Sales Tax State Activity Update - November 2004

South Carolina Addresses Taxability of Communication Services

The Department of Revenue released a ruling providing a comprehensive discussion on the application of sales and use tax to a wide variety of communication services. The ruling summarized longstanding Department opinions concerning the taxability of various communication services, and lists those services that the Department has held in the past as being subject to the tax; whether through formal advisory opinions, audits or informal advice provided to taxpayers.

Communications are subject to sales and use taxes pursuant to Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3) which imposes the tax on the “gross proceeds accruing or proceeding from the charges for the ways or means for the transmission of the voice or messages, including the charges for use of equipment furnished by the seller or supplier of the ways or means for the transmission of the voice or messages”. Based on this definition, it is the Department’s position that charges for the ways or means of communication include charges for access to, or use of, a communication system (the manner, method or instruments for sending or receiving a signal of the voice or of messages), whether this charge is based on a fee per a specific time period or per transmission.

The Department of Revenue has taxed communication services such as telephone services (those not specifically exempt under Code Section 12-36-2120(11)), including telephone services provided over the traditional public switched telephone network (PSTN), a wireless transmission system, a voice over Internet protocol (VoIP) system, teleconferencing services, paging services, answering services, cable television services, satellite programming services, fax transmission services, voice mail messaging services, e-mail services, and database access transmission services (on-line information services), such as legal research services, credit reporting/research services and charges to access an individual website.

Based on the Department’s longstanding opinions, the following communication services are not subject to the sales and use tax: telephone services specifically exempt under Code Section 12-36-2120(11) such as toll charges between telephone exchanges and carrier access charges and customer’s access line charges established by the FCC or the SC PSC, communication services involving automatic teller machines, data processing services (as defined in Code Section 12-36-910(C), computer database information services provided by a cooperative for exclusive use by cooperative members, electronic filing of tax returns by the tax return preparer, music provided by AM and FM radio stations, and closed circuit television.

(Revenue Ruling 04-15, South Carolina Department of Revenue, Issued 10/26/04)

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