Maine ~ Sales and Use Tax: Passed-through Telecommunications Fees Were Taxable

CCH Tax Day Report

The Maine Judicial Supreme Court held that a telecommunications carrier’s charges on certain business customers were not exempt from the service provider tax because the charges were not made for interstate telecommunications services. Service provider tax is imposed on the sale price of telecommunications services, which includes all consideration received without deduction for costs, but sales of interstate telecommunications services are exempt. The carrier was an interexchange carrier (IXC), providing long-distance telecommunications service. The carrier was charged fees by local carriers who were seeking to recover a portion of their interstate local loop costs. These charges were capped under federal regulation. The carrier passed through the cost of these charges to certain multi-line customers. The carrier charged this limited number of customers a higher fee than it paid, but kept the fee under the federal cap for charges made by local carriers. The court found that the carrier’s charges were a taxable portion of the sale price, despite the carrier’s claim that the charges were not made in exchange for access to telecommunications services. The charges were not exempt, however, because the carrier did not show that the charges arose as payment for interstate telecommunications services in Maine.

BCN Telecom, Inc. v. State Tax Assessor, Maine Supreme Judicial Court, No. Ken-15-541, November 8, 2016, ¶200-852

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