I. Introduction

Effective September 1, 1990, Massachusetts extended the tax under G.L. c. 64H, 64I, to the sales and use of telecommunications services. See St. 1990, c. 121; St. 1990, c. 150; Technical Information Release 90-8 (Taxation of Sales and Use of telecommunications Services). 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." St. 1990, c. 121, § 42. This Technical Information Release (TIR) clarifies the application of the tax on the sale and use of telecommunications services to certain resale transactions and to transactions involving the simultaneous sale of telecommunications and information services.

II. Sales for Resale

The tax on sales of telecommunications services under G.L. c. 64H applies to retail sales and not to sales for resale within the meaning of G.L. c. 64H, § 8 as amended by St. 1990, c. 121, § 53. See also St. 1990 c. 150, s. 372. In general, a purchaser of telecommunications services purchases the services for resale if the purchaser does not itself consume the services and if the purchaser is in the business of selling telecommunications services. A purchaser consumes a telecommunications service that it purchases if it is a participant in the telecommunication, such as the actual originator or recipient of a telephone call, and not merely the person that owns the telecommunications equipment or that is billed for the service by the original telecommunications provider. Examples of purchasers that may themselves be in the business of selling telecommunications services include, but are not limited to, hotels and motels that separately charge guests for telephone calls placed by the guests, commercial facsimile transmission services, and universities or other institutions that purchase telecommunications in bulk and then resell those services to individual students, faculty members, or other retail purchasers, for their personal use. A purchaser is not in the business of selling telecommunications services and is therefore not a reseller of telecommunications services if its only sales of telecommunications services are casual and isolated sales within the meaning of G.L. c. 64H, § 6(c), and 830 CMR 64H.6.1.

A retailer that purchases telecommunications services for resale must provide its wholesale vendor with a resale certificate (Form ST-4) and must collect tax from its retail customers on the sales price that it charges those retail customers for the telecommunications services. If a retailer that has given a resale certificate to its wholesale telecommunications vendor itself consumes some of the telecommunications services that it purchased tax free under the resale certificate, it must file use tax returns and pay tax on the sales price of the telecommunications that it consumes. For example, a hotel that gives a resale certificate to a telecommunications vendor must pay use tax on all telecommunications services that it purchases with the certificate but that it does not resell to its guests (or others).

The resale principles stated in this TIR are effective as of September 1, 1990. Because of uncertainty among taxpayers about the application of the tax on telecommunications services in resale transactions, however, the Commissioner will enforce the resale principles stated in this TIR on a prospective basis. In general, if a retail vendor that is a telecommunications reseller has neglected to register as a services vendor on Form TA-2 and to give its wholesale telecommunications vendor a resale certificate, the Commissioner will not assess the sales and use tax on that reseller's retail sales of telecommunications services between September 1, 1990, and the date of this TIR if, during this period, the reseller has paid tax to its wholesale vendor as if its purchases were all retail purchases. This prospective enforcement policy will not, however, constitute grounds for abatement of sales or use tax paid over by telecommunications resellers that have already registered as telecommunications vendors.

III. Information Services

The tax on the sale or use of telecommunications services under G.L. c. 64H, 64I, is a tax on the "transmission" of messages or information by various electronic or similar means. It is generally not a tax on the sale or use of information itself. In some transactions, such as telephone calls to "900 numbers" or to certain database services, a person may simultaneously purchase a telecommunication service (i.e. the telephone call or other transmission) and the information or data being transmitted. Under such circumstances, the entire sales price of the transaction is taxable as the sale or use of telecommunications services unless the sales price of the transmission and the sales price of the information or data transmitted are separately stated on the purchaser's bill. If the two amounts are separately stated, the tax is assessed only on the sales price of the transmission service.

Mitchell Adams
Commissioner of Revenue

TIR 91-1

March 29, 1991