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					                        Release Bulletin
                                                                  CorpSystem® ZIPcomm
                                                                  January 2011


                       Welcome to CorpSystem®
                                           ZIPcomm
This bulletin provides important information relating to CorpSystem® ZIPcomm’s January 2011 release.
If you have any questions, or require more information, please call 1-866-513-CORP, Option 4.

      I. New Taxes Added to ZIPcomm – January 2011

              Entry of Local Cable Franchise Fees & PEG Access Support Fees
               in Various Additional Cities in Louisiana

                        Detailed Explanation of New Tax

As reported in the September, 2010 month-end Release Notes, we have created an enhancement
to the database whereby we have begun to add in two new layers of local franchise fees in the
state of Louisiana. Unlike the standard cable franchise agreement which exists in every local
jurisdiction in the country which is both “company-specific” and populated with a “bucket-rate”
(as captured in the database by Tax Type 43,45) these new franchise fees are not company-
specific but are instead recorded with an exact rate. The two tiers of franchise fees which we
have begun to enter into the system are: (1) a Local Cable Franchise Fee & (2) a Local PEG
Access Support Fee. As per the state authorizing statutes, the maximum rates which a locality
may impose such fees upon a cable TV provider are: 5% of a cable provider’s gross revenues
for the “higher tier” cable franchise fee and 0.5% of a cable provider’s gross revenues for the
“lower tier” PEG fee.1

Initially, we set up Local Cable Franchise Fees and Local PEG Fees in the cities of Killian &
Shreveport, LA. Meanwhile, in order to identify other cities in Louisiana which impose such
cable fees, we have taken the liberty of sending out query letters to the largest cities in the state.
Our pro-active initiative is now beginning to bear fruit: Effective with this month’s update, we
are now entering cable franchise fees and PEG Fees in the following additional LA cities:

1 - Abbeville
2 – Franklin
3 – Mandeville [Cable Franchise Fee only]
4 – Pineville

Please note that the rate for the local cable franchise fee in the city of Franklin is 3.5% - not 5%
as is true for the remaining cities on this list.


 1
     See Louisiana Revised Statutes §§ 45:1366 & 45:1370, respectively.

                                                         1
             Colorado Prepaid Wireless 911 Surcharge

                        Detailed Explanation of New Tax
Pursuant to enacted Colorado Senate Bill 120 (2010), effective January 1, 2011, a new state-wide
prepaid wireless 911 surcharge of 1.4% will be imposed on the retail sale of prepaid wireless 911
services. To quote the newly codified statute that establishes the fee:

"A prepaid wireless E911 charge of 1.4% of the price of the retail transaction is hereby
imposed on each retail transaction".2

The term "retail transaction" is correspondingly defined as "the purchase of prepaid wireless
telecommunications service from a seller for any person other than resale."3

In turn, the term "prepaid wireless telecommunications service" is defined as "wireless
telecommunications access that allows a caller to dial 911 to access the 911 system, is paid for in
advance, and is sold in predetermined units or dollars, of which the number of units or dollars
available to the caller declines with use in a known amount."4

Unlike most other 911 surcharges imposed on prepaid wireless services this new prepaid
wireless 911 surcharge will be imposed at the point-of-sale of the prepaid wireless service.
In notable contrast, most other 911 fees applicable to prepaid wireless services are levied on a
monthly basis and imposed upon each active prepaid wireless account. However, as a point of
fact, the imposition of state-wide 911 surcharges at the point-of-sale is becoming more common
and has already been adopted by such states as Maine, Louisiana, Texas, Rhode Island and
Indiana, the District of Columbia, as well as Virginia and Oklahoma (see sections below) .

FACT PATTERN

To provide further clarification as to how this new prepaid wireless 911 surcharge will be
imposed, let us assume that Mr. Jansen, a resident of Colorado, orders $100 worth of prepaid
airtime for his cellular phone over the telephone from a wireless prepaid provider and charges
this to his credit card. Mr. Jansen will be immediately subject to a $1.40 Colorado prepaid
wireless 911 surcharge ($100 worth of prepaid wireless services X 1.4% = $1.40), but will no
longer be subject to any other state or local 911 fee regarding this purchase. The $1.40 surcharge
must be charged by the prepaid wireless provider at the time Mr. Jansen purchases the $100 of
prepaid wireless airtime, added to the $100 charge for the prepaid wireless airtime, and then
remitted to the Colorado Department of Revenue. Moreover, if Mr. Jansen were to purchase
another $50 of prepaid wireless airtime from the same prepaid wireless provider three months
later, the wireless provider would subsequently need to collect from Mr. Jansen an additional
Colorado prepaid wireless 911 surcharge of $0.70 ($50 worth of prepaid wireless services x
1.4% = $0.70).

 2
     Colorado Code §29-11-102.5(2)(a).
 3
     Colorado Code §29-11-102.5(e).
 4
     Colorado Code §29-11-101(5.5).



                                                 2
Please note that due to the structure of the original prepaid wireless Group in ZIPcomm (i.e.
Group 5018), this new Colorado prepaid wireless 911 surcharge will be imposed only on certain
Items within this group. The reason for this is that the Items in this Group are divided between
point-of-sale Items versus point-of-use Items. For example, Items 001-003 & 008-010 represent
prepaid wireless charges associated with point-of-sale transactions, while Items 004-007
represent prepaid wireless charges associated with point-of-use transactions. Since this new
Colorado prepaid wireless 911 surcharge is only imposed at the point-of-sale, only the point-of-
sale Items in Group 5018 (i.e., Items 001-003 & 008-010) will be coded with YES taxability
decisions for purposes of this new surcharge. Similarly, Items 001-003 in Group 5036 (Cellular
Prepaid – Retail) will also be subject to the new Colorado prepaid wireless 911 surcharge since
these Items also cover charges associated with the retail sale of prepaid wireless services.

Please also note that the database captures the Colorado standard local 911 fee via
Taxtype,Taxcat 33,00.

The same statute, as amended, now contains the following supplemental provision:

"The prepaid wireless E911 charge imposed by this section shall be the only direct E911 funding
obligation imposed with respect to prepaid wireless telecommunications services in this state.
No tax, fee, surcharge, or other charge to fund E911 shall be imposed by this state, any political
subdivision of this state, or any intergovernmental agency upon a provider, seller, or consumer
with respect to the sale, purchase, use, or provision of prepaid wireless telecommunications
service.”5

Accordingly, we are now removing the existing YES –Taxable decisions associated with
the applicable wireless prepaid Items in the database (namely Items 5018/006, 5035/004 &
5036/004) for purpose of Taxtype,Taxcat 33,00 in the state of Colorado given that (A) this
Taxtype,Taxcat combination represents the standard Colorado local 911 fee and (B) such prepaid
wireless charges have now been legislatively declared to be exempt from this surcharge.

NOTE: Since this new Colorado prepaid wireless 911 surcharge is imposed solely on the retail
sale of prepaid wireless service, Group 5035 – which covers the taxability of wireless prepaid
services sold on a wholesale level – will be totally free of this surcharge.

      Provisions of the Colorado Prepaid Wireless 911 Surcharge

         SHOWN ON CUSTOMER’S BILL AS: “CO PREPAID WIRELESS 911
          CHARGE”

          1. Rate – 1.4%

          2. Pass-through of the Fee to Customers – PASSFLAG = 1 (Required)




 5
     Colorado Code §29-11-102.5(4).



                                                3
          3. Level of Taxation -

           Tax is on the State level

          4. Tax-type –

           06 = State 911 Surcharge

          5. Tax-cat –

           75 = Prepaid

          6. Base-type –

           00 = Consumer – Sales Price

          7. Effective date = January 1, 2011

             Oklahoma Prepaid Wireless 911 Surcharge

                       Detailed Explanation of New Tax
Pursuant to enacted Oklahoma House Bill 2556 (2010), effective January 1, 2011, a new state-
wide prepaid wireless 911 surcharge of $0.50 will be imposed on the retail sale of prepaid
wireless 911 services.

To quote the newly codified statute that establishes the fee:

"There is hereby imposed a prepaid wireless nine-one-one fee of fifty cents ($ 0.50) per retail
transaction, on and after the effective date of an adjusted amount per retail transaction that is
established under subsection G of this section, the adjusted amount".6

The term "retail transaction" is correspondingly defined as "the purchase of prepaid wireless
telecommunications service from a seller for any person other than resale."7

In turn, the term "prepaid wireless telecommunications service" is defined as "a
telecommunications wireless service that provides the right to utilize mobile wireless service as
well as other non-telecommunications services, including the download of digital products
delivered electronically, content and ancillary services, which must be paid for in advance that is
sold in predetermined units or dollars of which the number declines with use in a known
amount".8




 6
     63 Oklahoma Code §2843.2(B).
 7
     63 Oklahoma Code §2843.2(A)(4).
 8
     63 Oklahoma Code §2843(8).

                                                 4
Accordingly, effective with the January 2011 release of our database, we shall now capture this
state-level prepaid 911 surcharge in Oklahoma via Taxtype,Taxcat 06,75 and apply this new Tax
Type, Tax Cat combination to the point-of-sale Items contained within Group 5018 (Cellular
Prepaid Service), i.e., Items 001-003 & 008-010 given that this surcharge applies to the sale of
prepaid wireless phone service on a retail level rather than on a “usage-basis”. In addition,
taxability shall also apply to Group 5036 (Cellular Prepaid – Retail) on a Group level with
the exception of Item 004 (Unit Based Monthly Access Charges).

Please also note that the database captures the standard Oklahoma local wireless 911 fee via
Taxtype,Taxcat 33,06.

The same statute, as amended, now contains the following supplemental provision:

"The prepaid wireless nine-one-one fee imposed by this section shall be the only nine-one-one
funding obligation imposed with respect to prepaid wireless telecommunications services in this
state, and no tax, fee, surcharge, or other charge shall be imposed by this state, any political
subdivision of this state, or any intergovernmental agency, for nine-one-one funding purposes,
upon any provider, seller, or consumer with respect to the sale, purchase, use, or provision of
prepaid wireless telecommunications service.”9

Accordingly, we are now removing the existing YES –Taxable decisions associated with
the applicable wireless prepaid Items in the database (namely Items 5018/006, 5035/004 &
5036/004) for purpose of Taxtype,Taxcat 33,06 in the state of Oklahoma given that (A) this
Taxtype,Taxcat combination represents the standard Oklahoma local wireless 911 fee and (B)
such prepaid wireless charges have now been legislatively declared to be exempt from this
surcharge.

      Provisions of the Oklahoma Prepaid Wireless 911 Surcharge

         SHOWN ON CUSTOMER’S BILL AS: “OK PREPAID WIRELESS 911
          CHARGE”

          1. Rate – $0.50 (Per Retail Transaction)

          2. Pass-through of the Fee to Customers – PASSFLAG = 1 (Required)

          3. Level of Taxation -

           Tax is on the State level

          4. Tax-type –

           06 = State 911 Surcharge




 9
     Oklahoma Code §2843.2(O).



                                                 5
          5. Tax-cat –

           75 = Prepaid

          6. Base-type –

           17 = Consumer - Transaction

          7. Effective date = January 1, 2011

              Virginia Prepaid Wireless 911 Surcharge

                        Detailed Explanation of New Tax
Pursuant to enacted Virginia House Bill 754 and Senate Bill 441 (2010), effective January 1,
2011, a new state-wide prepaid wireless 911 surcharge of $0.50 will be imposed on the retail sale
of prepaid wireless 911 services.

To quote the newly codified statute that establishes the fee:

"The prepaid wireless E-911 charge shall be $ 0.50 per retail transaction".10

The term "retail transaction" is correspondingly defined as "the purchase of prepaid CMRS
from a dealer for any purpose other than resale. If more than one item or article of prepaid
CMRS is purchased by an end user, then each item or article purchased shall be deemed to be
a separate retail transaction."11

In turn, the term "prepaid CMRS" is defined as "CMRS that allows a caller to dial 911 to access
the 911 system, which CMRS service is required to be paid for in advance and is sold in
predetermined units or dollars of which the number declines with use in a known amount".12

Accordingly, effective with the January 2011 release of our database, we shall now capture this
state-level prepaid 911 surcharge in Virginia via Taxtype,Taxcat 06,75 and apply this new Tax
Type, Tax Cat combination to the point-of-sale Items contained within Group 5018 (Cellular
Prepaid Service), i.e., Items 001-003 & 008-010 given that this surcharge applies to the sale of
prepaid wireless phone service on a retail level rather than on a “usage-basis”. In addition,
taxability shall also apply to Group 5036 (Cellular Prepaid – Retail) on a Group level with
the exception of Item 004 (Unit Based Monthly Access Charges).

Please also note that the database captures the standard Virginia state wireless 911 fee via
Taxtype,Taxcat 06,06. The new legislation now exempts prepaid wireless telecommunications
services from the standard Virginia state wireless 911 fee.13

 10
      Virginia Code §56-484.17:1(B).
 11
      Virginia Code §56-484.17:1(A).
 12
      Virginia Code §56-484.17:1(A).
 13
      See Virginia Code §56.484.17(B).



                                                 6
Accordingly, we are now removing the existing YES –Taxable decisions associated with
the applicable wireless prepaid Items in the database (namely Items 5018/006, 5018/007,
5035/004, and 5036/004) for purpose of Taxtype,Taxcat 06,06 in the state of Virginia given that
(A) this Taxtype,Taxcat combination represents the standard Virginia state wireless 911 fee and
(B) such prepaid wireless charges have now been legislatively declared to be exempt from this
surcharge.

   Provisions of the Virginia Prepaid Wireless 911 Surcharge

      SHOWN ON CUSTOMER’S BILL AS: “VA PREPAID WIRELESS 911
       CHARGE”

       1. Rate – $0.50 (Per Retail Transaction)

       2. Pass-through of the Fee to Customers – PASSFLAG = 1 (Required)

       3. Level of Taxation -

        Tax is on the State level

       4. Tax-type –

        06 = State 911 Surcharge

       5. Tax-cat –

        75 = Prepaid

       6. Base-type –

        17 = Consumer - Transaction

       7. Effective date = January 1, 2011

II. Update to Taxes Covered – Taxability Changes – January 2011

          Changes to the Imposition of the State and Local 911 Fees on VOIP
           in Washington

            Explanation

Pursuant to enacted Senate Bill 6846, effective January 1, 2011, the Washington state 911 fee
will increase from $0.20 to $0.25, and will now be explicitly imposed on VOIP services.
Furthermore, the surcharge rate for the local 911 fees will increase from $0.50 to $0.70, and will
also now be explicitly imposed on VOIP services.




                                                7
However, please note that vis-à-vis the local 911 fees, there are a couple of exceptions to the
general rule, namely:

      (1) Clark and Yakima counties will continue imposing their local 911 fees at the current
          $0.50 rate.
      (2) Yakima County will not be imposing their local 911 surcharge on VOIP services.

          Changes to the Taxability of Private Lines in Nebraska

               Explanation

Pursuant to amended Nebraska sales tax regulation §1-065, effective November 6, 2010, the
clause that was interpreted to exempt most private lines from the sales tax has now been deleted.
Accordingly, it is now evident that intrastate private lines are subject to the sales tax.

The regulation in question previously contained the following provision:

"There is no tax on private lines maintained by one or more persons if there is no sale of
telephone or telegraph service to the public. A private line does not include a line provided
by a telephone company that is routed through a switching facility".14

According to our understanding, the Nebraska DOR interpreted this clause to mean that any
private line that was not routed through a "switching facility" was not subject to the sales tax.
Since, by definition, most private lines are not routed through a "switching facility", private lines
would generally exempt from sales tax liability. Therefore, the database did not record any YES
taxable decisions for either Group 5023 (Voice Private Lines) or Group 5024 (Data Private
Lines) – i.e., both Groups were treated as being exempt from NE Sales Tax on the Group level.
However, in light of the recent removal of this exemption clause, (as well as a result of Nebraska
becoming a member state of the SSTP which agreement explicitly includes "private
communications services" - i.e., private lines - as a type of telecommunications service),
it is apparent that the state of Nebraska now imposes their sales tax on private lines.

As a result of the above referenced change to the Nebraska sales tax law, the database is being
updated for this month’s release to reflect that private lines (as covered by Groups 5023 & 5024)
will now be subject to NE sales tax on an intrastate level.

III. Update to Taxes Covered – System Changes – January 2011

          Texas Local Sales Tax: Several Additonal Local Jurisdictions Now Tax
           Telecommunications Service

               Explanation

Effective January 1, 2011, the following additional local jurisdictions in Texas will impose their
local option sales tax on telecommunication services:15

 14
      Nebraska Regulation §1-065.05

                                                  8
          City of Hico (in Hamilton County) - reflected on ZIPcomm by Taxtype,Taxcat 04,02
          City of Liberty Hill (in Williamson County) - reflected on ZIPcomm by Taxtype,Taxcat
           04,02
          City of Salado (in Bell County) - reflected on ZIPcomm by Taxtype,Taxcat 04,02
          City of Timpson (in Shelby County) - reflected on ZIPcomm by Taxtype,Taxcat 04,02
          County of Houston - reflected on ZIPcomm by Taxtype,Taxcat 02,02
          Corpus Christie Crime Control District - reflected on ZIPcomm by Taxtype,Taxcat 05,02

Additionally, effective January 1, 2011, the following local jurisdiction will no longer impose
their local option sales tax on telecommunications:

          City of Bulverde (in Comal County) - reflected on ZIPcomm by Taxtype,Taxcat 04,01

              Removal of Taxable Decisions for Cable Television & Satellite
               Television “Pay-Per-View” Charges for Purposes of LA Sales Tax

                Explanation

Earlier this year, the Louisiana Department of Revenue issued an official bulletin designed to
instruct taxpayers regarding the taxability status of charges for “Pay-per-view” and “On-demand
Movies” billed by cable TV and satellite TV providers to their subscribers.

For purposes of completeness, the full text of that bulletin stated as follows:

“The purpose of this Revenue Information Bulletin is to provide guidance concerning the sales
tax treatment of transactions involving pay-per-view movies and programs and on-demand
television purchased for viewing by customers of cable television and satellite television
providers.

Pay-per-view movies and programs are provided for viewing to customers who pay to have the
broadcast decrypted for viewing. The payment is usually only a one-time payment for a single or
time-limited viewing. On-demand television service gives the customer access to thousands of
television shows and movies. The on-demand program selected is downloaded to a digital video
recorder and is available to watch whenever the customer desires. The customer may or may not
pay a fee to have access to the on-demand movie or television program. The pay-per-view
service and on-demand television can only be accessed, if the viewer has a regular subscription
for service with a cable television or satellite television provider. There is usually an extra fee for
pay-per-view and on-demand television movies and programs over and above the regular
subscription service fee charged to each customer.”16


 15
      See http://www.cpa.state.tx.us/taxinfo/taxpubs/tx96_339.html for further reference.
 16
   Revenue Information Bulletin No. 10-015: “Sales Tax Treatment of Transactions Involving Pay-per-view and
 On-demand Movies Leased by Viewers from Cable Television and Satellite Television Providers” [published by
 the Louisiana Dept. of Revenue June 25, 2010].



                                                           9
Having presented the typical “business model” fact pattern associated with the sale of pay-per-
view and on-demand programming, the LA DOR proceeded to analyze relevant sources of law:

“Tangible personal property as defined in La. R.S. 47:301(16)(a) means and includes personal
property which may be seen, weighed, measured, felt or touched or is in any other manner
perceptible to the senses. The movie or program selected from pay-per-view or on-demand and
viewed on the television set is perceptible to the senses. Downloaded media is considered to be
an item of tangible personal property. “On-demand” audio and video downloads generally are
considered to be items of tangible personal property that are subject to Louisiana sales and use
tax. LAC 61:I.4301(C).

With respect to pay-per-view or on-demand movies and/or programs for which a fee is
charged to view, the customer is typically not allowed to show the movie for commercial
purposes and copies of the movie may not be recorded and retained upon the customer’s digital
video recorder (DVR) beyond the time period allowed by the service provider. The customer
does not take title to the pay-per-view or on-demand movie or program but has control over
the choice of paying a fee for the privilege of viewing either a pay-per-view or on-demand
movie or program.

Lease or rental is defined in La. R.S. 47:301(7)(a) as the leasing or rental of tangible personal
property and the possession thereof by the lessee or renter, for a consideration without transfer of
the title of such property. In a lease, a lessee takes possession but not title to the item of tangible
personal property. However, the lessee’s possession may subject to the conditions set forth by
the lessor. Typically a lessee is charged with the duty of returning the item back to the lessor in
the same condition minus normal wear and tear, if this is applicable.

Louisiana Revised Statute 47:305.16 provides a sales and use tax exemption for necessary fees
incurred in connection with the installation and service of cable television. This exemption
applies only to funds collected from the subscriber for regular service, installation and repairs.
Rentals of pay-per-view and on-demand movies and programs are not considered part of a
regular subscription purchase by a cable or satellite customer. There is an extra fee for pay-per-
view movies and for some on-demand movies over and above the regular subscription service
fee charged to each customer.”17

Based upon this directive, we updated our database this past August to reflect the fact that Items
5031/003 (Cable TV Pay-Per-View Programming) & 5042/003 (Satellite TV Pay-Per-View
Programming) were both subject to Louisiana Sales Tax. However, in the case of Item 5042/003
we limited the scope of taxability solely to Louisiana Sales Tax on the state level given the
existence of a federal statute which prohibits local jurisdictions from taxing direct-to-home
satellite TV programming in any way, shape or form.

Nevertheless, the LA DOR has recently issued a second Information Bulletin which appears (at
least on a purely day-to-day, practical level) to rescind this earlier ruling.

To quote the ruling:



 17
      Revenue Information Bulletin No. 10-015.

                                                  10
“The Department is temporarily suspending the implementation of two Policy Statements
pertaining to digital products effective November 15, 2010. Revenue Ruling No. 10-001 and
Revenue Information Bulletin No. 10-015 are the two Policy Statements which are temporarily
suspended. Revenue Ruling No. 10-001 addresses the issue of whether sales, use and/or lease tax
is due upon the purchase or use of products, computer software and applications, or stored media
and/or other materials electronically delivered into Louisiana, which are accessed from instate or
out-of-state providers or vendors. Revenue Information Bulletin No. 10-015 addresses the sales
tax treatment of transactions involving Pay Per View movies and Video on Demand movies
purchased for viewing by customers of cable television and satellite television providers.”18

Based upon this most recent release of information, we are now deleting the existing taxable
decisions regarding Items 5031/003 & 5042/003 for purposes of LA Sales Tax in the database,
pending any future reinstatement of such taxability by the Louisiana DOR.

              Changes to the Taxability of Various Telecommunications-Related
               Transactions for Purposes of GA Sales Tax in Conformity With the
               State’s Status as a New Member of Streamlined Sales Tax

                Explanation

On November 1, 2010 the Streamlined Sales Tax Governing Board approved Georgia’s petition
for membership. Georgia is set to become an associate member on January 1, 2011. In advance
of this granting of membership, the Georgia Legislature enacted certain changes in the state’s
sales tax law in order to achieve compliance with the key provisions of the Streamlined Sales &
Use Tax Agreement (SSUTA). Among the changes enacted was the adoption of the various
standardized definitions associated with the taxation of telecommunications service. In addition,
the Georgia Department of Revenue has also compiled an official SSTP taxability matrix, which
is one of the requirements of becoming streamlined. The enactment of these legislative changes
and the publishing of the taxability matrix have presented us with a fresh opportunity to review
and revise our set of taxability decisions regarding Georgia Sales Tax, as such tax is applied to
the various Groups & Items in our database. The changes which we are making to that tax
decision matrix effective January, shall now be presented, on a transaction-by-transaction basis.

A. Local Usage-Based Service (Group 5001)

As per the state sales tax imposition statute:

“There is levied and imposed a tax on the retail purchase, retail sale, rental, storage, use, or
consumption of tangible personal property and on the services described in this article.”19

The same statute adds:

 18
   Revenue Information Bulletin No. 10-028: “Temporary Suspension of Policy Statements Pertaining to Digital
 Transactions” [published by the Louisiana Dept. of Revenue November 15, 2010].

 19
      Georgia Code § 48-8-30(a).

                                                     11
“Every person purchasing or receiving any service within this state, the purchase of which is a
retail sale, shall be liable for tax on the purchase at the rate of 4 percent of the sales price made
for the purchase. Every person furnishing a service, the purchase of which is a retail sale, shall
be a dealer and shall be liable for a tax on the sale at the rate of 4 percent of the sales price made
for furnishing the service, etc.”20

In turn, the term “retail sale” is correspondingly defined to include “charges, which applied to
sales of telephone service, made for local exchange telephone service, except coin operated
telephone service, etc.”21

The term “local exchange telephone service” is not further defined. Nor is it known from this
statute whether such term only refers to the basic monthly recurring charge for local exchange
service or whether charges for local toll (i.e., usage-based service) are taxable as well. It has been
our established policy that to treat “collect and remit” taxes such as the GA Sales Tax strictly by
erring on the side of caution. Accordingly, up until now we have been treating Group 5001
(Local Usage-Based Service) as subject to GA Sales Tax on the Group level. Nevertheless, as
per the GA DOR SSTP taxability matrix, charges for “Interstate residential telecommunications
service” are exempt from GA Sales Tax.

Accordingly, we are now removing our Group-level YES decision for Group 5001 and instead
replacing that record with Item-level YES decisions solely for the Intrastate Items contained
within Group 5001, i.e., Items 001, 004 & 008.

B. Telecommunication Nonrecurring Charges

As noted above, the sales tax statute in Georgia specifies that “every person furnishing a service,
the purchase of which is a retail sale, shall be a dealer and shall be liable for a tax on the sale at
the rate of 4 percent of the sales price made for furnishing the service, etc.”22

In turn, the term “sales price” is defined as “the total amount of consideration, including cash,
credit, property, and services, for which personal property or services are sold, leased, or rented,
valued in money, etc.”23 The same statute adds that:

“"Sales price" shall not include: “Telecommunications nonrecurring charges if they are
separately stated on the invoice, billing, or similar document.”24



 20
      Georgia Code § 48-8-30(f)(1).

 21
      Georgia Code § 48-8-2(31)(F).

 22
      Georgia Code § 48-8-30(f)(1).
 23
      Georgia Code § 48-8-2(34)(A).
 24
      Georgia Code § 48-8-2(34)(B)(vi).

                                                  12
Based upon this exclusion, we are now changing the taxability status for the following Items in
the database from Taxable to Non-Taxable:

                Group 5006 (Cellular Service) / Items 007 & 010
                Group 5018 (Cellular Prepaid Service) / Item 007
                Group 5025 (Cellular Monthly Service) / Items 003, 004 & 007

C. Cellular Service

Based upon a fresh re-evaluation of governing legal sources, we are now completely overhauling
our tax decision matrix regarding the taxability of cellular phone service for purposes of GA
Sales Tax. Although outdated and not synchronized with the impact of the SSTP upon Georgia
Sales Tax, the governing sales tax regulation has yet to be repealed. The regulation states:

“Communication Services. [Georgia Sales] tax applies to charges made for local exchange
telephone services, for cellular telephone services, and for the amount of the guaranteed
charges for semi-public coin-box telephone services. The tax does not apply to other
communication services.”25

Regarding “cellular telephone service”, the regulation lists the following categories as being
among the “taxable charges” for cellular service:

1 - The monthly access charge (charge for the right to access the cellular system) in the amount
as set forth on each cellular telephone provider's statement or bill to its customer or subscriber.
However, should the monthly charge include both access and a stated allowed airtime usage in a
combined or bundled amount, tax will be due on the entire combined or bundled amount, unless,
on the bill or statement, the amount is broken out as between the various charges.

2 - All vertical services for special features, including, but not limited to, call waiting, call
forwarding, speed calling, three-way calling.26

The same regulation adds that regarding cellular service, “Non-Taxable Charges” include:
“Airtime usage, if listed separately on the customer's bill or statement.”27

In addition, in its taxability matrix, the Georgia DOR places “Intrastate mobile wireless service”
under the Exempt column, citing the codified regulation quoted above. However, the agency also
adds the following parenthetical note:


 25
      Georgia Rules & Regulations; Rule 560-12-2-.24(1).
 26
      Georgia Rules & Regulations; Rule 560-12-2-.24(2)(a).

 27
      Georgia Rules & Regulations; Rule 560-12-2-.24(2)(b)1.



                                                           13
“The regulation mentions the term ‘cellular telephone service’. The Georgia Department of
Revenue uses this term synonymously with the term ‘mobile wireless service.’ Taxable only to
the extent it is treated as a local telecommunication service.”28

Based upon this combination of sources, it is now our revised understanding that to the extent
the above-quoted regulation continues to remain in effect, the Georgia DOR draws a distinction
between the taxable status of the monthly recurring charge for cellular service representing pure
access and the non-taxable status of charges for airtime usage. Moreover, regarding the monthly
recurring charge for “access-only”, such charges are only taxable to the extent they represent
charges for local service only. Meanwhile, the above regulation makes clear that the non-taxable
status of charges for airtime cellular usage is conditioned upon such charges being separately
stated on the monthly bill or invoice issued to a subscriber. The Georgia sales tax regulation
quoted above was last reissued in 1994 – several years before the historic federal legislation
known as the Mobile Telecommunications Sourcing Act (MTSA) was enacted by Congress.
A key provision of that legislation declares as follows:

“Additional taxable charges. If a taxing jurisdiction does not otherwise subject charges for
mobile telecommunications services to taxation and if these charges are aggregated with and
not separately stated from charges that are subject to taxation, then the charges for nontaxable
mobile telecommunications services may be subject to taxation unless the home service
provider can reasonably identify charges not subject to such tax, charge, or fee from its books
and records that are kept in the regular course of business.”29

Thus, unlike other kinds of charges for telecommunications service which may or may not be
subject to permissive unbundling rules by a state for purposes of the state’s sales tax law,
providers of cellular or mobile telecommunications service enjoy an automatic right to unbundle
their charges in their administrative back-office by virtue of this pre-emptive federal statutory
provision. Therefore, it is our seasoned understanding that the requirement established by the
Georgia DOR pursuant to Regulation 560-12-2-.24 that a cell phone provider must separately
itemize its charges for airtime usage in order to qualify for the exemption afforded such charges
is, in fact, unenforceable. Accordingly, we have now overhauled our taxability matrix regarding
Georgia Sales Tax, as such tax applies to cell phone service, to reflect the non-taxable status of
charges for airtime usage regardless of whether such charges are separately itemized on
a customer’s monthly statement or merely unbundled from the monthly charge for service
in the provider’s administrative back-office.

The following Groups & Items represent the taxability status of the various Wireless Groups in
our database on a going-forward basis (synthesizing the GA DOR regulation quoted above, the
MTSA unbundling provision & any changes brought about by SSTP compliance legislation).

Group 5006 (Cellular Service): TAXABLE Items = 001-003, 008, 009 & 011
Group 5018 (Cellular Prepaid Service): EXEMPT on the Group level
Group 5025 (Cellular Monthly Service): TAXABLE Items = 001, 005, 006 & 017.

 28
      Georgia Streamlined Sales Tax Taxability Matrix, p. 13.
 29
      4 United States Code § 123(b).

                                                          14
Group 5026 (Cellular Toll Service): EXEMPT on the Group level
Group 5035 (Cellular Prepaid - Wholesale): EXEMPT on the Group level
Group 5036 (Cellular Prepaid - Retail): EXEMPT on the Group level
Group 5037 (Wireless Enhanced Services): EXEMPT on the Group level

NOTE: The reason we are now treating Cellular Prepaid Service, as captured by Groups 5018
& 5036 in our database as exempt from Georgia Sales Tax on a Group level is because it is our
understanding that cellular prepaid service amounts to a form of pure “airtime usage” (i.e., toll-
based or “metered” service) which is exempt from sales tax liability in Georgia by virtue of
Regulation 560-12-2-.24. The same theory applies to Group 5026 (Cellular Toll Service).
Similarly, Group 5035 is coded as non-taxable because this Group represents charges for cellular
prepaid phone service sold on a wholesale level. Georgia Sales Tax, by definition, only applies to
sales made on a retail level. Finally, Group 5037 is being treated as exempt from taxability on a
Group level because as per Regulation 560-12-2-.24, only cellular monthly “access charges” are
subject to tax. Cell phone enhanced features such as “ring tones” would not meet this definition.

D. Payphone Service

Among the transactions covered in our database is Payphone Service as captured by Group 5038.
This Group contains a single Item, i.e., Item 001, whose description is “Payphone Access Line”.
As contained in our database Mapping Guide, we define this Item in the following way:

“A flat monthly recurring charge billed by a local exchange carrier (an ILEC or a CLEC) to an
independent provider of pay telephone service to connect payphone stations to the carrier’s local
exchange telephone network. The leasing of such local exchange phone lines represents the
wholesale side of pay telephone service.”

Hence, it is our understanding that there are two halves of pay telephone service, i.e., (1) the
wholesale side of the transaction as represented by the charge from the LEC to the payphone
provider for the payphone line itself and (2) the retail side of the transaction as represented by
charges deposited by users into the payphone. It is our further understanding, based upon our
extensive research into the taxability of payphone service, that both sides of the equation are
almost never taxable, i.e., the taxability of one side of the equation negates the other. In addition,
we have also established the fairly reliable default taxability rule that charges for the payphone
line itself are often exempt from taxability as a “sale for resale”. Nevertheless, to the extent that
a statutory exemption from sales tax exists regarding the charges for payphone service collected
on a retail level, such exemption would tend to “cancel out” the typical default exemption for
payphone service sold on a wholesale level. In Georgia, such a statutory exemption exists.
To re-quote the governing definition cited above:

The term “retail sale” includes “charges, which applied to sales of telephone service, made for
local exchange telephone service, except coin operated telephone service, etc.”30


 30
      Georgia Code § 48-8-2(31)(F).



                                                  15
Therefore, to the extent that revenue derived from “coin operated telephone service” which
represents the retail side of pay telephone service, is statutorily exempt from tax liability,
revenue derived from the lease of the pay telephone access line (i.e., the wholesale side of pay
telephone service) would conversely be subject to Georgia sales tax liability as a form of “local
exchange telephone service.” Accordingly, effective with the January release, we are now
entering a Group-level YES taxability decision for Group 5038 (Payphone Service) for purposes
of Georgia Sales Tax. NOTE: Although we characterize the sale of the payphone access line as
a wholesale transaction, states that apply their sales tax to such transactions would instead label
the payphone provider as the “end-user” thereby justifying the retail taxation of these charges.

E. Wireline Prepaid Service

Effective with this month’s release, we are deleting the previously recorded Item-level YES
taxability decisions for Items 001 & 002 in Group 5039 (Wireline Prepaid Service – Wholesale)
given that Georgia sales tax only applies on the retail level.

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