Are an interexchange carrier's gross receipts from 800-number calls exempt from Kansas sales tax?

Plain-English summary

An interexchange carrier providing long-distance service in Kansas asked whether the gross receipts from its "800" calls are exempt from Kansas sales tax.

The statute taxes telephone service but excludes WATS. K.S.A. 79-3603(b) taxes gross receipts from intrastate telephone/telegraph service and from certain interstate telephone/telegraph service that originates or terminates in Kansas and is billed to a Kansas number or account — but the sale of interstate telephone or telegraph service "does not include … [a]ny interstate incoming or outgoing wide area telephone service or wide area transmission type service which entitles the subscriber to make or receive an unlimited number of communications to or from persons having telephone service in a specified area which is outside the state in which the station provided this service is located."

Only WATS-type service is exempt. The Department's opinion is "that only interstate wide area telephone service or wide area transmission ('WATS') telephone service as described per statute qualifies for exemption from Kansas retailers' sales tax."

But the Department could not classify "800 service." "The '800 service' mentioned in your letter may or may not meet the definition of WATS. Therefore, we are unable to advise you [as to] the taxability of this service."

Bottom line: the exemption is limited to interstate WATS-type service that fits the statutory description. Whether a given "800 service" qualifies depends on whether it actually meets that WATS definition — something the Department could not determine on the facts presented, leaving the taxability of this particular service unresolved.

What this means for you

The exemption is defined by function, not by the "800" label

Kansas exempts interstate WATS-type service that meets the statutory description — unlimited communications to or from a specified area outside the state where the station is located. A service is not exempt simply because it is marketed as "800" service; it must actually fit the WATS definition.

You have to match your service to the statutory description

To claim the exemption, a carrier must show that its offering is the kind of interstate wide area telephone/transmission service the statute describes. The Department will look at the service's actual characteristics, not its trade name.

An indeterminate answer is a signal to develop the facts

The Department declined to rule because the record did not show whether the "800 service" met the WATS definition. If you want certainty, present detailed facts about how the service works so the classification question can be answered.

Intrastate and non-WATS interstate service remains taxable

The statute taxes intrastate service and interstate service billed to a Kansas number that does not fall within the WATS exclusion. Only the WATS-type carve-out is exempt.

Common questions

Are 800 calls exempt from Kansas sales tax?
Only if the service qualifies as interstate WATS-type service under K.S.A. 79-3603(b). The Department could not say whether this carrier's "800 service" met that definition.

What makes telephone service exempt here?
Being interstate wide area telephone service or wide area transmission ("WATS") service that fits the statutory description of unlimited communications to or from a specified out-of-state area.

Why wouldn't the Department give a yes-or-no answer?
Because the facts did not establish whether the "800 service" meets the WATS definition, so it was unable to advise on taxability.

What should we do to get a definite answer?
Document how the service actually operates and how it matches (or does not match) the statutory WATS description, then seek a determination on those specific facts.

Citations and references

• K.S.A. 79-3603(b) — taxes gross receipts from intrastate and certain interstate telephone/telegraph service, but excludes interstate WATS-type service meeting the described conditions; only that WATS-type service is exempt.
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued September 30, 1998 by Mark D. Ciardullo, Tax Specialist, Office of Policy & Research, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-144

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 30, 1998

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Dear XXXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated September 3, 1998.

You stated that your company is an interexchange carrier providing long distance services in Kansas. You asked if the gross receipts from the sales of 800 calls is exempt per Kansas Law.

K.S.A. 79-3603(b) states in pertinent part:

“[t]he gross receipts from intrastate telephone or telegraph services and (2) the gross receipts received from the sale of interstate telephone or telegraph services, which (A) originate within this state and terminate outside the state and are billed to a customer's telephone number or account in this state; or (B) originate outside this state and terminate within this state and are billed to a customer's telephone number or account in this state except that the sale of interstate telephone or telegraph service does not include: (A) Any interstate incoming or outgoing wide area telephone service or wide area transmission type service which entitles the subscriber to make or receive an unlimited number of communications to or from persons having telephone service in a specified area which is outside the state in which the station provided this service is located [emphasis added];”

It is the opinion of the Kansas Department of Revenue that only interstate wide area telephone service or wide area transmission (“WATS”) telephone service as described per statute qualifies for exemption from Kansas retailers’ sales tax. The “800 service” mentioned in your letter may or may not meet the definition of WATS. Therefore, we are unable to advise you at the taxability of this service.

This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 10/06/1998 Date Modified: 10/10/2001

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