830 CMR: DEPARTMENT OF REVENUE
830 CMR 64H.00: SALES AND USE TAX
830 CMR 64H.00 is hereby repealed and replaced with the following:
830 CMR 64H.1.6: Telecommunications Services
830 CMR 64H.1.6: Telecommunications Services
830 CMR: DEPARTMENT OF REVENUE
Table of Contents
(1) Statement of Purpose; Effective Date; Outline of Topics
(a) Statement of purpose. The purpose of this regulation, 830 CMR 64H.1.6, is to explain the sales and use tax treatment of sales of telecommunications services under M.G.L. chs. 64H and 64I, respectively.
(b) Effective date. This regulation, 830 CMR 64H.1.6, applies to sales of telecommunications services on or after September 1, 1990 except that in the case of residential telecommunications services, as defined in 830 CMR 64H.1.6(5), the tax only applies 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 St. 1990, c. 150, § 372.
(c) Outline of topics. This regulation, 830 CMR 64H.1.6, is organized as follows:
(1) Statement of Purpose; Effective Date; Outline of Topics.
(3) General Rule.
(4) Sale or Use of Telecommunications Services in Massachusetts; Interstate Telecommunications.
(5) Residential Telephone Service Exemption.
(6) Sales for Resale of Telecommunications Services.
(7) Services Sold in Conjunction with Telecommunications Services.
(8) Collection of Tax.
For the purpose of this regulation, 830 CMR 64H.1.6, the following terms have the following meanings, unless the context requires otherwise:
Commissioner, the Commissioner of Revenue or the Commissioner's duly authorized representative.
Home Service Provider, the facilities-based carrier or reseller with which the retail customer contracts for the provision of mobile telecommunications service.
Interstate telecommunications services, includes both telecommunications that cross state borders within the United States and telecommunications that cross international borders. The term "state," as used in this section, includes both foreign states and states within the United States, as well as the District of Columbia, and U.S. territories, including Guam, Puerto Rico, and the U.S. Virgin Islands.
Local Access and Transport Area, a "local access and transport area" (LATA) is a geographic region in which a local telephone operating company provides services after the AT&T divestiture. As of the date of promulgation of this regulation, 830 CMR 64H.1.6, Massachusetts is serviced by two LATAs, which cover the 413 and 617/508 area codes.
Mobile Telecommunications Service, commercial mobile radio service, as defined in section 20.3 of title 47 of the Code of Federal Regulations as in effect on June 1, 1999.
Person, an individual, partnership, trust or association, with or without transferable shares, joint stock company, corporation, society, club organization, institution, estate, receiver, trustee, assignee, or referee, and any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals acting as a unit.
Place of Primary Use, the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which shall be the residential street address or the primary business address of the customer and which shall be within the licensed service area of the home service provider. The place shall be determined in accordance with 4 U.S.C. §§ 121-122.
Post-paid calling service, a telecommunications service obtained by making a payment on a call-by-call basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a telephone number that is not associated with the origination or termination of the telecommunications service.
Prepaid calling arrangement, the right to access exclusively telecommunications services, which must be paid for in advance and which enables the origination of calls using an access number or authorization code, whether manually or electronically dialed, and that is sold in predetermined units or dollars of which the number declines with use in a known amount.
Retail sale, a sale of services or tangible personal property or both for any purpose other than resale in the regular course of business.
Service address, a service address is the location of the telecommunications equipment from which a taxpayer originates or at which a taxpayer receives a telecommunication. In the event that this equipment may not be at a defined location, as in the case of mobile phones, paging systems, maritime systems, etc., the service address is generally the location of the taxpayers' primary use of the telecommunications equipment as determined by the telephone number, authorization code, or location where the bills are sent. In the case of post-paid calling services, the service address is the origination point of the telecommunications service first identified by either the seller's telecommunications system or in information received by the seller from its service provider, where the system used to transport such signals is not that of the seller.
Tax, the excise tax imposed under M.G.L. c. 64H or c. 64I.
Telecomm unications services, 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. In general, telecommunications include telephone and other transmissions between or among specific parties or specific locations, but do not include public broadcasts.
Vendor, a retailer or other person selling services or tangible personal property the gross receipts from the retail sale of which are required to be included in the measure of the tax imposed by M.G.L. c. 64H or c. 64I.
(3) General Rule
The sales tax on telecommunications services under M.G.L. chs. 64H and 64I applies to the retail sale or use of telecommunications services in Massachusetts, by individuals or businesses, including small businesses, as defined in 830 CMR 64H.6.11. The tax on sales of telecommunications services under M.G.L. c. 64H does not apply to sales for resale within the meaning of M.G.L. c. 64H, §8. Refer to 830 CMR 64H.1.6(6)(b) for rules pertaining to sales of telecommunications services for resale.
(4) Sale or Use of Telecommunications Services in Massachusetts; Interstate Telecommunications
The sales tax on telecommunications services applies to all telecommunications services provided between or among points in the Commonwealth. The sales tax on telecommunications services applies to interstate telecommunications services if the sale of the services occurred in Massachusetts. M.G.L. c. 64H, § 1, as amended by St. 1990, c. 121, §42.
(a) Sales occurring in Massachusetts. Sales of interstate telecommunication services, except as provided in 830 CMR 64H.1.6(4)(c), 830 CMR 64H.1.6(4)(d) and 830 CMR 64H.1.6(4)(e), 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. In general, a telecommunication is paid for in the Commonwealth if it is billed to an address within the Commonwealth. However, the Commissioner will disregard a billing address that a taxpayer has adopted for the purpose of avoiding tax.
(b) 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 M.G.L. c. 64H, 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 M.G.L. c. 64H. The amount of the credit is the amount of the tax paid to the other state, provided that the credit may not exceed the tax imposed on the sale under M.G.L. c. 64H. M.G.L. c. 64H, §1.
(c) Mobile telecommunications services. For customer bills issued after August 1, 2002, the sale of intrastate and interstate mobile telecommunications services, except as provided in 830 CMR 64H.1.6(4)(d) and 830 CMR 64H.1.6(4)(e), shall be deemed to be provided by the customer's home service provider and shall be considered a sale within the Commonwealth if the customer's primary place of use is located in the Commonwealth.
(d) Post-paid calling services. Sales of post-paid calling services on or after September 1, 2005, including air-to ground telecommunications services, are deemed to occur in Massachusetts if the origination point of the telecommunications service is in Massachusetts, as first identified by either:
1. The seller's telecommunications system, or
2. The information received by the seller from its service provider, where the system used to transport such signals is not that of the seller.
(e) Prepaid calling arrangements. Sales of prepaid calling arrangements on or after April 1, 2003 are deemed to occur in Massachusetts if the transfer for consideration physically takes place at a retail establishment in the commonwealth. In the absence of such physical transfer for consideration at a retail establishment, the sale or recharge shall be deemed a retail sale in Massachusetts if the customer's shipping address is in Massachusetts or, if there is no item shipped, if the customer's billing address or the location associated with the customer's mobile telephone number, as applicable, is in Massachusetts. The sale is deemed to occur on the date of the transfer for consideration. For purposes of reporting the sale or recharge of prepaid calling arrangements, the sale shall be considered a taxable sale of tangible personal property unless the vendor is otherwise required to report sales of telecommunications services.
(5) Residential Telephone Service Exemption
(a) General rule. The tax on telecommunications services under M.G.L. c. 64H and 64I extends to any retail sale to, or use of telecommunications services by individuals or businesses, including small businesses as defined in 830 CMR 64H.6.11, in Massachusetts. A limited exemption is available for residential telephone services under M.G.L. c. 64H, § 6(i), as amended by Chapter 150, § 360. The amount of the exemption is limited to thirty dollars per month. If the residential service exceeds the thirty dollar exemption limit, the amount over thirty dollars is subject to tax. The tax on residential telephone services, as defined in this regulation, 830 CMR 64H.1.6(5)(b), 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 St. 1990, c. 150, §372.
(b) Residential telephone service. 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 for 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.
(c) Services Eligible for Residential Exemption. The residential exemption includes 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.
(d) Services Not Eligible for Residential Exemption. Services that do not qualify for the residential telephone exemption include, but are not limited to:
1. any call to or from a point outside of the purchaser's LATA other than calls within the purchaser's local calling area;
2. 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;
3. 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;
4. any residential telecommunications services other than exempt telephone services.
(6) Sales for Resale of Telecommunications Services
(a) General rule. The tax on sales of telecommunications services under M.G.L. c. 64H applies to retail sales and not to sales for resale within the meaning of M.G.L. c. 64H, § 8 as amended by St. 1990, c. 121, § 53. See also St. 1990 c. 150, §372.
(b) Criteria for determining which services are purchased for resale. In general, a purchaser of telecommunications services purchases the services for resale only if both of the following criteria are met:
1. The purchaser does not itself use or consume the telecommunications services; and
2. The purchaser sells such telecommunications services in the regular course of business.
A purchaser consumes a telecommunications service if it is a participant in the telecommunications, such as the originator or recipient of a telephone call, or purchases telecommunications services in connection with the provision of information services or Internet access services not subject to tax under M.G.L. c. 64H, § 1, or M.G.L. 64I, §1. See 830 CMR 64H1.6(7)(b).
3. Examples. The following examples include, but are not limited to, instances where purchasers may be in the business of reselling telecommunications services:
a. Highlife Hotel, a large hotel with telephones located in each hotel room, separately charges guests for telephone calls placed by the guests while renting the rooms. Highlife Hotel is a purchaser of telecommunications services for resale, since it does not itself consume the services and because it regularly sells telecommunications services to others as part of its business. See also 830 CMR 64H.1.6(6)(e) for rules pertaining telecommunications services originally purchased for resale but subsequently consumed, in whole or in part, by a purchaser, rather than resold.
b. Now U See It, Inc. is a commercial facsimile transmission service that handles a large volume of facsimile transmission for its customers. Now U See It is a purchaser of telecommunications services for resale, since it does not itself consume the telecommunications services and because it regularly resells telecommunications services to its customers as part of its business. See also 830 CMR 64H.1.6(6)(e) for rules pertaining to telecommunications services originally purchased for resale but subsequently consumed, in whole or in part, by a purchaser, rather than resold.
c. Yack University is a major educational institution that purchases telecommunications services in bulk and resells those services to individual students, faculty members, and other retail purchasers for their personal use. Because Yack does not itself consume the services and because it regularly sells telecommunications services to others, it is a purchaser of telecommunications services for resale. See also 830 CMR 64H.1.6(6)(e) for rules pertaining to telecommunications services originally purchased for resale but subsequently consumed, in whole or in part, by a purchaser, rather than resold.
(c) Services not purchased for resale. In general, a purchaser of telecommunications services does not purchase the services for resale if the purchaser itself consumes the services and is not in the business of selling telecommunications services. A purchaser is also 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 M.G.L. c. 64H, §6(c), and 830 CMR 64H.6.1.
1. Examples. The following examples include, but are not limited to, instances where purchasers of telecommunications services are not selling such services for resale.
a. Lawrence Law is an attorney who, while working on behalf of a client, uses the telephone to request information or to schedule a meeting. The attorney is the consumer of the telecommunications service and therefore does not purchase the service for resale, even if the attorney bills the client for the cost of the call.
b. Bob Badluck, whose automobile breaks down on a rural road, uses Sally Savior's telephone to make a long distance call to a repair service located 40 miles away. Upon leaving, Bob pays Sally $2.00 for the cost of the telephone call. Sally is not in the business of reselling telecommunications services to visitors to her home. The sale of these services to Bob qualifies as a casual and isolated sale under M.G.L. c. 64H, §6(c).
(d) Access charges. The payment of access charges by a long distance carrier to a local operating company generally constitutes a sale for resale of telecommunications services, provided that the access charges are included in the amount that the long distance carrier bills its retail customer for long distance telecommunications service. A vendor of telecommunications services must presume that its sales are retail sales and must collect tax accordingly unless it takes a Resale Certificate (Form ST‑4) in good faith from the purchaser.
(e) Reseller's obligations. Any vendor 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 purchaser 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).
(7) Services Sold in Conjunction with Telecommunications Services
(a) General rule. In general, any amount paid for services that are part of a sale of telecommunications services are included in the sales price subject to tax. M.G.L. c. 64H, §1. Thus, where telecommunications services are purchased in conjunction with other services, the entire sales price is taxable as a sale or use of telecommunications services, unless the sales price of the telecommunications portion of the services is separately stated from the sales price of the other services being provided on the invoice or other evidence of the sale. If the two amounts are separately stated, the tax is assessed only on the sales price of the taxable telecommunications services, provided that such separately stated charges are: 1) determined in a manner that reasonably reflects the value of the telecommunications services in relation to the other services, 2) set in good faith, and 3) supported by records sufficient to document the charges. If all of these conditions are not met, the entire transaction is taxable.
(b) Information and Internet Access Services. The tax on the sale or use of telecommunications services under M.G.L. c. 64H, 64I is a tax on the "transmission" of messages or information by various electronic or similar means. Generally, it is not a tax on the sale or use of information itself. In some transactions, such as telephone calls to "900" number pay-per-call services, database or electronic information services available to multiple subscribers, or Internet access services, an information vendor or Internet access provider may purchase telecommunications services (i.e., the telephone call or other transmission) from another vendor in order to provide non-taxable information services, database access, or Internet access to its retail customers. Under such circumstances, the telecommunications services purchased by the information vendor or Internet service provider are not purchased for resale and are subject to tax when they are sold in or purchased for use in Massachusetts. See 830 CMR 64H.1.6(4).
(c) Information Delivery Services. Charges for Information Delivery Services provided by a local telephone operating company within Massachusetts area codes are taxable when sold to customers in Massachusetts. Effective June 1, 2003, the local telephone company shall only collect and remit tax on the tariffed "transport charge" for the telecommunications service, not the total charge to the party making the call to a "976" or "940" pay-per-call number, regardless of whether the telecommunications charge is separately stated from the information charge on the invoice to the party making the call.
(8) Collection of Tax
For purposes of collection of the tax imposed by Chapters 64H and 64I on telecommunications services, the sale of such services is deemed to occur on the date that the bill for such services is first issued by the vendor in the regular course of its business.
830 CMR 64H.1.6: M.G.L. c. 14, § 6(l); M.G.L. c. 62C, § 3; M.G.L. c. 64H, § 1.
Emergency Regulation: 3/6/91
Date of Promulgation: 6/7/91