Did Illinois decide whether hosted call-automation software, phone-number charges, and a regulatory recovery fee were taxable telecommunications?

Plain-English summary

The Department did not decide whether this company's hosted call-automation services, telephone-number charges, or 7% regulatory recovery fee were taxable. The request omitted the company's identity and a power of attorney and did not give enough detail about the carrier services or how the company used them. Illinois therefore declined to issue a Private Letter Ruling and said it could not draw specific conclusions even in the GIL.

The Department instead supplied general 2010 rules. Computer-processing services that act on information for purposes other than transmission could fall outside "telecommunications," but a telecommunications retailer had to disaggregate and separately state those charges in its records; otherwise the entire charge was taxable as telecommunications. Data storage and processing charges intended to change data's form or content were excluded from "gross charges."

The letter also explained that a person claiming to resell telecommunications needed an active Department resale number and had to give it to the carrier. Without one, the purchase could not be made tax-free as a resale. Separately, Illinois said it was addressing hosted-software questions through formal rulemaking and recited its then-current rules for canned, custom, and licensed software without classifying this company's hosted applications.

What this means for you

Do not treat this GIL as approval of a hosted-software or telecom billing model. Separate processing charges from transmission charges, document the carrier services and how each is used, and verify current software, telecom, and resale-number rules before relying on the 2010 framework.

Common questions

Q: Did Illinois agree that the hosted applications were exempt value-added services?
A: No. That conclusion appeared in the requester's analysis, but the Department said the facts were insufficient to reach a specific result.

Q: Did paying tax to the carriers settle the company's resale or registration obligations?
A: No specific conclusion was given. The Department only explained that resale treatment required an active resale number furnished to the retailer.

Citations and references

• 35 ILCS 630/2, 3, 4, 5, and 8 (telecommunications definitions, tax, collection, and resale number)
• 35 ILCS 636/5-10 and 5-15 (municipal telecommunications tax)
• 86 Ill. Adm. Code 495.100(c) and 495.110 (gross charges and retailers)
• 86 Ill. Adm. Code 130.1935 (computer software)
• 2 Ill. Adm. Code 1200.110 and 1200.120 (PLRs and GILs)

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-10-0083.pdf

Original ruling text

ST 10-0083-GIL 09/09/2010 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 86 Ill. Adm. Code

495. (This is a GIL.)

September 9, 2010

Dear Xxxxx:
This letter is in response to your letter dated February 10, 2010, 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:
On behalf of our client, Company, we are requesting guidance on the appropriate
application of the Illinois Telecommunications Excise Tax and the Illinois
Telecommunications Infrastructure Maintenance Fee to Company’s business.
Company Overview
Company is an Illinois-based business that provides its customers with hosted software
applications to automate their inbound and outbound telephone calls. Customers are
mostly other businesses, but Company also sells subscriptions for hosted software
applications through commissioned resellers and partners. The term ‘hosted’ generally
refers to computing technology that uses the internet and centralized servers to
maintain applications and allows Company’s customers to use applications without
installation of personal files and significant capital investment. The applications can be
accessed at any computer with internet access.
As a hosted software solution, Company’s hosted software applications are made
available and configured via a web-based customer portal that is managed by
Company. The portal is accessed in a secure environment, where a customer can login with a secure username and password.

Company’s customers are required to procure their own ‘dial tone’ in order to sign-up
and use Company’s hosted applications. For example, a customer must have already
purchased a telephone line with any traditional telephone or Voice over Internet
Protocol (“VOIP’) service provider. Company then sells subscriptions for its hosted
applications to work in conjunction with the customer’s telephone line. Company’s
product suite consists of the following applications, all available on the web via the
customer portal:
1)

APP 1 – allows users to automatically deliver both pre-recorded
voice messages and interactive phone calls.

2)

APP 2 – allows users to create a web based application that has
phone menus to route calls, qualify leads, process orders, etc.

3)

APP 3 – allows users to set up a virtual call center, whereby staff
can answer calls at anytime [sic] and from any phone.

4)

APP 4 – provides detailed and real-time phone call analytics on call
volume, call routing, call duration, for both inbound and outbound
calls.

5)

APP 5 – allows users to set up an auto attendant service that
automatically greets, routes calls based on office schedule, and
allows callers to leave voice mail.

6)

APP 6 – allows users to route calls to the appropriate company
staff based on pre-set criteria. The calls may be routed based on
schedule (time of day, day of week), allocation percentage (e.g., 3
sales team members are to receive 1/3 of the calls each),
geography (area code, zip code), etc.

7)

APP 7 – route incoming calls to appropriate retail location based on
caller area code or zip code

8)

APP 8 – forwards calls to any prescribed phone (desk phone, cell
phone, home phone) in sequence or simultaneously.

9)

APP 9 – schedule a group call with multiple participants

10)

APP 10 – insert a link on website or in an email where a visitor or
customer can immediately establish a call with the company of
interest. The visitor plugs in the number to be dialed, and a phone
call is generated connecting the visitor with the appropriate
company representative.

Company’s applications run on a hosted platform that connects to the public switched
telephone network, which is the traditional interconnected voice-oriented public
telephone network and VOIP networks. It integrates licensed automatic speech
recognition, text to speech, and the standard format for interactive voice dialogues
between humans and computer technologies to deliver its hosted applications. The

platform supports multiple points of all initiation, multiple points of call destination, and a
proprietary management engine.
The proprietary Company infrastructure includes over 350,00 lines of custom developed
and proprietary computer software code that comprise the hosted applications. The
code enables the applications to easily be configured, deployed, and scaled for any type
of business. The applications are frequently called ‘building blocks’ (i.e., they can be
configured together to deliver various automated telephone calls/interactions) that are
used by businesses in many different industries, channels, verticals, and geographies.
Company also leases local and toll-free numbers from various carriers and makes them
available to Company’s customers. Company is not reselling the local and toll-free
numbers; it is using them in its own business. Company will offer customers the local
and toll free numbers for use in conjunction with the above applications. For example, a
customer will rent ten different toll-free numbers to place in different advertising features
(on website, on flyers, in magazine ads, radio commercials, etc.). The toll-free numbers
allow the company to project a national image, all while the success of the campaigns
can be tracked with Company’s application reporting. This allows Company’s customer
to determine which ads are most effective. On the customer invoice, there would be a
line item for ‘Toll-free numbers (10 @ 4.95).’ In this example, the customer would have
procured the ‘dial tone’ and Company would have the ten different toll-free numbers
routed to that single telephone number and Company would charge the customer a
monthly rental fee of $4.95 for using those toll-free numbers. If a customer cancels its
service, the Company does not normally return the local or toll-free number(s) to the
Company’s carrier, rather, it normally ages the number(s) in a database for
approximately six months, after which Company normally reassigns the number(s) to
another customer.
Company derives revenue from three main sources, as follows:
1)

Subscription fees for accessing the hosted applications and other
recurring add-on features, such as additional local and toll-free
phone numbers, port charges, and voicemail boxes;

2)

Application usage fees, which are primarily driven by the per minute
charges to customers for using the hosted applications; and

3)

Related professional services and other revenues consisting
primarily of one-time setup costs and consulting.

Subscription revenues are driven primarily by the number of paying subscribers of
Company’s service and the subscription price of service. In general, retail packages
range in price from $24.95 to $49.95. As the price increases, the customer has access
to more Company applications. Additional services are available, such as access to
additional local and toll-free phone numbers (as described above), ports (simultaneous
calls), and voicemail boxes.
Usage has a tiered pricing structure, where as the customer’s usage increases, the
average price per minute comes down. Retail pricing on usage ranges from $0.035 per
minute to $0.079 per minute. Company must negotiate carrier agreements, where it
‘consumes’ telecommunication minutes, which Company treats as a cost of sale in
order to provide the Company’s applications to its customers. The usage costs that the

Company incurs vary directly with the customer’s usage; therefore this pricing scheme
is developed to be proportional to the costs Company incurs to provide the services.
As previously mentioned, all Company customers are required to procure their own ‘dial
tone’. In addition, in order to provide its services, Company procures and consumes
carrier minutes on its own. This in effect creates dual carrier charges:
1)

Company’s customers are charged by their own carriers in order to
procure their own ‘dial-tone’. The normal billing relationship occurs,
whereby the customer must pay its carrier for that usage and
applicable taxes and fees.

2)

Company also consumes carrier minutes to provide its applications.
Company negotiates separate contracts with various carriers to
procure termination (i.e., outbound) minutes and origination
(inbound) minutes. The carrier contracts also include provisions for
Company to lease the local and toll-free numbers (as described
above) that it makes available to customers. The following list
includes, but is not limited to, the taxes and fees Company is
assessed on its carrier bill:
a.
b.
c.
d.
e.
f.
g.

Communications Service Tax
P.U.C. Fee
FUSF
Illinois Telecommunications Excise Tax
Illinois Telecommunications Infrastructure Maintenance Fee
State Universal Service Fund
FCC Regulatory Fee

These taxes and fees are charged to Company by its telecommunications carriers and
Company pays these taxes and fees directly to its carriers as part of the monthly
invoice. It is assumed that the carriers subsequently remit the taxes and fees to the
appropriate federal, state, and local taxing authorities. In addition, Company does not
have a resale number assigned by the Department.
To date, Company has completely absorbed the taxes and fees outlined in items 2 a.
through 2 g., above, as a cost of doing business. The taxes and fees are treated as a
cost of sale in the Company’s income statement.
As the total cost of the taxes and fees has increased and the market for Company’s
hosted applications has become more competitive, Company can no longer absorb
these costs. Starting in early 2010, Company will increase its fees by charging all of its
customers a ‘Regulatory Cost Recovery Fee’. The Regulatory Cost Recovery Fee will
be 7% of the total cost of customer’s invoices for subscription fees and usage fees. The
Regulatory Cost Recovery Fee will be disclosed on customer invoices as a separate
line item. Company is not making any representation on the invoice that the Regulatory
Cost Recovery Fee is a tax that Company is collecting and remitting. Rather, the
inclusion of this Regulatory Cost Recovery Fee is in effect just an increase of the
subscription and usage fees that Company charges its customers.
Issues

1.

Are the subscription fees and usage fees charged by Company for using its
hosted applications taxable under the Illinois Telecommunications Excise Tax Act
and the Illinois Telecommunications Infrastructure Maintenance Fee Act?

2.

Are the subscription fees and usage fees charged by Company for leasing local
and toll-free numbers to its customers taxable under the Illinois
Telecommunications Excise Tax Act and the Illinois Telecommunications
Infrastructure Maintenance Fee Act?

3.

Does the 7% ‘Regulatory Cost Recovery Fee’ charged on Company’s invoiced
subscription and usage fees require Company to register as a retailer or reseller
of telecommunications under the Illinois Telecommunications Excise Tax Act and
the Illinois Telecommunications Infrastructure Maintenance Fee Act?

Analysis
Issue 1: Taxability of Hosted Applications
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 630/3 and 35 ILCS 630/4. Any retailer maintaining a place of business in Illinois
shall collect and remit the tax to the Illinois Department of Revenue (the ‘Department’).
See 35 ILCS 630/5. Any such retailer shall be liable for the tax whether or not the tax
has been collected by the retailer. See 35 ILCS 630/5. A retailer is defined as ‘every
person engaged in the business of making sales at retail’ and the term ‘sale at retail’
means ‘the transmitting, supplying or furnishing of telecommunications and all services
and equipment provided in connection therewith for a consideration to persons other
than the Federal and State governments, and State universities created by statute and
other than between a parent corporation and its wholly owned subsidiaries or between
wholly owned subsidiaries for their use or consumption and not for resale.’ 35 ILCS
630/2. The definitions contained in the Telecommunications Infrastructure Maintenance
Fee Act, 335 ILCS 635/10, are substantially similar to the definitions contained in the
Telecommunications Excise Tax Act, 35 ILCS 630/2.
The Telecommunications Excise tax Act contains the following definition of
‘telecommunications’:
‘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 two-way 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. As used in this Act, ‘private
line’ means a dedicated non-traffic sensitive service for a single customer,
that entitles the customer to exclusive or priority use of a communications
channel or group of channels, from one or more specified locations to one
or more other specified locations. The definition of ‘telecommunications’

shall 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. ‘Telecommunications’
shall not
include purchases
of telecommunications
by a
telecommunications service provider for use as a component part of the
service provided by him to the ultimate retail consumer who originates or
terminates the taxable end-to-end communications. Carrier access
charges, right of access charges, charges for use of inter-company
facilities, and all telecommunications resold in the subsequent provision
of, used as a component of, or integrated into end-to-end
telecommunications service shall be non-taxable as sales for resale.
35 ILCS 630/2(c) (emphasis added).
The Telecommunications Excise Tax Act also contains a definition of ‘gross receipts,’
35 ILCS 630/2(a), and the applicable Illinois Department of Revenue regulation provides
examples.
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 are exempt (Section 2(c) of the Act).
For example, the charges for computer data, protocol conversations that
permit computers to exchange data, no matter which languages or
protocols a computer’s out-put may be in, and packet-switching, which
groups data into packets for efficiency of transmission would be exempt.
86 Ill. Adm. Code § 495.100(d).
As stated above, Company’s product suite consists of the following applications, all
available on the internet via a customer portal via the web: APP 1 THROUGH APP 10.
These hosted applications are comprised of custom developed and proprietary
computer software code. These hosted application services are value added services
and they should not be considered taxable as ‘telecommunications’ under the
Telecommunications Excise Tax Act because the definition of telecommunications does
‘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,’ 35 ILCS 630/2(c).
Therefore, Company’s hosted applications should be considered exempt value added
services and Company should not be required to register as a retailer because it is not
making retail sales of taxable telecommunications under the Illinois
Telecommunications Excise Tax Act and the Illinois Telecommunications Infrastructure
Maintenance Fee Act.
Issue 2: Taxability of Leased Local and Toll-Free Numbers
The Telecommunications Excise Tax Act requires resellers of telecommunications to
have a resale number issued by the Department. The Act provides as follows:
If a person who originates or receives telecommunications in this State
claims to be a reseller of such telecommunications, such person shall

apply to the Department for a resale number. Such applicant shall state
facts which will show the Department why such applicant is not liable for
tax under this Article on any of his purchases and shall furnish such
additional information as the Department may reasonably require.
35 ILCS 630/8.
In addition, The Telecommunications Excise Tax Act prohibits a taxpayer from making a
purchase of telecommunications tax-free without a resale number. The Act provides as
follows:
Except as provided hereinabove in this Section, the act or privilege of
originating or receiving telecommunications in this State shall not be made
tax-free on the ground of being a sale for resale unless the person has an
active resale number from the Department and furnishes that number to
the retailer in connection with certifying to the retailer that any sale to such
person is nontaxable because of being a sale for resale.
35 ILCS 630/8.
As stated above, Company leases local and toll-free numbers from various carriers and
makes them available to Company’s customers. Company is not reselling the local and
toll-free numbers; it is using them in its own business. Company only offers customers
local and toll free numbers for use in conjunction with the use of the above applications.
The leases of the local and toll-free numbers should not be considered taxable as
‘telecommunications’ under the Telecommunications Excise Tax Act because the
definition of telecommunications does not ‘include purchases of telecommunications by
a telecommunications service provider for use as a component part of the service
provided by him to the ultimate retail consumer who originates or terminates the taxable
end-to-end communications,’ 35 ILCS 630/2(c).
As stated above, on the customer invoice, there would be a line item for ‘Toll-free
numbers (10 @ 4.95).’ In this example, the customer would have procured the ‘dial
tone’ and Company would have the ten different toll-free numbers routed to that single
telephone number and Company would charge the customer a monthly rental fee of
$4.95 for using those toll-free numbers. Company uses the local and toll-free numbers
as a component part of the service provided by Company to the customer, the ultimate
retail consumer, who originates or terminates the taxable end-to-end communications.
Importantly, Company pays all taxes, including the Telecommunications Excise Tax and
other relevant taxes and fees, to its telecommunications carriers for the use of the local
and toll-free numbers used as a component of the services provided by Company.
These taxes and fees are paid directly to the Company’s carriers as part of the monthly
invoice.
Therefore, Company’s subscription and usage fees for leasing local and toll-free
numbers to its customers should not be taxable because tax has already been paid on
these services and Company should not be required to register as a retailer or reseller
of telecommunications under the Illinois Telecommunications Excise Tax Act and the
Illinois Telecommunications Infrastructure Maintenance Fee Act.
Issue 3: Company’s ‘Regulatory Cost Recover Fee’

As stated above, Company consumes carrier minutes to provide its hosted applications.
Company does not have a resale number assigned by the Department. Accordingly,
Company pays various federal, state and local taxes and fees to its carriers. These
taxes and fees are charged to Company by its telecommunications carriers and
Company pays these taxes and fees directly to its carriers as part of the monthly
invoice. It is assumed that the carriers subsequently remit the taxes and fees to the
appropriate federal, state, and local taxing authorities.
To date, Company has completely absorbed the taxes and fees as a cost of doing
business. The taxes and fees are treated as a cost of sale in the Company’s income
statement.
As the total cost of the taxes and fees have increased and the market for Company’s
hosted applications has become more competitive, Company can no longer absorb
these costs. Starting in early 2010, company will increase its fees by charging all of its
customers a ‘Regulatory Cost Recovery Fee’. The Regulatory Cost Recovery Fee will
be 7% of the total cost of customer’s invoices for subscription fees and usage fees for
its non-taxable services (see Issue 1, above). The Regulatory Cost Recovery Fee will
be disclosed on customer invoices as a separate line item. Company is not making any
representation on the invoice that the Regulatory Cost Recovery Fee is a tax that
Company is collecting and remitting. Rather, the inclusion of this Regulatory Cost
Recovery Fee is in effect just an increase of the subscription and usage fees that
Company charges its customers.
Therefore, Company should not be required to register as a retailer or reseller of
telecommunications under the Illinois Telecommunications Excise Tax Act and the
Illinois Telecommunications Infrastructure Maintenance Fee Act as a result of charging
its customers the 7% Regulatory Cost Recovery Fee.
Request for Guidance
Company respectfully requests a reply to the request for guidance on the issues
contained herein. If the Department disagrees with the Company’s analysis or if the
Department intends to provide guidance contrary to the Company’s conclusions
contained herein, then please contact us in order that we may withdraw our request for
guidance.

DEPARTMENT’S RESPONSE:
It is unclear from your letter whether you are requesting a private letter ruling or a general
information letter. The Department’s regulation “Public Information, Rulemaking and Organization”
provides that “[w]hether to issue a private letter ruling in response to a letter ruling request is within
the discretion of the Department. The Department will respond to all requests for private letter rulings
either by issuance of a ruling or by a letter explaining that the request for ruling will not be honored.”
2 Ill. Adm. Code 1200.110(a)(4). Your letter does not provide the identity of the Company involved
and does not contain a power of attorney from the Company. See Section 1200.110(a)(1). In
addition, you letter fails to provide sufficient information regarding the nature and type of services
provided by the Company’s carriers and how those services are used by the Company to provide the
services you describe. Therefore, the Department’s is unable to issue a Private Letter Ruling.
However, we hope the following will be helpful in addressing your question.

Computer Software
The Department has been holding information requests regarding computer software hosting
to determine the appropriate taxation of these types of arrangements. After review of these issues
and the continuing evolution of the different types of transactions involving computer software
applications, we believe that the proper forum for providing this type of guidance is through a formal
administrative rulemaking process rather than through individual inquiries.
The following general information may be helpful. Generally, sales of “canned” computer
software are taxable retail sales in Illinois. Sales of canned software are taxable regardless of the
means of delivery. For instance, the transfer or sale of canned computer software downloaded
electronically would be taxable. However, if the computer software consists of custom computer
programs, then the sales of such software may not be taxable retail sales. See 86 Ill. Adm. Code
130.1935(c). Custom computer programs or software must be prepared to the special order of the
customer.
Charges for updates of canned software are fully taxable pursuant to Section 130.1935. If the
updates qualify as custom software under Section 130.1935(c), they may not be taxable. But, if
maintenance agreements provide for updates of canned software, and the charges for those updates
are not separately stated and taxed, then the whole agreements would be taxable as sales of canned
software.
If transactions for the licensing of computer software meet all of the criteria provided in
subsection (a)(1) of Section 130.1935, neither the transfer of the software nor the subsequent
software updates will be subject to Retailers' Occupation Tax. A license of software is not a taxable
retail sale if:
A)
B)
C)

D)

E)

It is evidenced by a written agreement signed by the licensor and the customer;
It restricts the customer’s duplication and use of the software;
It prohibits the customer from licensing, sublicensing or transferring the software to a
third party (except to a related party) without the permission and continued control of the
licensor;
The licensor has a policy of providing another copy at minimal or no charge if the
customer loses or damages the software, or permitting the licensee to make and keep
an archival copy, and such policy is either stated in the license agreement, supported by
the licensor’s books and records, or supported by a notarized statement made under
penalties of perjury by the licensor; and
The customer must destroy or return all copies of the software to the licensor at the end
of the license period. This provision is deemed to be met, in the case of a perpetual
license, without being set forth in the license agreement.

Please note that it is very common for software to be licensed over the internet and the
customer to check a box that states that they accept the license terms. Acceptance in this manner
does not constitute a written agreement signed by the licensor and the customer for purposes of
subsection (a)(1)(A) of Section 130.1935. To meet the signature requirement for an exempt software
license, the agreement must contain the written signature of the licensor and customer. A license of
canned software is subject to Retailers' Occupation Tax liability if all of the criteria set out in 86 Ill.
Adm. Code 130.1935(a)(1) are not met.
Telecommunications

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).
Retailers of telecommunications are persons who engage in the business of making sales of
telecommunications at retail. 86 Ill. Adm. Code 495.110. "Sale at retail" means the transmitting,
supplying or furnishing of telecommunications and all services and equipment provided in connection
therewith for a consideration. The Telecommunications Excise Tax must be collected from a
taxpayer by a "retailer maintaining a place of business in this State." The Department may, in its
discretion, upon application, authorize the collection of the tax by any retailer not maintaining a place
of business within this State, who, to the satisfaction of the Department, furnishes adequate security
to insure collection and payment of the tax. Such retailer shall be issued, without charge, a permit to
collect such tax. When so authorized, it shall be the duty of such retailer to collect the tax upon all of
the gross charges for telecommunications in this State in the same manner and subject to the same
requirements as a retailer maintaining a place of business within this State. The permit may be
revoked by the Department at its discretion. 35 ILCS 630/2(l).
A retailer maintaining a place of business in this State must collect and remit to the
Department the tax imposed by the Act. The retailer shall be liable for the tax whether or not the tax
has been collected by the retailer. 35 ILCS 630/5.
If a person who originates or receives telecommunications in this State claims to be a reseller
of such telecommunications, the person is required to apply to the Department for a resale number.

The applicant must state facts which show the Department why the applicant is not liable for tax on
his purchases. The act or privilege of originating or receiving telecommunications in this State cannot
be made tax free on the ground of being a sale for resale unless the person has an active resale
number from the Department and furnishes that number to the retailer in connection with a sale to
such person. 35 ILCS 630/8.
If a person originating or receiving telecommunications in this State elects not to apply for a
resale number, the act or privilege of originating or receiving telecommunications in this State by such
person cannot be made tax free. If a reseller is purchasing telecommunications services from a
retailer and has not provided the retailer with an active resale number, the retailer is responsible for
collecting the tax from the reseller for calls originating or terminating in this State.
You have provided a lot of information regarding the Company’s business and services;
however, the information provided is not sufficient for us to draw any specific conclusions regarding
the taxability of the services under the Telecommunications Excise Tax Act.
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