Illinois Administrative Code › Title 86 - REVENUE › Part 495 - TELECOMMUNICATIONS EXCISE TAX › Section 495.100 - Meaning of "Gross Charges"

Current through Register Vol. 48, No. 28, July 12, 2024
a)
"Gross charge" means the amount paid for the act or privilege of
			 originating or receiving telecommunications in this State and for all services
			 and equipment provided in connection therewith by a retailer, valued in money,
			 whether paid in money or otherwise, including cash, credits, services and
			 property of every kind or nature, and shall be determined without any deduction
			 on account of the cost of those telecommunications, the cost of materials used,
			 labor or service cost or any other expense whatsoever
. (Section 2(a)
			 of the Telecommunications Excise Tax Act (the Act) [
			 35 ILCS
			 630/2(a) ] A retailer may provide
			 services to customers that are not provided in connection with originating or
			 receiving telecommunications. If those services are not necessary for or
			 directly related to the retailer's provision of telecommunications to customers
			 and the charges for the services are disaggregated and separately identified
			 from other charges, the charges need not be included in "Gross charges".
			 Without limitation, examples of services not included in "Gross charges" are
			 directory advertising; specialized designing and/or engineering services;
			 specialized security measures; and consulting services.
b) "
Gross charges" shall not include
			 charges for customer equipment, including equipment that is leased or rented by
			 the customer from any source, wherein those charges are disaggregated and
			 separately identified from other charges
(Section 2(a)(4) of the Act).
			 Customer equipment includes, but is not limited to, all items generally
			 classified as customer equipment or terminal equipment, such as telephone
			 instruments and station sets, dialers, modems, private branch exchanges (PBXs),
			 inside wiring, facsimile machines, pagers and non-electronic associated items
			 such as documentation, manuals and furniture. Items of customer equipment,
			 including maintenance and miscellaneous services, may be leased, rented or sold
			 to one customer or a group of customers without being included in the gross
			 charges, but will be subject to retailer's occupation or use taxes. To be
			 exempt, the charges for customer equipment must be disaggregated and separately
			 identified from other charges in the books and records of the
			 retailer.
c) "
Gross
			 charges" does not include charges for the storage of data or information for
			 subsequent retrieval or charges for the processing of data or information
			 intended to change its form or content
(Section 2(a)(3) of the Act).
			 Charges for answering services, for example, whether provided electronically or
			 by live operators, represent charges for the storage of information or data for
			 subsequent retrieval, and are not subject to tax, provided that these charges,
			 if provided in connection with taxable telecommunications, are disaggregated
			 and separately identified in the books and records of the retailer. Charges for
			 automated data storage, retrieval and processing services or for the use of
			 computer time or other equipment are not included in gross charges. Automated
			 information retrieval or data processing charges are not included in gross
			 charges. For example, a customer who accesses an on-line computer data base
			 would not be subject to tax on the charge for the data processing or inquiry,
			 but would be subject to tax on the charge for the transmission of the data. If
			 a telecommunications retailer provides both transmission and data processing
			 services, the charges for each must be disaggregated and separately identified
			 in the books and records of the retailer.
d)
Value added services in which
			 computer processing applications are used to act on the form, content, code and
			 protocol of the information for purposes other than transmission
are
			 exempt (Section 2(c) of the Act). For example, the charges for computer data,
			 protocol conversions that permit computers to exchange data, no matter which
			 languages or protocols a computer's out-put may be in, and packet-switching,
			 which groups data into packets for efficiency of transmission, would be
			 exempt.
e) Advertising revenue
			 either from online directory sales (e.g., yellow pages) or from message
			 additions to telecommunications service are not included in gross charges. For
			 example, revenues from an advertising message preceding a time/weather call are
			 not included in gross charges.
f)
			 Contributions to a telethon fund-raising campaign are not included in gross
			 charges.
g) Gross charges shall
			 include, but are not limited to, charges for unlisted or unpublished numbers,
			 operator assistance, directory information, call-waiting, call-forwarding, and
			 burglar alarm services provided by telecommunications retailers.
h) A caller located in Illinois who calls a
			 900 number and receives a billing for that call at his or her service address
			 will have made a call subject to Telecommunications Excise Tax. The invoice to
			 the caller for a 900 number call need not separately state the line charge and
			 tax specifically. However, the telecommunications retailer is responsible for
			 remitting the tax due on the line charge.
i) Gross charges shall include the
			 transmission charges for premium services. Time/weather, gab line/party line
			 and other public announcement services of information and entertainment, and
			 charges for the message content or information of those services, are not
			 included in gross charges.
EXAMPLE: A call to a 900 code number is made to register an
				opinion in a poll. The caller is billed $1.00. $.80 is the transmission charge.
				$.80 is included in gross charges.
j) Charges for billing and collection
			 received by telecommunications retailers from persons selling services or
			 products to the telecommunications retailer's customers, which are billed and
			 collected by the telecommunications retailer, are not included in gross
			 charges.
EXAMPLE: A call to a 900 code number to sell a product is
				billed by the telecommunications retailer as follows:
$25.00
service charge to caller for product or service
$ .30
call charge (15¢ call, 15¢ billing and
						  collection)
$ .15
billing and collection charge is not included in gross
						  charges
$25.00
is not included in gross charges
$ .15
is included in gross charge
k)
			 Billing and collections charges paid by persons selling services or products to
			 telecommunications retailer's customers or billing and collections charges paid
			 by telecommunications retailers to credit card companies whose holders have
			 charged calls are not includable in gross charges.
l) Taxes imposed on consumers for community
			 911 service, lifeline service or other services required by regulatory
			 authorities or government are not includable in gross charges.
m) Generally, persons that provide customers
			 access to the Internet (Internet Service Providers or ISPs) and who do not, as
			 part of that service, charge customers for the line or other transmission
			 charges that are used to obtain access to the ISP's server or other point of
			 access, are not considered to be telecommunications retailers from these
			 activities. This is the case so long as such ISPs do not, as part of their
			 billing, charge customers for those line charges and instead pay their
			 telecommunications suppliers all transmission costs that they incur in
			 providing the Internet service. In this situation, an ISP's customer pays his
			 or her telecommunications supplier for all transmission costs incurred while
			 using the service. The single monthly fee charged by the ISP, which often
			 represents a flat charge for a package of items including Internet access,
			 e-mail, and electronic newsletters, would generally not be subject to tax. If,
			 however, the ISP charges customers for line or other transmission charges, it
			 should provide its telecommunications suppliers with Certificates of Resale and
			 should collect and remit the tax. For example, if an ISP provides customers
			 with Internet access, as described in this subsection, but also provides
			 customers the use of a 1-800 service to access the ISP, and separately assesses
			 customers per minute charges for the use of the 1-800 service, the ISP is
			 considered a telecommunications retailer and incurs Telecommunications Excise
			 Tax on the charges made for the 1-800 service. If the charges are not
			 disaggregated as provided in subsection (c), all charges are subject to the
			 Telecommunications Excise Tax.
n)
"Gross charges" for private line service shall include:
1)
charges imposed at each channel
			 point within this State;
2)
charges for the channel mileage
			 between each channel point within this State; and
3)
charges for that portion of the
			 interstate inter-office channel provided within Illinois.
Charges for that portion of the interstate inter-office channel
			 provided in Illinois shall be determined by the retailer as follows:
A)
For interstate inter-office
			 channels having 2 channel termination points, only one of which is in Illinois,
			 tax may be imposed on 50% of the total charge imposed.
For example,
			 tax would be imposed on 50% of the total charge for a private line with one
			 termination point in Chicago and one termination point in San
			 Francisco.
B)
For
			 interstate inter-office channels having more than 2 channel termination points,
			 one or more of which are in Illinois, tax may be imposed on an amount equal to
			 the total charge multiplied by a fraction, the numerator of which is the number
			 of channel termination points within Illinois and the denominator of which is
			 the total number of channel termination points.
For example, Illinois
			 would receive tax on 60% of the total charge for a private line that had 3
			 termination points in Illinois, 1 termination point in New York and 1
			 termination point in Los Angeles. Using the same apportionment rule, New York
			 and Los Angeles would each receive tax on 20% of the total charge.
C) Tax may be imposed using any
other
			 method that reasonably apportions the total charges for interstate inter-office
			 channels among the states in which channel termination points are
			 located.
(Section 2(a) of the Act) For instance, the Illinois mileage
			 of the channel could be calculated by determining a fraction, the numerator of
			 which is the actual measured Illinois miles of that channel and the denominator
			 of which is the actual measured route miles of the entire channel. If it is
			 impossible for a retailer to measure actual route miles, a method that
			 accurately approximates the Illinois route miles of an interstate inter-office
			 channel and accurately approximates the route miles of the entire channel can
			 be used (e.g., the use of straight-line air miles). Any method of approximation
			 used by a telecommunications provider shall be subject to verification by the
			 Department.