WAC 458-20-245
Telephone business, telephone service. Under the provisions of various sections of chapter 3, Laws of
1983 2nd ex. sess., the retail sales tax is extended to
"telephone service." The effective date is July 1, 1983 and
the tax applies to all sales of "telephone service" billed on
or after that date, whether or not such service was rendered
before that date.
Persons engaged in the "telephone business" or rendering
"telephone service" are taxable under the retailing of
wholesaling classification of the business and occupation tax,
whichever is applicable, on total gross revenues, as described
herein. Such persons who are taxable under retailing must
also collect retail sales tax from consumers, subject to
certain exemptions explained more fully herein.
Definitions
As used herein: The term "telephone service" includes
competitive telephone service and network telephone service.
The term "telephone business" means the business of
providing network telephone service and includes cooperative
or farmers line telephone companies or associations operating
an exchange.
The term "competitive telephone service" means the
providing by any person of telecommunications equipment or
apparatus, or service related to that equipment or apparatus
such as installation, repair, or maintenance services, if the
equipment or apparatus is of a type which can be provided by
persons that are not subject to regulation as telephone
companies under Title 80 RCW.
The term "network telephone service" means the providing
by any person of access to a local telephone network,
switching service, toll service, or coin telephone services,
or the providing of telephonic, video, data, or similar
communication or transmission for hire, over a local telephone
network, toll line or channel, cable, microwave, or similar
communication or transmission system. "Network telephone
service" includes interstate service, including toll service,
originating from or received on telecommunications equipment
or apparatus in this state if the charge for the service is
billed to a person in this state. "Network telephone service"
does not include the providing of competitive telephone
service, the providing of cable television service, nor the
providing of broadcast services by radio or television
stations.
The term "residential customer" means an individual
subscribing to a residential class of telephone service.
The term "toll service" means the charge for services
outside the local telephone network except customer access
line charges for access to a toll calling network.
The term "telephone company" means a person engaged in
the telephone business or rendering telephone service.
Business and Occupation Tax
Retailing and wholesaling. Persons making retail sales
of telephone service to consumers are taxable upon the gross
proceeds of sales under the retailing classification. Persons
making sales of telephone services for resale in the regular
course of business are taxable upon the gross proceeds of
sales under the wholesaling classification. The tax shall
apply to the gross income from all sales of competitive
telephone service and network telephone service, as described
more fully below.
For purposes of applying the business and occupation tax
to telephone service, a sale takes place in Washington when a
call originates from or is received on any telephone or other
telecommunications equipment, instrument, or apparatus in
Washington and the cost for the telephone service is charged
to that equipment, instrument, or apparatus, regardless of
where the actual billing invoice is sent.
The business and occupation tax shall apply to the gross
proceeds of sales of competitive telephone service to
customers. The tax shall be measured by total gross billings
to such customers. The business and occupation tax shall also
apply to the gross proceeds of sales of network telephone
service, other than interstate and intrastate toll service,
measured by total gross billings to customers. The tax as
applied to interstate and intrastate service, including toll
service, shall be determined under the apportionment
guidelines set forth in the following paragraph.
With respect to interstate and intrastate toll service,
the business and occupation tax shall apply to the income
received from the interstate or intrastate division of revenue
pool. The income subject to tax shall include amounts
received for expenses incurred in furnishing the interstate or
intrastate services plus any amounts received as return. Persons who are not members of the interstate or intrastate
division of revenue pool but who receive shared interstate or
intrastate revenues through a member of the division of
revenue pool, are liable for business and occupation tax on
the income received.
Persons engaged in the telephone business or rendering
telephone service shall report on the combined excise tax
return their total gross income received from billings to
customers under column 2 of the appropriate classification
line on the return (wholesaling or retailing). An adjustment
may be made under column 3 of the excise tax return for
revenues received from providing interstate and intrastate
toll service, as described in the previous paragraph. On the
reverse side of the return it should be explained that such
adjustment was the result of income received from the
interstate or intrastate division of revenue pool. The
reported gross income under column 2 shall be the same under
the retailing business and occupation tax and retail sales tax
classifications, with appropriate adjustments and deductions
noted under column 3.
Service. Persons engaged in the telephone business or
rendering telephone service are taxable under the service and
other activities classification on their income from services
which are not included within the definition of the terms
"sale at retail" in RCW 82.04.050 or "competitive telephone
service" and "network telephone service," as defined herein. Included under this classification are, among others, gross
income from the sale of advertising in telephone directories,
gross income from charges made for processing NSF checks, and
any other miscellaneous income.
Retail Sales Tax
The retail sales tax applies to all sales of competitive
telephone service provided to both residential and business
(nonresidential) customers. The retail sales tax also applies
to all sales of network telephone service provided to business
(nonresidential) customers.
The retail sales tax applies upon sales to a telephone
company of all tangible personal property used as a consumer
in providing telephone service. A consumer is liable for
retail sales tax on all telephone service, as described
herein, in situations where the tax was not paid to a
telephone company as a result of a billing or other invoice
rendered by that company.
The retail sales tax must be collected and accounted for
in every case where retailing business and occupation tax is
due as outlined herein, except for the following. The retail
sales tax shall not apply to sales of network telephone
service, other than toll service, provided to residential
customers nor to sales of network telephone service paid for
by inserting coins in coin-operated telephones.
The retail sales tax does not apply to sales of network
telephone service, other than toll service, provided to
residential customers.
The retail sales tax does not apply to sales of network
telephone service which is paid for by inserting coins in
coin-operated telephones. However, the retail sales tax does
apply if the network telephone service is provided through a
coin-operated telephone, the service originates from or is
received on equipment in this state, and the charge for the
service is billed to a telephone or other telecommunications
equipment, instrument, or apparatus which is located in
Washington.
The sales tax does not apply to network telephone service
which is merely billed to a telephone or other
telecommunications equipment, instrument, or apparatus whose
situs is in Washington if the service neither originated from
nor was received on equipment in this state.
Use Tax
The use tax applies to telephone or other
telecommunications equipment, instrument, or apparatus
purchased at retail and upon which the sales tax has not been
paid. (See WAC 458-20-178.) A telephone company is liable
for use tax on all tangible personal property purchased at
retail and upon which the sales tax has not been paid. A
telephone company is not liable for use tax on its own use as
a consumer of its own network telephone service.
Special Situations
Persons making sales of telephone service for resale in
the regular course of business must follow the provisions of
WAC 458-20-102 concerning resale certificates.
The local retail sales tax applies to sales of telephone
services as described herein. (See WAC 458-20-145.)
Persons engaged in telephone business or rendering
telephone service are not taxable under the public utility
tax, except with respect to gross income from engaging in
telegraph or any other public service business as defined in
WAC 458-20-179.
All retail telephone services including sales of
equipment are taxable at the same state retail sales tax rate
of 6.5 percent, regardless that such sales may be made in a
border county. (See WAC 458-20-237.)
[Statutory Authority: RCW 82.32.300. 83-17-099 (Order ET
83-6), § 458-20-245, filed 8/23/83.]