Did Illinois tax wireless Internet access sold alone or bundled with voice, messaging, and other services?

Plain-English summary

Illinois did not give a plan-by-plan answer for the seven wireless Internet offerings. It said only that some described services might not be subject to Telecommunications Excise Tax if the provider disaggregated and separately identified their charges from taxable telecommunications in its books and records.

The 2010 GIL distinguished telecommunications from value-added services that use computer processing to change information's form, content, code, or protocol for purposes other than transmission. Qualifying storage and data-processing charges were excluded from telecommunications gross charges. If a retailer failed to separate those charges, however, the entire charge was taxable as telecommunications.

The letter also described the then-current federal Internet-access tax moratorium. It warned that the protection did not cover every service using Internet protocol; voice, audio, video programming, and other separately charged products could fall outside it. Its November 1, 2014 moratorium date and stated tax rates are historical.

What this means for you

Do not assume that calling a wireless feature a "data plan" decides its tax treatment. Identify what the customer receives, separate potentially excluded Internet-access or value-added charges from taxable transmission charges, and preserve that separation in the books and records.

Common questions

Q: Did the GIL exempt all seven listed wireless plans?
A: No. It said the limited facts supported only general guidance and that some services might not be taxable if properly separated.

Q: What happened if taxable and potentially excluded charges were bundled without separation?
A: The GIL said the entire charge was taxable as a sale of telecommunications.

Citations and references

• 35 ILCS 630/2(a), 2(c), 3, and 4
• 35 ILCS 636/5-10 and 5-15
• 86 Ill. Adm. Code 495.100(c)
• 47 U.S.C. § 151 note, Internet Tax Freedom Act § 1101, as discussed in the 2010 GIL

Subject

Telecommunications Excise Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0008.pdf

Original ruling text

ST 10-0008-GIL 02/25/2010 TELECOMMUNICATIONS EXCISE TAX
The Telecommunications Excise Tax is imposed upon the act or privilege of originating or
receiving intrastate or interstate telecommunications in Illinois at the rate of 7% of the gross
charges for such telecommunications purchased at retail from retailers. See 35 ILCS 630/1 et
seq. (This is a GIL.)

February 25, 2010

Dear Xxxxx:
This letter is in response to your letter dated December 30, 2009, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
Our company, develops billing software for telecommunications carriers. COMPANY
assists its customers in ensuring that their tax databases are up-to-date and that all
taxes are properly applied to subscriber bills.
We are contacting the Illinois Department of Revenue (‘Department’) to respectfully
request a General Information Letter (‘GIL’) regarding the taxation of wireless Internet
service that is either bundled with voice and other taxable services or sold separately.
Wireless providers often market and refer to Internet services as a data plan, but the
service provided is essentially equivalent to that of a dial-up or broadband Internet
access plan which one might subscribe to through their local phone company or cable
provider. It essentially allows the subscriber to browse the Internet and send and
receive e-mail in the same way they would on a land line connection, but on their
wireless phone/device, instead of on their home PC. Additional charges may accrue for
download of ringtones, songs, or other media to a wireless device.
We would like to know, to what extent, these services would be subject to Illinois sales
taxes under the following scenarios:

1.

A phone plan which provides unlimited long distance, air time, call waiting, call
ID, text messaging, and data (Internet access) is sold for a single price of
$99/month.

2.

A plan sold in addition to the basic wireless voice plan which provides unlimited
data (Internet access) only for $29/month.

3.

A plan sold in addition to the basic wireless voice plan which provides for a
limited amount of data (Internet access) 10MB for $5/month, with each additional
kilobyte at $0.05.

4.

A plan sold in addition to the basic wireless voice plan which provides for
unlimited data (Internet access) and picture messaging for $29/month.

5.

A plan sold in addition to the basic wireless voice plan which provides for data
(Internet access) based exclusively on usage at a rate of $0.05/Kilobyte.

6.

A plan sold in addition to the basic wireless voice plan which provides a limited
menu of information including weather, trivia, sports, and stock information for
$4/month.

7.

A plan sold in addition to the basic wireless voice plan which provides 24 hour
access to health care professionals for medical questions for $4/month.

Our company requests anonymity should your response be made public. Please do not
hesitate to contact us should you have any questions regarding our inquiry.

DEPARTMENT’S RESPONSE:
The Illinois Telecommunications Excise Tax Act imposes a tax on the act or privilege of
originating or receiving intrastate or interstate telecommunications by persons in Illinois at the rate of
7% of the gross charges for such telecommunications purchased at retail from retailers by such
persons. 35 ILCS 630/3 and 4. The Simplified Municipal Telecommunications Tax Act allows
municipalities to impose a tax on the act or privilege of originating in such municipality or receiving in
such municipality intrastate or interstate telecommunications by persons in Illinois at a rate not to
exceed 6% for municipalities with a population of less than 500,000, and at a rate not to exceed 7%
for municipalities with a population of 500,000 or more, of the gross charges for such
telecommunications purchased at retail from retailers by such persons. 35 ILCS 636/5-10 and 5-15.
“Telecommunications,” in addition to the meaning ordinarily and popularly ascribed to it,
includes, without limitation, messages or information transmitted through use of local, toll and wide
area telephone service; private line services; channel services; telegraph services; teletypewriter;
computer exchange services; cellular mobile telecommunications service; specialized mobile radio;
stationary two way radio; paging service; or any other form of mobile and portable one-way or twoway communications; or any other 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. “Telecommunications” do not include “value added services in which computer
processing applications are used to act on the form, content, code and protocol of the information for
purposes other than transmission.” See 35 ILCS 630/2(a) and 2(c). If telecommunications retailers
provide these services, the charges for each service must be disaggregated and separately stated

from telecommunications charges in the books and records of the retailers. If these charges are not
thus disaggregated, the entire charge is taxable as a sale of telecommunications.
“Gross charges” means the amount paid for the act or privilege of originating or receiving
telecommunications in this State and for all services and equipment provided in connection therewith
by a retailer, valued in money whether paid in money or otherwise, including cash, credits, services
and property of every kind or nature, and shall be determined without any deduction on account of the
cost of such telecommunications, the cost of materials used, labor or service costs or any other
expense whatsoever. “Gross charges” do not include “charges for the storage of data or information
for subsequent retrieval or the processing of data or information intended to change its form or
content.” See 86 Ill. Adm. Code 495.100(c).
The Internet Tax Freedom Act imposes a federal moratorium on state or municipal taxes on
Internet access until November 1, 2014. 47 USCA § 151 note; § 1101. “Internet access”:
(A) means a service that enables users to connect to the Internet to access content,
information, or other services offered over the Internet;
(B) includes the purchase, use or sale of telecommunications by a provider of a service
described in subparagraph (A) to the extent such telecommunications are purchased,
used or sold(i) to provide such service; or
(ii) to otherwise enable users to access content, information or other services offered
over the Internet;
(C) includes services that are incidental to the provision of the service described in
subparagraph (A) when furnished to users as part of such service, such as a home
page, electronic mail and instant messaging (including voice and video-capable
electronic mail and instant messaging), video clips, and personal electronic storage
capacity;
(D) does not include voice, audio or video programming, or other products and services
(except services described in subparagraph (A), (B), (C), or (E)) that utilize Internet
protocol or any successor protocol and for which there is a charge, regardless of
whether such charge is separately stated or aggregated with the charge for services
described in subparagraph (A), (B), (C), or (E); and
(E) includes a homepage, electronic mail and instant messaging (including voice and
video-capable electronic mail and instant messaging), video clips, and personal
electronic storage capacity, that are provided independently or not packaged with
Internet access.
Telecommunications that are purchased, used or sold by a provider to enable users to connect
to the Internet or to otherwise enable users to access content, information or other services offered
over the Internet are subject to the federal moratorium. Thus, not all telecommunications are subject
to the moratorium. In addition, paragraph D of the definition of “Internet access” excludes “voice,
audio or video programming, or other products and services (except services described in
subparagraph (A), (B), (C), or (E)) that utilize Internet protocol or any successor protocol and for
which there is a charge, regardless of whether such charge is separately stated or aggregated with
the charge for services described in subparagraph (A), (B), (C), or (E).”
Therefore,
telecommunications, including for example Voice over Internet Protocol (VoIP), that are not
purchased, used or sold to a provider to enable users to connect to the Internet or to otherwise
enable users to access content, information or other services offered over the Internet, are not
subject to the federal moratorium and are subject to the Telecommunications Excise Tax.

Based on the limited information provided on the services described in your letter, some of the
services may not be subject to Telecommunications Excise Tax, provided that the charges for such
services are disaggregated and separately identified from other charges in the books and records of
the telecommunications retailer. See 86 Ill. Adm. Code 495.100.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk