Sales Tax State Activity Update - October 2004

Taxability of 911 Service Charge Clarified in Wyoming

A telecommunications company, Qwest, appealed an audit assessment which imposed sales tax on two charges that Qwest collected from its customers: the 911 emergency service charge and the End User Common Line charge. Qwest also claimed that the statute of limitations barred the Department of Revenue’s audit assessment.

The first issue, involving the 911 emergency service charge, is a fee that local exchange carriers such as Qwest collect from their customers and remit to authorized local government entities for construction, maintenance and operation of the 911 emergency response system. The Department took the position that the 911 charge was subject to sales tax because the charge was incidental to the provision of intrastate telephone service and therefore should be considered a part of sales price subject to tax.

With respect to the End User Common Line charge (EUCL), this fee is authorized by the Federal Communications Commission. The EUCL charge is a flat charge that does not vary based on the customer’s use of telecommunications service. The EUCL charge is not a tax or fee charged by the government. Instead, the money received from this charge went directly to Qwest to recover a portion of the customer’s local loop (the connection from the customer’s premise to the telephone company’s central office and switching equipment) that is used for providing interstate telephone service. The Department viewed the EUCL charge as part of the sales price a person pays in order to obtain basic phone service. Although authorized by the FCC, the Department viewed the charge as supporting the maintenance of the local exchange.

With respect to the first issue, the 911 emergency service charge, the Board of Equalization held that the charge was not taxable as an intrastate telephone and telegraph service. The 911 system is an emergency reporting system operated by a local government entity, not by the local exchange carrier. The carrier was only required to provide the access necessary to connect to the 911 emergency service, not the service itself. With respect to the EUCL, the Board concluded that the charge was associated exclusively with the local loop provided by Qwest and was taxable as part of the consideration paid by the customer for intrastate telephone services, even though the transmission subsequently was directed to or had previously been received from an interstate carrier.

Finally, there was no violation of the statute of limitations because the audit was conducted within the statutory time limit. The audit was extended based upon requests initiated by Qwest and were granted on the condition that the audit period be extended as well.

(In the Matter of the Appeal of Qwest Corporation from an Audit Assessment Decision of the De-partment of Revenue, Wyoming State Board of Equalization, Docket No. 2003-92, 9/8/04)

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