State Activity Update - June 2004

Sales Tax Discounts Provided for Telecommunications Service in Massachusetts

A company, doing business in Massachusetts, requested a letter ruling on the applicability of Massachusetts sales tax on amounts charged to retail customers for taxable telecommunications services sold pursuant to a multi-product discount program. Through in-state subsidiaries, the company sold both taxable services, i.e., telecommunications services, and non-taxable services, i.e., cable television services and Internet access. Customers could purchase one or more of these services, as well as other optional features within each service category. If more than one service was purchased, the customer received a “multi-product” discount of five dollars per service per month. Taxable and non-taxable services were separately stated on the retail customer’s bill, as well as the five-dollar discount applicable to each service. Specifically, the company asked if the discount given to retail customers participating in this program could be deducted in calculating the sales tax on telecommunications services.

The Department ruled that the multi-product discounts given by the company to its retail customers when they purchase more than one service are cash discounts within the meaning of G.L. c. 64H, §1, and 830 CMR 64H.1.4 and could be deducted when calculating the Massachusetts sales tax on telecommunications services. If the Corporation implemented its multi-product discount program, but charged, collected and remitted tax on taxable telecommunications services without reducing the sales tax in accordance with the applicable discount, the company could apply for an abatement by filing form CA-6 for periods within the statue of limitations. Before any refunds could be made, the Corporation must establish to the satisfaction of the Commissioner that it has repaid or credited to its retail customers the amount of the tax.

(Letter Ruling 04-1, Department of Revenue, Issued 5/7/04) 6/04

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