Sales Tax Articles
Sales Tax State Activity Update - January 2005
Cellular Phone Service not Exempt in Washington
RCW 82.08.0289 provides an exemption from the sales tax for the sale of network telephone service, other than toll service, provided to residential customers.
Network telephone service is defined by RCW 82.04.065 and this definition includes the provision of cellular telephone service. The term "residential customer", adopted in 1983, is defined in RCW 82.08.0289(2)(b) as "an individual subscribing to a residential class of telephone service." The term reflects the then-customary division of all telephone service into separate "residential" and "business" classifications, as defined by regulatory tariffs filed by the telephone company. These separate classes were mandated by state regulatory approval of telephone rates, and wire-line telephone carriers filed, and continue to file, separate tariffs with the Washington Utilities and Transportation Commission (WUTC) governing each class of service.
However, the telecommunications industry has evolved tremendously since 1983. Some individuals have abandoned wire-line telephone service and now rely exclusively upon a wireless carrier for telephone service. Unlike traditional wire-line service, wireless telephone service is not divided into distinct classifications through the filing of formal tariffs with the WUTC. Cellular service lacks the regulatory structure necessary to define "a residential class of telephone service" as required by RCW 82.08.0289.
In addition, the traditional regulatory distinction of "residential" service was intended to provide telephone service at an individual's residence. The very nature of cellular service is that the subscriber is free to make and receive telephone calls over a wide area and the service is not tied to the user's place of residence. In this sense, cellular telephone service can never be provided on a "residential" basis. For these reasons the Department has determined that wireless telephone service does not qualify for the exemption under RCW 82.08.0289. All charges for network telephone service provided to a consumer by a mobile telecommunications service provider are subject to retail sales tax.
(Excise Tax Advisory 2019.08.245, Department of Revenue, Issued 12/1/04)
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