Minnesota Taxes Telephone Services
- Aug 20, 2013 | Gail Cole
As explained in a fact sheet issued by the Minnesota Department of Revenue, it doesn't matter who provides telecommunication and pay television services, and it doesn't matter how they're delivered (cable, direct satellite, donkey). They're subject to sales tax, plain and simple. Ancillary services associated with telecommunication services are also subject to sales tax, as is any equipment used directly in providing such services.
Taxable telecommunications services are what you think they are: "the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points." They include:
- Air-to-ground radiotelephone service;
- Local and long distance telephone service;
- Mobile telecommunication service;
- Prepaid and postpaid calling services;
- Prepaid wireless calling service; and
- Private communications services.
It's worth noting that 911 emergency telephone charges are not taxable. The same is true for charges to the Telephone Assistance Plan (TAP) and the Telecommunications Access Minnesota Fund (TAM).
How to tax a phone on the move
Phones today are often on the move, so it can be hard to determine how to source calls for taxability. Home lines are sourced at the home address, of course. Telecommunication services that are not billed on a call-by-call basis, mobile telecommunication services, and prepaid calling cards, etc, are sourced to the customer's "place of primary use." That's usually the residential street address.
If they're billed on a call-by-call basis, telecommunications services are billed as follows:
- When the call originates and terminates in the same taxing jurisdiction, that jurisdiction's rate of sales tax applies.
- When the call either originates or terminates at the customer's service address, the rate of sales tax at the service address applies.
- When the call is paid for with a credit or debit card or is charged to a telephone number not involved with the call, the tax rate in the call's place of origin applies.
How to tax an additional service
Many extra telecommunication features are also subject to sales tax in Minnesota. These include, but are not limited to:
- Call forwarding and waiting;
- Caller ID and priority calling;
- Connection and disconnection charges;
- Voice mail and messaging.
Internet access is not allowed to be taxed in Minnesota, therefore separately stated internet service charges provided through a telecommunications service are not subject to sales tax. Charges associated with telephone lines devoted solely to Internet access are also not taxable. Tax may apply if a line is used for both phone and Internet.
The department's fact sheet also explains how coin-operated telephones are taxed (they still exist?) and how calls made by guests of lodging establishments are taxed.
Machinery and equipment
Any machinery and equipment associated with telecommunications services and pay television are subject to tax in Minnesota.
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