.
10. Data Acquisition System (DAS). DAS is used to collect data on operations and performs other record keeping functions. As DAS fulfills an administrative function, it is taxable in full.
11. Switching Control Center System (SCCS). SCCS permits the remote control of switching equipment. This system is exempt with the exception of its surveillance and record keeping (real-time and batch analysis) functions.
12. Computer Systems for Mainframe Operations (COSMOS). COSMOS assists in the management of the mainframe, providing a data base for use throughout the company. To this extent, COSMOS is a taxable administrative tool. However, COSMOS is used in an exempt manner to the extent used to control or shift the flow of telephone calls in the company's system.
13. Automatic Message Accounting Recording Center (ARMARC). ARMARC is a centralized system to record billing data. While accurate billing of customers is necessary for the operation of the business as a whole, it is not indispensable to the rendition of public utility service. Rather AMARC performs a taxable administrative support, function, and is therefore taxable in full.
14. AMARC Tape Duplication System (ATADS/AMARC). As this system merely duplicates billing information, it too is taxable in full for the reasons stated in 13 above.
15. Automatic Message Accounting Teleprocessing System (AMATPS). As AMATPS performs billing functions similar to AMARC, it too is taxable for the reasons stated in 13 above.
16. Maintenance and Analysis Plan for Special Services (MAPS). MAPS provides various administrative, record keeping, and report preparation functions for use in measuring and evaluating customer service. As MAPS carries out an administrative and record keeping function, it is used indirectly in the rendition of public utility service.
17. Electronic Systems Assistance Center (ESAU). ESAU serves the taxable administrative function of overseeing and controlling various company software maintenance programs.
Based upon the foregoing, it is obvious that certain some tangible personal property used in some minicomputer systems is used both in a taxable and exempt manner. In such situations, the tax should be computed by applying the tax to the purchase price of a particular item and multiplying the resulting figure by the percentage of time that taxable usage of the item bears to total usage.
I hope that this will answer your questions regarding the taxability of various computer systems used by your company. If not or if you have any further questions, please feel free to contact the department. It should be noted that this ruling is applicable only to your company and not to other telephone utilities.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner