Massachusetts has adopted two Acts: St. 1990, c. 121 (Chapter 121), and St. 1990, c. 150 (Chapter 150), that have substantially modified the provisions of the sales and use tax in Chapters 64H and 64I of the General Laws. In particular, these Acts have extended the tax under G.L. c. 64H, 64I, to the sale or use of certain services in Massachusetts. The Department of Revenue is issuing this Technical Information Release (TIR) to describe the taxation of telecommunication services under the amended sales and use tax provisions.
II. Telecommunications Services Subject to Tax
A. Definition of Telecommunications Services
Chapters 121 and 150 have extended the sales and use tax in G.L. c. 64H and 64I to the retail sale or use of telecommunications services in Massachusetts. See Chapter 121, sections 42, 43. Telecommunications services are defined as "any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiber-optics, laser, microwave, radio, satellite, or similar facilities, but not including cable television." Chapter 121, section 42. In general, the telecommunications contemplated by the statute include telephone and other transmissions between or among specific parties or specific locations, but do not include public broadcasts.
B. Sale or Use in Massachusetts; Interstate Telecommunications
The tax on telecommunications services in General Laws Chapters 64H and 64I, as amended, applies to the retail sale or use of these services in Massachusetts. The tax applies to all telecommunication services provided between or among points in the Commonwealth, and to interstate telecommunications services if the sale of the services occurred in Massachusetts. See G.L. c. 64H,§ 1 as amended by Chapter 121, § 42.
Sales of interstate telecommunication services are deemed to occur in Massachusetts if the telecommunication either originates or is received at a location within Massachusetts and the service is charged to a service address in Massachusetts. However, if a particular telecommunication that originates or is received in Massachusetts is charged to neither the service address where the telecommunication originates nor a service address where the telecommunication is received, the telecommunication service is deemed to be sold within Massachusetts if it is paid for in the Commonwealth.
C. Credit for Taxes Paid to Other States
In order to avoid the multi-state taxation of a sale of interstate telecommunications services that is subject to tax under G.L. c. 64H, as amended, any taxpayer that demonstrates that it has paid to another state a tax that was properly due on the sale may claim a credit against the tax imposed under G.L. c. 64H. The amount of the credit shall be the amount of the tax paid to the other state, provided that the credit may not exceed the tax imposed on the sale under G.L. c. 64H.
III. Exemptions from Tax
A. Residential Telephone Service Exemption
The tax under G.L. c. 64H and 64I extends to any retail sale to, or use of telecommunications services by individuals or businesses in Massachusetts, including small businesses. However, a limited exemption is available for residential telephone use under G.L. c. 64H, § 6(i) as amended by Chapter 150, § 360. Specifically, the exemption applies to "residential main telephone services billed on a monthly recurring basis or billed as message units, and residential intra local access and transport area [LATA] service billed on a recurring monthly basis, provided that...[this exemption]...shall not exceed the amount of thirty dollars per month." If the residential service exceeds the thirty dollar exemption limit, the amount over thirty dollars is subject to tax.
Residential telephone service generally includes service provided to an individual for personal use at his or her residential address, including an individual dwelling unit such as an apartment. In the case of institutions where individuals reside, such as schools or nursing homes, telephone service is considered residential if it is provided to and paid by an individual resident rather than the institution. Telephone service provided to a business is not residential service even if the business is located in an individual's home. If an otherwise residential telephone is used for business purposes, the business must file a use tax return and pay tax on the services that it used.
The residential exemption includes, but is not limited to, the following telephone services, when provided to a residential purchaser, up to a total of $30 per month:
1. recurring basic monthly service charges, including recurring end user common line charges imposed by the Federal Communications Commission and recurring charges for auxiliary services such as call waiting and touch tone service;
2. message units or similar unitemized per message/per minute charges for calls placed within the purchaser's local calling area;
3. recurring monthly charges for unlimited calling within all or a specified portion of the purchaser's LATA;
4. recurring monthly charges for a pre-determined number of minutes of telephone service within all or a specified portion of the purchaser's LATA.
Services that do not qualify for the residential telephone exemption include, but are not limited to:
5. any call to or from a point outside of the purchaser's LATA other than calls within the purchaser's local calling area;
6. toll calls within the purchaser's LATA that are not billed on a recurring monthly basis, including charges for minutes in excess of any time limit on an intra-LATA calling plan, to the extent that such excess minutes are attributable to toll calls;
7. non-residential telephone service, including service from mobile telephones and public telephones, and including service billed to a purchaser's residential account through a credit card, calling card, or similar device, if the service is not actually provided at the purchaser's residence;
8. any residential telecommunications services other than exempt telephone services.
B. Exempt Purchasers
Governmental organizations and eligible charitable organizations are exempt from sales and use tax, including the tax on sales or use of telecommunications services. G.L. c. 64H, §§ 6(d), 6(e). Small businesses are not exempt. G.L. c 64H, § 6(qq). A charitable organization must present Forms ST-2 (Certificate of Exemption) and ST-5 (Exempt Purchaser Certificate) to a vendor in order to claim its exemption. Governmental organizations may provide vendors with Form ST-5, but are not required to do so.
IV. Effective Date
The sales and use tax applies to telecommunications services provided on or after September 1, 1990. However, in the case of residential telecommunications services, the tax applies only to services that are provided on or after September 1, 1990, and that are billed in the regular course of the vendor's business on or after October 1, 1990. See Chapter 150, section 372. If a bill issued by a vendor includes unitemized charges for a period beginning before September 1, 1990, and ending on or after September 1, 1990, the vendor must prorate any tax applicable to those charges. Solely for the purposes of the payment over to the Commissioner of tax on telecommunications services, a sale is deemed to occur on the date that the bill for the services is first issued by the vendor in the regular course of its business.
Stephen W. Kidder,
Commissioner of Revenue
August 22, 1990