Sales Tax Activities
Sales Tax State Activity Update - December 2006
Tennessee Puts Voice Mail through the True Object Test
A telecommunications company, BellSouth Telecommunications, was not entitled to a refund of Tennessee sales tax on certain voice mail services. The issue in this case was whether voice mail services were subject to tax in Tennessee as a telecommunications service. The company sold three different types of voice mail service. Following an audit, the Department determined that BellSouth's most basic voice mail service was found to be not taxable, however the company's other voice mail services (which offered subscribers additional features and functionality) were taxable.
Both the Department and BellSouth relied upon the "true object" test to determine whether the voice mail services were taxable. The company argued that the telecommunications service was not the true object of the services at issue. However the Department argued, and the Court agreed, that the true object of the service was to facilitate the transmission and receipt of a telephone communication. Accordingly, the services were subject to tax as a telecommunications service.
(BellSouth Telecommunications, Inc. v. Ruth E. Johnson, Commissioner of Revenue of State of Tennessee , Tennessee Court of Appeals No. M2005-00865-COA-R3-CV, Filed 10/27/06)
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