Sales Tax Articles
Sales Tax State Activity Update - September 2006
A Phone Line by Any Other Name - VoIP Examined in Missouri
A Missouri letter ruling discussed the sales tax treatment of Voice over Internet Protocol (VoIP) telecommunications service. The applicant developed billing software for telecommunication carriers including companies that provided VoIP telecommunications service. The applicant wanted to know whether the VoIP telecommunications service was subject to sales tax.
VoIP allows users to make telephone calls over the Internet utilizing a broadband connection instead of a traditional (analog) telephone line. Interconnected VoIP service provides access to the public switched telephone network (PSTN). Such interconnection enables the user to receive and transmit calls to and from any telephone number currently in service, including but not limited to (i) calls received from or sent to telephone number assigned to other VoIP users, (ii) calls received from or sent to other landline and cellular telephone numbers, and (iii) local and long distance (domestic and international) telephone calls.
The Department ruled based on the facts presented that VoIP telecommunications service is subject to Missouri sales tax. The rate is based upon the location of the customer. Separately stated charges for local and intrastate telecommunications services are subject to sales tax and separately stated charges for interstate and international telecommunications are not subject to sales tax. However, the charges must be separately stated; if the charges are not separately stated, the total charge is taxable. Additionally, billing components associated with VoIP telecommunications services such as non-recurring charges, usage charges and flat-rate monthly recurring charges are also subject to sales tax.
(Letter Ruling No. LR3220, Missouri Department of Revenue, 8/3/06)
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