Were charges for high-speed satellite downloading, bundled or satellite-only Internet access, dedicated lines, and purchased Internet access taxable in the four scenarios presented?

Plain-English summary

None of the four described service arrangements was subject to Louisiana sales or use tax, but each reached that result for a different reason.

High-speed downloading was an excluded information service. Internet access was protected by the then-applicable federal moratorium. Dedicated lines were taxable telecommunications in substance but were sourced outside Louisiana. Purchased Internet access resold to customers qualified for the telecommunications resale exclusion.

Scenario 1: high-speed satellite downloading

Customers requested data through their ISP, and the company routed the retrieved data from an out-of-state uplink by satellite to Louisiana computers.

Although this involved satellite transmission, the Department classified it as retrieval of data or information. That information service was excluded from telecommunications and was not otherwise an enumerated taxable service.

Scenarios 2 and 3: Internet access bundles

In scenario 2, the company resold third-party Internet access together with its downloading service. In scenario 3, it provided two-way satellite-only Internet access and downloading.

The ruling applied the Internet Tax Freedom Act to the Internet-access charges and treated the downloading component as the same excluded information service described in scenario 1.

Scenario 4: purchased telecommunications

Dedicated lines connecting the uplink facility to the Internet were consumed in providing the company's own service, so they were not acquired for resale. But the provider sourced them outside Louisiana and did not charge them to a Louisiana service address, so Louisiana tax did not apply.

The separate Internet access purchased from an ISP was resold to end customers rather than consumed by the company. It therefore qualified as telecommunications for resale.

Common questions

Q: Did every satellite transmission escape the telecommunications definition?

A: No. The downloading escaped because it fit the information-and-data-service exclusion.

Q: Did bundling Internet access with downloading make the bundle taxable?

A: No, on the described facts.

Q: Were the dedicated lines treated as purchases for resale?

A: No. They were used by the company, but Louisiana did not tax them because of the stated out-of-state sourcing.

Q: Was purchased Internet access treated as resale?

A: Yes, because the company passed that service to customers rather than consuming it.

Citations and references

• La. R.S. 47:301(14)(b) and 47:301(14)(i) — taxable services, telecommunications, sourcing, resale, and information-service exclusions
• Internet Tax Freedom Act, Public Law 105-277
• 2000 La. Acts 22, § 12 — Louisiana statement respecting the federal Internet-tax restriction
• LAC 61:III.101.C — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 02-002

Original ruling text

STATE OF LOUISIANA

DEPARTMENT OF REVENUE

M. J. "MIKE" FOSTER, JR.

CYNTHIA BRIDGES

Governor

Secretary

Private Letter Ruling 02-002
Redacted Version
Taxability of High-Speed Downloading/Sales Tax
April 1, 2002
A Private Letter Ruling based upon the following scenarios was requested:
Scenario One
An out-of-state corporation with Louisiana nexus provides high-speed satellite
downloading. The downloading takes place after the customer sends a request for data
through the customer’s Internet service provider (ISP) and the data has been routed via
landlines to the out-of-state corporation’s satellite uplink facility in another state. From this
site, the data is transmitted by satellite to the customer’s computer in Louisiana. The outof-state corporation maintains Internet Protocol at all times while the data and images are
routed though the high-speed downloading channel.
Scenario Two
Two services are being provided to the out-of-state corporation’s customers. First, the outof-state corporation provides Internet access to its customers after purchasing Internet
access from a large ISP and reselling the service to the out-of-state corporation’s
customers in Louisiana. This third-party Internet access service is then bundled with the
out-of-state corporation’s high-speed satellite downloading service. The high-speed
satellite downloading service is the same as described in scenario one. Bundling these two
services provides the customer efficiency in billing and reduced cost for the services.
Scenario Three
The out-of-state corporation is providing satellite-only Internet access and downloading
service. The satellite-only service is a two-way transmission between the out-of-state
corporation’s uplink facility and the consumer. No landlines are used in providing this
service.
Scenario Four
The out-of-state corporation purchases two different telecommunication services from a
non-Louisiana provider and this provider sources the sale to the out-of-state corporation’s
domicile state.

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Private Letter Ruling 02-002
April 1, 2002
Page 2 of 4
The first telecommunication service involves the out-of-state corporation’s purchase of
dedicated lines that connect the out-of-state corporation’s uplink facility to the Internet. In
scenarios one and two, the customer’s requests are transmitted through the Internet by the
ISP. Once the data and information have been retrieved, it is routed through the dedicated
lines purchased by the out-of-state corporation to its out-of-state uplink facility for satellite
transmission to the customer.
The second telecommunication service purchased by the out-of-state corporation involves
the out-of-state corporation’s purchasing of Internet access from an ISP. The out-of-state
corporation then sells this Internet access to the end consumer.
Analysis / Discussion:
Louisiana Revised Statutes Title 47, Section 301(14)(b) provides:
(14) ‘Sales of services’ means and includes the following:

(i) (i) The furnishing of telecommunication services for compensation.
(ii) …the term “telecommunications services” means:

(cc)(I)Interstate telecommunication services; however, only the amounts paid for
interstate telecommunication services which either originate or terminate in this state and
which are charged to a service address in this state, regardless of where such amounts are
billed or paid, shall be subject to the tax imposed by this Chapter.

(iii) The term “telecommunication services” shall not include:
(dd) The furnishing of any telecommunication services for resale….
(ff) Information and data services, including storage of data or information for
subsequent retrieval, the retrieval of data or information, or the processing, or reception
and processing, of data or information intended to change its form or content.
Scenario One
In the first scenario, the service being sold by the out-of-state corporation is the providing of the
high-speed satellite downloading. This service is a type of “telecommunication service” because it
involves the transmission or conveyance, or routing of information or signals to a point, or between
or among points, through a satellite. However, because the service involves the retrieval of data or
information, it meets the definition of “information and data services,” which is specifically
excluded from the term “telecommunication service.” In contrast to the general rule that all
transfers of tangible personal property for a consideration are subject to the state sales or use tax,
only the sales of those services specifically enumerated in La. R.S. 47:301(14) are taxable. Because
this downloading service does not fit within the statutory definitions of taxable sales of services,
these charges are not subject to the Louisiana sales and use tax.

Private Letter Ruling 02-002
April 1, 2002
Page 3 of 4
Scenario Two
In the second scenario, two services are being provided to the out-of-state corporation’s customers.
The first is Internet access and the second is the high-speed satellite downloading service.
Taxing the service of providing customers access to the Internet is subject to the limitations
imposed under federal legislation, the Internet Tax Freedom Act, Pub. L. No. 105-277, which
prohibits states from taxing charges affiliated with services that enable users to access content,
information, electronic mail, or other services offered over the Internet. Therefore, federal law
prohibits the State of Louisiana from taxing the charges made to the out-of-state corporation’s
customers that are related to Internet access. The Louisiana Legislature confirmed its intent to
follow this federal moratorium in Section 12 of 2000 La. Acts 22, which first enacted taxes on
interstate telecommunication services in La. R.S. 47: 301(14)(i)(ii)(cc)(I), by stating that “nothing
in this Act shall be construed as imposing any tax, or authorizing the imposition of any tax, on any
… service, if the imposition of such tax would be prohibited by the Internet Tax Freedom Act.”
The second service of providing high-speed downloading service is, as discussed in scenario one,
an information service that is specifically excluded from the definition of telecommunication
services.
Scenario Three
In the third scenario, the out-of-state corporation is providing satellite-only Internet access and
downloading service. As provided in scenario two, the service of providing Internet access is an
activity protected from state taxation under the provisions of the Internet Tax Freedom Act (ITFA).
And, as discussed in scenario one, the downloading service is an information service that is not a
taxable service under Louisiana law.
Scenario Four
The first telecommunication service involves the out-of-state corporation’s purchases of dedicated
lines that connect the out-of-state corporation’s uplink facility to the Internet. While the “furnishing
of any telecommunication services for resale” is excluded from the definition of
“telecommunications services,” this is only true to the extent that the party purchasing the
telecommunication is not using or consuming the service in providing its own service. The
dedicated lines are used to provide the high-speed satellite downloading referenced in scenarios one
and two are used by the out-of-state corporation in providing its service to the end consumer. Thus,
the purchasing of these dedicated lines is not a purchase of telecommunication service for resale.
However, according to the facts provided, the purchases are sourced outside of the state of
Louisiana. Therefore, according to the provisions of La. R.S. 47:301(14)(i)(ii)(cc)(I), these amounts
are not charged to a service address in this state, and Louisiana sales tax cannot be imposed on this
service.
The second telecommunication service purchased by the out-of-state corporation involves the outof-state corporation’s purchasing of Internet access from an ISP. The out-of-state corporation then
sells this Internet access to the end consumer, a nontaxable transaction under ITFA. The out-of-state
corporation is not consuming these purchases of Internet access, but instead, offers its customers
this service as bundled package with its satellite downloads. These purchases are
telecommunication services for resale and are excluded from the definition of telecommunication
services.

Private Letter Ruling 02-002
April 1, 2002
Page 4 of 4
Conclusion:
The services described as being provided or purchased by the out-of-state corporation are not
subject to the Louisiana sales or use tax for the reasons expressed in the above analysis. The highspeed satellite downloading is excluded from the definition of telecommunications service because
it is an information service. The charges for Internet access that the out-of-state corporation
provides to its clients are exempt from state tax under the federal Internet Tax Freedom Act. The
out-of-state corporation’s satellite-only Internet access is also exempt under this federal legislation.
The out-of-state corporation’s purchase of dedicated lines satisfies the definition of
telecommunications services, but because the purchases are sourced outside the state, Louisiana
sales tax cannot be imposed on the sale. Finally, The out-of-state corporation’s purchases of
Internet access from an ISP are not being consumed by the out-of-state corporation in providing its
services and are for resale to the customer. Thus, they are purchases of telecommunications for
resale, an exclusion from the general definition of telecommunications services.
If you should have any questions or need additional information, please contact the Policy
Services Division at (225) 219-2780.
Sincerely,

Cynthia Bridges
Secretary

By: _____
Christina L. Fletcher
Attorney
Policy Services Division
A Private Letter Ruling (PLR) is issued under the authority of LAC 61:III.101(C). A PLR provides guidance to a
specific taxpayer at the taxpayer’s request. It is a written statement issued to apply principles of law to a specific set of
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carried out as proposed. The Department’s position concerning the particular tax situation addressed remains in effect
for the requesting taxpayer until a subsequent declaratory ruling, rule, court case, or statute supersedes it.