Sales, Use and International Tax Activity Update - May 2009

Minnesota Discerns between Data and Voice for VoIP

The Minnesota Department of Revenue has modified a previously issued Revenue Notice regarding Voice over Internet Protocol (VoIP) service due to statutory changes in the definition of the term “telecommunications services.”

Minnesota sales tax statutes define telecommunication services as “the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points.” Previously, the transmission, conveyance, or routing of information or signals by satellite, optical, microwave or other medium or method regardless of the protocol used qualified as a telecommunication service.

Telecommunication services do not include data processing and information services that allow data to be generated, acquired, stored, processed, or retrieved and delivered by an electronic transmission to a purchaser when the purchaser’s primary purpose for the underlying transaction is the processed data or information.

The Department’s position for purposes of Minnesota sales and use tax, is that VoIP is not an information service since it uses computer processing applications solely for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

Although, VoIP uses Internet protocol that allows the transmission of packeted data across a network, it merely serves to address and route the voice, data, or audio.

(Modification of Revenue Notice 05-03, Minnesota Department of Revenue, Issued 4/13/09) 5/09

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