May 7, 2004
You ask for a letter ruling on behalf of *************** ("Corporation"), a *************** corporation, and certain of its subsidiaries doing business in Massachusetts regarding the applicability of Massachusetts sales tax to amounts charged to retail customers for taxable telecommunications services pursuant to the multi-product discount program described below. Specifically, you ask if a discount given to retail customers participating in this program may be deducted in calculating the sales tax on telecommunications services.
Through in-state subsidiaries, Corporation sells Internet access service, cable television service, and telephone service to retail customers in Massachusetts. Customers may purchase one or more of these services, as well as other optional features within each service category. When more than one service is purchased, the customer receives a "multi-product" discount of five dollars per service per month. Taxable and non-taxable services have been separately stated on the bills to the retail customers, as well as the five dollar discount applicable to each service. These services include both taxable services, i.e., telecommunications services, and non-taxable services, i.e., cable television services and Internet access.
Under Massachusetts General Laws, sales tax is imposed on sales of telecommunications services, defined as "any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiberoptics, laser, microwave, radio, satellite or similar facilities, but not including cable television." G.L. c. 64H, § 1. Cash discounts allowed and taken on sales are excluded from the sales price subject to tax. Id. See also the Department's regulation on Discounts, Coupons and Rebates, 830 CMR 64H.1.4.
The multi-product discounts given by Corporation to its retail customers when they purchase more than one service are cash discounts within the meaning of G.L. c. 64H, § 1, and 830 CMR 64H.1.4. To the extent that Corporation implemented its multi-product discount program, but charged, collected and remitted tax on taxable telecommunications services sold in Massachusetts without reducing the sales tax in accordance with the applicable discount, Corporation may apply for an abatement by filing form CA-6 for periods within the time limitations and other conditions of G.L. c. 62C, § 37. Before any refund can be made, the Corporation must establish to the satisfaction of the Commissioner that it has repaid or credited to its retail customers the amounts for which the application is made. See 830 CMR 62C.37.1(5).
Very truly yours,
Commissioner of Revenue