|Organization:||Massachusetts Department of Revenue|
|Referenced Sources:||Massachusetts General Laws|
Sales and Use Tax
May 7, 2012
On behalf of your client **************** (the “Company”), you have requested a letter ruling with respect to Massachusetts sales and use tax as it applies to Company’s sales to Massachusetts retailers. Specifically, you request a ruling on whether sales of “call tracking services” as described in your request are subject to the sales tax imposed under G.L. c. 64H, §§ 1 and 2. The following is your representation of the facts upon which we base this ruling.
Company provides a service to certain car dealerships in Massachusetts (hereinafter “Retailers”), whereby the company collects and analyzes certain information regarding prospective customers, measures advertising performance, and evaluates employee call handling skills (herein referred to as “call tracking services”). Company has engaged a third party call measurement, monitoring and tracking service provider (herein referred to as “Company B”) as a sub-contractor to provide services on its behalf. Company B is headquartered in California but has a computer call center located in Texas.
To facilitate the call tracking and measurement services, Company B arranges for one or more custom vanity numbers (1-8YY numbers which can be customized, e.g., “800-RET-AILR”) to be used by the Retailers. The toll-free numbers are used in advertisements on Company’s website, or on the Retailer’s website and under certain premium plans the toll-free numbers can also be used in advertising medium of the Retailer’s choice (e.g., newspaper, radio, television, etc.).
All vanity numbers ring directly to Company B’s computer call center located in Texas. They do not ring directly to the Retailer’s location, nor does the Retailer have any other use of the toll-free number(s) (e.g., for outgoing calls, etc.). Company B is the “Customer of Record” for any numbers used, and maintains exclusive rights to any such number(s) beyond the term of the agreement with Company and/or the Retailer. The telecommunications providers bill Company B for the toll-free numbers consumed in the delivery of its call monitoring, measurement and tracking services. Per the agreement with Company B, all applicable federal, state and local sales and use taxes are included in the telecommunication service provider’s invoice to Company B and paid by Company B on the services it consumes. No federal, state or local sales and use taxes are charged to Company by Company B, nor to the Retailers.
When a potential customer of Retailer dials the toll-free number, the call is connected to Company B’s computer servers located in Texas. Company B’s servers pick up the call and play a “Welcome” message and the server makes a second call dialed to the “point to number” at the Retailer. The “point to number” is the Retailer’s own separate pre-existing or dedicated local telephone number. When a call to the toll-free number, necessary for the call tracking services, is forwarded to the “point to number,” it rings at the Retailer’s location. The Retailer is the “Customer of Record” for the local telephone number(s) used as a part of the call tracking service. The local telecommunications provider bills the Retailer for this local service in Massachusetts if the Retailer is located within the Commonwealth, which includes all applicable federal, state and local sales and use taxes.
A salesperson at Retailer answers the phone and a recording is played indicating who is on the line, where the customer obtained the toll-free number, and asking if the salesperson wishes to be connected to the customer. If prompted, the salesperson is then connected to the customer. Company B’s servers are still recording the call. Company B’s servers also provide the information obtained from/about the customer to Retailer via the Internet. The salesperson at the Retailer has access to all of this information during the call.
Once the Retailer is done talking to the customer, the customer has the option to take a survey. If the customer chooses, Company B’s computer servers take over asking the customer questions. The Retailer has access to a report via the Internet that contains the detailed information for each of these calls – including a link to a recording of the call. Under certain plans, the Retailer can also receive reports to determine which advertisements were most effective based on the number of calls using the toll-free number assigned to that advertisement. The Company also receives a report summarizing the Retailer’s phone referrals and usage data for each toll-free number. Company does not make such reports available to any party other than the Retailer.
Company charges a flat subscriber fee for the call tracking service to the Retailer. The flat fee ranges from $99 per month for the basic service which includes the use of and tracking on one toll-free number to $499 per month for the premium service which includes the use of and tracking of ten toll-free numbers. The charge for the use of the 800 numbers is included in the flat fee and thus there is neither a separate fee charged for the toll-free number(s) nor any per minute charges related to the usage of the 1-800 numbers.
Are call tracking services sold by Company to Massachusetts Retailers subject to the Massachusetts sales or use tax?
Massachusetts Retailers’ purchases of the Company’s call tracking services are not subject to the Massachusetts sales and use tax. Company and its subcontractor, Company B, are responsible for Massachusetts sales or use tax on the telecommunications services purchased and consumed in the provision of the nontaxable call tracking service subject to credit for tax properly due and paid to another jurisdiction.
IV. LAW AND ANALYSIS
Massachusetts imposes a 6.25% sales tax on sales of telecommunication services and tangible personal property in the Commonwealth, including sales of prewritten (also called “canned” or “standardized”) software regardless of the method of delivery. The rules relating to tax on computer hardware and software are contained in the Computer Industry Services and Products Regulation, 830 CMR 64H.1.3. Section (3) provides the following:
(3) General Rules.
(a) Sales Tax. Sales in Massachusetts of computer hardware, computer equipment, and prewritten computer software, regardless of the method of delivery, and reports of standard information in tangible form are generally subject to the Massachusetts sales tax. Taxable transfers of prewritten software include sales effected in any of the following ways regardless of the method of delivery, including electronic delivery or load and leave: licenses and leases, transfers of rights to use software installed on a remote server, upgrades, and license upgrades. The vendor collects sales tax from the purchaser and pays the sales tax to the Commissioner.
Generally, where the object of a transaction is to obtain services other than (a) the use of software or (b) standard reports of information on tangible media, the transaction is not subject to tax. Taxable transfers of prewritten software include sales effected through electronic delivery or transfers of rights to use software installed on a remote server.
Sales of reports or other information on printed matter or magnetic media, sold or intended to be sold to two or more purchasers, are generally taxable. 830 CMR 64H.1.3(8)(a). Such reports may reflect collection, compilation, or analysis of information. Id. Examples include database files, mailing lists, market research, and surveys. Id. However, there is an exemption for sales of reports of individual information, whether printed or on magnetic media; such personal and individual information is not taxable if the report may not be or is not substantially incorporated into reports furnished to other persons. 830 CMR 64H.1.3(8)(b).
The Company argues that it is providing a nontaxable telemarketing service to Retailers. The object of the transaction sought by the Retailer is to market itself to prospective customers as well as to receive information about prospective customers, to record calls for training purposes, and to measure the effectiveness of its advertising initiatives. We agree with that conclusion.
As part of its call tracking service, Company also makes sales of information. The initial information Company provides to its customers as part of its call tracking service relates only to determining the source of the customer’s advertising that generated the telephone inquiry, and if available, the location of the prospective car purchaser. This information provided by Company to the Retailers is personal and individual to the Retailer’s advertising practices. The information is transmitted electronically by Company’s subcontractor through the Internet only to the Retailer and Company, and is not incorporated into reports furnished to other persons. Accordingly, the call tracking service qualifies for the exemption from tax under 830 CMR 64H.1.3(8)(b) for the provision of information which is personal or individual in nature and is not or may not be incorporated into reports furnished to others.
The results of the exit survey taken by Company B also qualify for the sales and use tax exemption under 830 CMR 64H.1.3(8)(b) as sales of information that is personal and individual in nature, but only if neither the Company nor its subcontractor, Company B, furnishes the information obtained in the survey to persons other than the Retailer for whom the survey was performed. If the survey is made available in tangible form to individuals other than the Retailer for whom the survey was performed, the receipts from the sale of the exit survey results are subject to the sales and use tax.
Telecommunications services consumed in the provision of services which are not subject to tax under G.L. c. 64H or G.L. c. 64I are not purchased for resale and are taxable when they are sold in or purchased for use in Massachusetts. This rule applies whether or not such a vendor separately states telecommunications charges to its customer. See TIR 05-8.
Based on the facts provided and applicable provisions of Massachusetts law, the Department rules that the call tracking service provided by the Company to Retailers to track calls and gather information about the Retailer’s customers, advertising programs, and employee sales performance is not subject to sales and use tax under 830 CMR 64H.1.3(8)(b). The object of the transaction is a telemarketing service that includes provision of reports of individual and personal information unique to the Retailer purchasing the service. Company and its subcontractor, Company B, are responsible for Massachusetts sales or use tax on the telecommunications services purchased and consumed in the provision of the nontaxable call tracking service subject to credit for tax properly due and paid to another jurisdiction.
Very truly yours,
Commissioner of Revenue