On August 20, the Pennsylvania Department of Revenue issued Corporation Tax Bulletin 2018-04, which announces the Department’s position regarding the scope of taxable and nontaxable telecommunications receipts for Gross Receipts Tax (“GRT”) purposes based on the Pennsylvania Supreme Court’s decision in Verizon Pennsylvania, Inc. v. Commonwealth, 127 A.3d 745 (Pa. 2015), and Act 52 of 2018, which provides a statutory exclusion for receipts from certain equipment and accessories (“Equipment”). Act 52, which took effect on June 28, 2018, excludes receipts from “the sales of telephones, telephone handsets, modems, tablets and related accessories, including cases, chargers, holsters, clips, hands-free devices, screen protectors and batteries” from the tax base and applies retroactively to gross receipts from transactions occurring on or after January 1, 2004. Act 52 further provides that “no claim for refund or credit for a tax paid prior to [June 28, 2018]” shall be based on the Act, which creates a potential uniformity issue.
The Bulletin provides the following non-comprehensive sample of sales of services and equipment generating taxable receipts:
(1) End user charges, including costs, fees, and surcharges itemized on a customer’s bill (e.g., subscriber line charges and gross receipts tax surcharges).
(2) Directory Assistance.
(3) Late payment fees.
(4) Non-recurring charges, including termination, installation, repairs, moves and changes to service. Non-recurring charges include any charges for wires, switches, connectors, or similar property provided as part of the termination, installation, repairs, moves and changes to service.
(5) Enhanced telecommunications receipts, including voicemail, call forwarding, call waiting and custom ringtones.
(6) Receipts from sales of service using voice over Internet protocol (VOIP).
(7) Receipts from paging services.
(8) Receipts from sales and leasing of private lines and private networks, including dark fiber.
(9) Receipts from sales and leasing of equipment and property, except for excluded Equipment charges (see below).
The following is a comprehensive list of authorized GRT deductions per the Department:
(1) Receipts from sales of internet service to the ultimate consumer and sales of service exempt under the Internet Tax Freedom Act.
(2) Resale receipts from persons subject to GRT on the resale of the telecommunications.
(3) Sales tax collected by the taxpayer.
(4) Distributions to a telecommunications provider from the USF authorized by USAC.
(5) The uniform 911 surcharge.
(6) Bad debt, provided the taxpayer satisfies the conditions established in Corporation Tax Bulletin 2011-02.
(7) Receipts from sales and leasing of telephones, telephone handsets, modems, tablets and related accessories, including cases, chargers, holsters, clips, hands-free devices, screen protectors and batteries.