Did Illinois's rolling-stock exemption cover cellular data charges for GPS tracking on interstate trucks?

Plain-English summary

The rolling-stock exemption did not apply to Illinois Telecommunications Excise Tax. A GPS-tracking company used a cellular network to send truck-location data to its website and passed the cellular charge to customers, including an interstate trucking customer with a rolling-stock exemption.

The GIL says the exemption existed under the Retailers' Occupation, Use, Service Occupation, and Service Use Tax Acts, but not under the Telecommunications Excise Tax Act.

Value-added processing services were outside “telecommunications” only when charges were disaggregated and separately stated from transmission charges in the retailer's books and records; otherwise the entire charge was taxable as telecommunications. Data storage and processing intended to change data's form or content were excluded from gross charges.

The Department lacked enough information to decide whether the GPS company sold telecommunications or instead used telecommunications and owed tax to its cellular supplier.

What this means for you

Do not apply a truck's rolling-stock exemption to telecom charges. Separate and document transmission, storage, processing, mapping, and other value-added services, and determine who is the telecommunications retailer.

Common questions

Q: Did interstate use of the trucks exempt the cellular charge?
A: No. The rolling-stock exemption did not extend to Telecommunications Excise Tax.

Q: Were data-processing charges necessarily taxable telecommunications?
A: Not if they met the stated exclusion and were properly disaggregated; otherwise bundled charges could be fully taxable.

Q: Did the GIL decide who owed the tax?
A: No. Retailer-versus-user status remained unresolved.

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-10-0120.pdf

Original ruling text

ST 10-0120-GIL 12/21/2010 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.)

December 21, 2010

Dear Xxxxx:
This letter is in response to your letter dated September 14, 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:
I request your assistance with the applicability of the Rolling Stock Exemption to
Telecommunications Excise Tax. Our company sells GPS tracking devices that send a
vehicle’s GPS location data to our website via cellular technology so that the vehicles
can be tracked on our mapping software at the customer’s office. To send the GPS
data to our website from the GPS satellite, we piggyback on ABC’s cellular network.
ABC charges us for this, and we pass that on to our customer on a monthly invoice. We
have determined that this charge is subject to Illinois Telecommunications Excise Tax.
One of our customers however has a Rolling Stock Exemption, which exempts them
from Retailer’s [sic] Occupation Tax. However we are not sure if this exemption would
exempt them from Telecommunications Excise tax as well. This customer has a fleet of
trucks, with our GPS tracking devices in them, and they deliver goods across the
country, in and out of the state of Illinois.
Thank you so much in advance for your assistance in this matter. Please feel free to
contact me if you have any questions.

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 rolling stock exemption is only available under the Retailers’ Occupation Tax Act, the Use
Tax Act, the Service Occupation Tax act and the Service Use Tax Act. It is not available under the
Telecommunications Excise Tax Act.
However, based on the limited information you have provided in your letter we cannot
determine whether you are a retailer of telecommunications services or a user of telecommunications
who owes Telecommunications Excise Tax to your supplier.
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