Publication 510
taxmap/pubs/p510-033.htm#en_us_publink1000117133 | After July 31, 2006, collectors stopped collecting and paying
over the tax on nontaxable service. Taxpayers may request a credit or refund
only
on their 2006 federal income tax return for nontaxable service that was billed
after February 28, 2003, and before August 1, 2006. Instructions are provided on
the applicable income tax returns. Claims can no longer be filed on Form 8849,
Form 720, or Form 843 for nontaxable service; the IRS will not process these
claims. If you filed a claim prior to May 25, 2006, you or your representative
should have received a letter from the IRS explaining how your claim will be
processed. If you or your representative have not received a letter or an IRS
agent has not contacted you, call 1-866-699-4096 for assistance. If you did not
request a refund on your 2006 income tax return, you can file an amended return. Information on the credit and refund procedures for
collectors is described under Credits or Refunds, later. For more information,
see Notices 2006-50 and 2007-11.
|
A 3% tax is imposed on amounts paid for local telephone service
and teletypewriter exchange service.
taxmap/pubs/p510-033.htm#en_us_publink1000117135This includes access to a local telephone system and the privilege
of telephonic quality communication with most people who are part of the system.
Local telephone service also includes any facility or services provided in
connection with this service. The tax applies to lease payments for certain
customer premises equipment (CPE) even though the lessor does not also provide
access to a local telecommunications system.
taxmap/pubs/p510-033.htm#en_us_publink1000117136Local-only service is local telephone service as described above,
provided under a plan that does not include long distance telephone service or
that separately states the charge for local service on the bill to customers.
Local-only service also includes any facility or services provided in connection
with this service, even though these services and facilities may also be used
with long-distance service.
taxmap/pubs/p510-033.htm#en_us_publink1000117137Private communication service is not local telephone service.
Private communication service includes accessory-type services provided in
connection with a Centrex, PBX, or other similar system for dual use accessory
equipment. However, the charge for the service must be stated separately from
the charge for the basic system, and the accessory must function, in whole or in
part, in connection with intercommunication among the subscriber's stations.
taxmap/pubs/p510-033.htm#en_us_publink1000117138This includes access from a teletypewriter or other data station
to a teletypewriter exchange system and the privilege of intercommunication by
that station with most persons having teletypewriter or other data stations in
the same exchange system.
taxmap/pubs/p510-033.htm#en_us_publink1000117139The tax is based on the sum of all charges for local telephone
service included in the bill. However, if the bill groups individual items for
billing and tax purposes, the tax is based on the sum of the individual items
within that group. The tax on the remaining items not included in any group is
based on the charge for each item separately. Do not include in the tax base
state or local sales or use taxes that are separately stated on the taxpayer's
bill.
taxmap/pubs/p510-033.htm#en_us_publink1000117140Payments for certain services or payments from certain users
are exempt from the communications tax.
taxmap/pubs/p510-033.htm#en_us_publink1000117141Nontaxable service means bundled service and long distance service.
Nontaxable service also includes pre-paid telephone cards and pre-paid cellular
service.
taxmap/pubs/p510-033.htm#en_us_publink1000117142Bundled service is local and long distance service provided under
a plan that does not separately state the charge for the local telephone
service. Bundled service includes plans that provide both local and long
distance service for either a flat monthly fee or a charge that varies with the
elapsed transmission time for which the service is used. Telecommunications
companies provide bundled service for both landlines and wireless (cellular)
service. If Voice over Internet Protocol service provides both local and long
distance service and the charges are not separately stated, such service is
bundled service.
The method for sending or receiving a call, such as on a landline
telephone, wireless (cellular), or some other method, does not affect whether a
service is local-only or bundled.
taxmap/pubs/p510-033.htm#en_us_publink1000117143Long distance service is telephonic quality communication with
persons whose telephones are outside the local telephone system of the caller.
taxmap/pubs/p510-033.htm#en_us_publink1000117144A PTC will be treated as bundled service unless a PTC expressly
states it is for local-only service. Generally, the person responsible for
collecting the tax is the carrier who transfers the PTC to the transferee. The
transferee is the first person that is not a carrier to whom a PTC is
transferred by the carrier. The transferee is the person liable for the tax and
is eligible to request a credit or refund. For more information, see Regulations
section 49.4251-4.
The holder is the person that purchases a PTC to use and not
to resell. Holders are not liable for the tax and cannot request a credit or
refund.
taxmap/pubs/p510-033.htm#en_us_publink1000117145Rules similar to the PTC rules described above apply to pre-paid
cellular telephones. The transferee is the person eligible to request the credit
or refund.
taxmap/pubs/p510-033.htm#en_us_publink1000117146The tax does not apply to payments received for the installation
of any instrument, wire, pole, switchboard, apparatus, or equipment. However,
the tax does apply to payments for the repair or replacement of those items
incidental to ordinary maintenance.
taxmap/pubs/p510-033.htm#en_us_publink1000117147The tax does not apply to amounts paid for a private line, an
answering service, and a one-way paging or message service if they do not
provide access to a local telephone system and the privilege of telephonic
communication as part of the local telephone system.
taxmap/pubs/p510-033.htm#en_us_publink1000117148The tax does not apply to payments for a two-way radio service
that does not provide access to a local telephone system.
taxmap/pubs/p510-033.htm#en_us_publink1000117149The tax for local telephone service does not apply to payments
made for services by inserting coins in public coin-operated telephones. But the
tax applies if the coin-operated telephone service is furnished for a guaranteed
amount. Figure the tax on the amount paid under the guarantee plus any fixed
monthly or other periodic charge.
taxmap/pubs/p510-033.htm#en_us_publink1000117150The tax does not apply to amounts paid for telephones used only
to originate calls to a limited number of telephone stations for security entry
into a building. In addition, the tax does not apply to any amounts paid for
rented communication equipment used in the security system.
taxmap/pubs/p510-033.htm#en_us_publink1000117151The tax on teletypewriter exchange service does not apply to
charges for the following news services.
- Services dealing exclusively with the collection or dissemination
of news for or through the public press or radio or television broadcasting.
- Services used exclusively in the collection or dissemination
of news by a news ticker service furnishing a general news service similar to
that of the public press.
This exemption applies to payments received for messages from
one member of the news media to another member (or to or from their bona fide
correspondents). For the exemption to apply, the charge for these services must
be billed in writing to the person paying for the service and that person must
certify in writing that the services are used for an exempt purpose.
The tax applies to amounts paid by members of the news media
for local telephone service.
taxmap/pubs/p510-033.htm#en_us_publink1000117153The tax does not apply to communication services furnished to
an international organization or to the American National Red Cross.
taxmap/pubs/p510-033.htm#en_us_publink1000117154The tax does not apply to telephone services furnished to income
tax-exempt nonprofit hospitals for their use. Also, the tax does not apply to
amounts paid by these hospitals to provide local telephone service in the homes
of their personnel who must be reached during their off-duty hours.
taxmap/pubs/p510-033.htm#en_us_publink1000117155The tax does not apply to payments received for services and
facilities furnished to a nonprofit educational organization for its use. A
nonprofit educational organization is one that satisfies all the following
requirements.
- It normally maintains a regular faculty and curriculum.
- It normally has a regularly enrolled body of pupils or students
in attendance at the place where its educational activities are regularly
carried on.
- It is exempt from income tax under Internal Revenue Code section
501(a).
This includes a school operated by an organization exempt under
Internal Revenue Code section 501(c)(3) if the school meets the above
qualifications.
The tax does not apply to telephone services furnished to qualified
blood collector organizations for their use. A qualified blood collector
organization is one that is:
- Described in section 501(c)(3) and exempt from tax under section
501(a),
- Primarily engaged in the activity of collecting human blood,
- Registered with the IRS, and
- Registered by the Food and Drug Administration to collect
blood.
The tax does not apply to communication services provided to
the government of the United States, the government of any state or its
political subdivisions, the District of Columbia, or the United Nations. Treat
an Indian tribal government as a state for the exemption from the communications
tax only if the services involve the exercise of an essential tribal government
function.
taxmap/pubs/p510-033.htm#en_us_publink1000117158Any form of exemption certificate will be acceptable if it includes
all the information required by the Internal Revenue Code and Regulations. See
Regulations section 49.4253-11. File the certificate with the provider of the
communication services. An exemption certificate is not required for nontaxable
services.
The following users that are exempt from the communications tax
do not have to file an annual exemption certificate after they have filed the
initial certificate to claim an exemption from the communications tax.
- The American National Red Cross and other international organizations.
- Nonprofit hospitals.
- Nonprofit educational organizations.
- Qualified blood collector organizations.
- State and local governments.
The federal government does not have to file any exemption certificate.
All other organizations must furnish exemption certificates when
required.
taxmap/pubs/p510-033.htm#en_us_publink1000117159If tax is collected and paid over for nontaxable services, or
for certain services or users exempt from the communications tax, the collector
or taxpayer may claim a credit or refund if it has repaid the tax to the person
from whom the tax was collected or obtained the consent of that person to the
allowance of the credit or refund. Alternatively, the person who paid the tax
may claim a refund. For more information on how to file for credits or refunds,
see the Instructions for Form 720 or Form 8849.
taxmap/pubs/p510-033.htm#en_us_publink1000117160The collector may request a credit or refund if it has repaid
the tax to the person from whom the tax was collected, or obtained the consent
of that person to the allowance of the credit or refund. These requirements also
apply to nontaxable service refunds.
taxmap/pubs/p510-033.htm#en_us_publink1000117161Collectors using the regular method for deposits must use Form
720X to request a credit or refund if the collector has repaid the tax to the
person from whom the tax was collected, or obtained the consent of that person
to the allowance of the credit or refund.
taxmap/pubs/p510-033.htm#en_us_publink1000117162Collectors using the alternative method for deposits must adjust
their separate accounts for the credit or refund if it has repaid the tax to the
person from whom the tax was collected, or obtained the consent of that person
to the allowance of the credit or refund. For more information, see the
Instructions for Form 720.
taxmap/pubs/p510-033.htm#en_us_publink1000117163Credits or refunds for nontaxable service that was billed after
February 28, 2003, and before August 1, 2006, can be requested by taxpayers only
on their 2006 federal income tax returns. Instructions to request the credit or
refund are available with the 2006 income tax returns. Do not use Form 8849,
Form 720, or Form 843 to make claims for nontaxable service; the IRS will not
process these claims. If you did not request a credit or refund on your 2006
income tax return, you can file an amended return.
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