Background: Beginning September 1, 2003, wireline (land line) telephone customers in Massachusetts will see a new surcharge on their monthly bills to fund enhanced 911 services.[ 1]

Application of Sales Tax: For the reasons discussed below, surcharges to fund enhanced 911 services from wireline customers are not subject to Massachusetts sales and use tax.[ 2]

Discussion of Law: Massachusetts imposes a five percent sales and use tax on telecommunications services. Taxable telecommunications services are defined as "any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiberoptics, microwave, radio, satellite or similar facilities but not including cable television." Generally, tax is imposed on the total retail sales price of taxable services, which includes the vendor's cost of materials, labor or services, interest charges, losses or other expenses. G.L. c. 64H, § 1.

Where the legal incidence of an excise, tax or surcharge imposed by a government agency is on the consumer, the excise is not considered part of the vendor's cost of doing business and is therefore not included in the sales price subject to tax. In this situation, the vendor is acting as the collector for the federal or state agency that will receive the funds. See generally DOR Directive 86-1. Contrast DOR Directive 00-2.

General Laws c. 6A, § 18H, as amended by Chapter 239 of the Acts of 2002, provides for surcharges on wireline telephone services to fund wireline enhanced 911 services.[ 3] The Statewide Emergency Telecommunications Board (SETB) is the state agency charged with coordinating the implementation of enhanced 911 service in Massachusetts.

The amount of the enhanced 911 surcharges is regulated by the Department of Telecommunications and Energy. The applicable DTE regulation provides, "Surcharge receivables are collected by the telecommunications companies for the sole purpose of supporting the programs identified in 220 CMR 16.00. All receivables shall pass directly through the telecommunications companies to the SETB (Statewide Emergency Telecommunications Board) . . . . Telecommunications companies shall only be required to remit the actual amount collected from subscribers to the SETB." 220 CMR 16.03(8).

The incidence of the E911 wireline surcharge is on the consumer and the telecommunications vendor is required to remit the amounts collected to a state agency. Therefore, the E911 wireline surcharge is not included in the sales price of telecommunications services subject to Massachusetts sales or use tax.

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue

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ENDNOTES:
1. The E911 wireline surcharge has initially been established at $.85 per month. See D.T.E. Order 03-63-Phase I. [ return to text]

2. Similar surcharges on wireless (mobile) telecommunications services to provide wireless enhanced 911 service are also not subject to sales or use tax. See G.L. c. 6A, § 18H(a), as amended by Chapter 61 of the Acts of 2002, which specifically provides "(t)he surcharge shall not be subject to sales or use tax. The subscriber shall be liable for the surcharge imposed under this section." [ return to text]

3. Wireline Enhanced 911 Service is defined as "a service consisting of telephone network features provided for users of the public telephone system enabling such users to reach a public safety answering point by dialing the digits 911. Such service directs wireline 911 calls to appropriate public safety answering points based on selective routing. Wireline Enhanced 911 also provides the service capability for automatic number identification ( i.e., the automatic display of information relating to the geographical location of the telephone used to place a 911 call.)" See 220 CMR 16.02. [ return to text]

160181

August 28, 2003

TIR 03-16