Pennsylvania ~ Sales and Use Tax: Services, Infrastructure Provided to Internet Service Provider Exempt as Internet Access Service

The Commonwealth Court of Pennsylvania determined that a limited liability company’s (LLC’s) provision of services and infrastructure for an Internet Service Provider (ISP) was exempt from sales and use tax as an Internet access service.

In this case, an Internet session was initiated using the LLC’s service by opening up the ISP’s software on the end-user’s computer. The ISP’s software initiated an analog call over local telephone lines, and this call was then routed to the LLC’s facility that housed the infrastructure, which consisted of a network access point, modems, modem banks, network access servers, and other equipment. The LLC converted the analog call to a digital signal, transmitted the digital signal over its Internet Protocol (IP) network to the requested IP address, and delivered the end-user to the ISP’s data center. The system was set up so the end-users always accessed the ISP’s web page first.

The court reasoned that, since the LLC’s facility where the end-user connected with the network access point and network access servers was a Point of Presence (PoP) that connected to and helped other devices establish a connection with the Internet, it was there that the end-user’s connection with the Internet began. Therefore, the LLC’s service was an Internet access service even though the LLC delivered the end-user to the ISP’s web page first.

Level 3 Communications, LLC v. Commonwealth of Pennsylvania, Commonwealth Court of Pennsylvania, No. 166 F.R. 2007, October 15, 2015, ¶204-479



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