Sales Tax Articles
Sales Tax State Activity Update - October 2006
Indiana Discusses Telecom Services Taxation
An Indiana Revenue Ruling discussed the sales tax treatment of several telecommunications services that were offered by a company that developed billing software for telecommunications carriers. The company wanted to know whether the services it provided to the telecommunications service providers were subject to sales tax.
The Department ruled that the following charges were subject to sales tax:
- Service activation and termination charges;
- Wireless telephone features such as caller I.D., call forwarding, three way calling and speed dialing (charges for features that affect the transmission rather than the information contained in the transmission);
- Digital downloads such as ring tones, games, songs, and videos;
- Service change charges in order to add or change features.
The following charges were not subject to sales tax:
- Voice mail charges;
- Charges for access to premium websites;
- Optional warranty and maintenance agreements on wireless telecommunications devices (provided certain conditions are met);
The Department stressed that the taxation of voice mail service should not be confused with the transmission of voice mail messages. The company must pay sales or use tax on the intrastate transmission of the messages unless the purchase of telecommunications service is exempt from sales tax. In addition, text messages are similar in that the text message service itself is not taxable, but the transmission of the text message is taxable.
The Department ruled that for bundled telecommunication services, those in which taxable and nontaxable services are aggregated together and not separately stated, the nontaxable services can remain exempt provided the service provider can reasonably identify the nontaxable charges in his books and records kept in the regular course of business.
(Revenue Ruling No. 2006-04ST, Indiana Department of Revenue, 8/18/06)
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