Which 1986 cellular-service charges were taxable, and when did local or MTA tax apply to telecommunications and rented equipment?

Plain-English summary

The body is dated May 15, 1986. At that time, local and MTA tax did not apply to telecommunications services, so equipment rented as part of a telecommunications service also escaped those local taxes. Standalone equipment sales or rentals did not. The letter said local-option telecommunications taxes could not become effective before October 1, 1987.

The Comptroller classified start-of-service fees, detailed bills, advance and prorated monthly access, custom features, completed intrastate calls, intrastate interlata and roaming charges, directory assistance, equipment purchases, rate-plan changes, and service-change charges as taxable. Interstate and international toll calls were not taxable.

Monthly equipment rental was taxable unless telecommunications service was also being provided. The one-time installation charge to connect the control unit, transceiver, antenna, and cable was not taxable.

The insurance charge covering lost or stolen rental equipment was an expense connected with the rental and was stated to become taxable July 1, 1986. The timing of tax on an advance access charge required more billing, payment, and income-recognition facts.

Common questions

Were intrastate cellular calls taxable? Yes.

Were interstate and international calls taxable? No.

Was installation taxable? No.

Was a standalone equipment rental taxable? Yes; the local/MTA exception applied when equipment accompanied telecommunications service.

Did the letter decide when tax accrued on advance access charges? No; it requested additional timing facts.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8605L0813G02

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 15, 1986

Dear ***:

Thank you for your recent letter and list of services.

At the present time there is no local or MTA tax on telecommunications
services. Therefore, when equipment is leased or rented to a customer as
part of a telecommunications service, neither local nor MTA Tax would
apply.

If a customer purchases equipment or if he rents or leases equipment
apart
from the provision of a telecommunications service, the transaction would
not
be exempt from local and MTA tax.

Effective October 1, 1987, local and MTA taxes will become due on
telecommunications services on a local option basis. Officially, the
individual
governing authorities may make the decision at any time, but the local
and
MTA taxes cannot become effective until October 1, 1987.

As we discussed, I am restating each of the charges you listed with
response below.

Start of Service Fee A one-time charge for initiation of
service.

Response: Taxable

Monthly Detail Bill A detail listing of all calls for that
billing period (local calls).

Response: Taxable

Monthly Access The advance payment of the first
month's charge in Advance service charge.

Response: The charge is taxable, however in order to tell you when
tax is due on this charge, please send me the following information for
the June access charge:

0 Date billed
0 Date payment to be received
0 Date payment is recognized as income.

Month Prorated The proration of the monthly service
Service Charge charge to cover only the days used.

Response: Taxable.

Basic Features Charge An optional package of custom calling
features.
Response: Taxable.

Billed Air Charges Charges for completed calls.
Response: Taxable.

Interlata Toll Charges Calls made outside the intralata of
Austin.

Response: Taxable for intrastate calls.

Interstate Toll Charges Calls made outside State of Texas
Response: Not Taxable.

Intrastate Calls made within State of Texas

Response: Taxable.

International Toll Calls made outside the United States
Charges

Response: Not Taxable.

Roamer Air Charges 1% time charge for a call placed in a
cellular service area other than the
units home CGSA

Response: Taxable for intrastate calls.

Roamer Land Charges A service charge for calling from an
area other than the unit's home CGSA

Response: Taxable for intrastate calls.

Long-Distance A fee for using Southwestern Bell's
Directory Assistance directory service for outside local
exchange area

Response: Taxable.

Local Director A fee for using Southwestern Bell's
Assistance directory service within the focal
exchange access

Response: Taxable.

Equipment Purchase of cellular telephone equipment
Response: Taxable, as mentioned earlier, this transaction is not
exempt from local and MTA tax.

Monthly Rental The rental fee for use of cellular
telephone equipment
Response: Taxable, unless telecommunications services are being
provided also.

Rate Plan Charge A charge for adding or deleting custom
features
Response: Taxable.

Installation Charge A one-time charge to connect the user's
control unit, transceiver antenna, and
cable
Response: Not Taxable.

Insurance Charge A charge for coverage of rental
equipment

Response: This insurance to replace lost or stolen equipment is an
expense connected with the rental and will become taxable July 1,
1986.

Service Charge Charge A one-time charge for adding, deleting,
or changing cellular mobile phone
features.

Response: Taxable.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
AL Van Allen
Tax Policy Section
Tax Administration Division