DALLAS, Nov. 10, 2016 /PRNewswire/ -- The Supreme Judicial Court of Maine recently ruled that certain telecommunications fees passed through to customers were subject to the Service Provider Tax and did not qualify for an exemption (BCN Telecom, Inc. v. State Tax Assessor, Maine Supreme Judicial Court, No. Ken-15-541, November 8, 2016). A telecommunications carrier operated in Maine providing both local telephone service as a competitive local exchange carrier (CLEC) and long-distance service as an interexchange carrier (IXC).
The carrier paid certain charges known as PICCs, which are fees that allow a local exchange carrier to recover a portion of the interstate local loop cost from an IXC. The carrier also passed these charges through to its customers; however, the charges listed on its customers' bills were significantly higher than the costs it incurred. PICC charges were imposed on business customers with multiple long-distance lines that did not negotiate with BCN to avoid paying the charges to recover its cost and to realize a profit.
Maine imposes a 5% tax on the value of telecommunications services sold in Maine, which is measured by the sale price [36 M.R.S. § 2552(1)(E), (36 M.R.S. §2552(2)]. "The sale price means the total amount of consideration, including cash, credit, property, and services, for which…services are sold…without any deduction for the cost of materials used, labor or service cost, interest, losses and any other expense of the seller" [36 M.R.S. §2552(15)]. The court ruled that the PICC charges collected by the carrier were included in the "total amount of consideration" and were therefore subject to the service provider tax. Despite the carrier's argument that PICC fees were not consideration for actual telecommunications charges, the court ruled that there was no evidence that distinguished it from a charge for telecommunications services.
The court also addressed the exemption for sales of interstate telecommunications service pursuant to 36 M.R.S. § 2557(34). The court ruled that the PICC fees did not qualify for this exemption because the carrier did not meet its burden of proof by providing evidence that the fees were only related to interstate telecommunications services.
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.
Logo - http://photos.prnewswire.com/prnh/20160125/325377LOGO
TECHNICAL INFORMATION CONTACTS:
Available Topic Expert(s): For information on the listed expert(s), click appropriate link.
ProfNet - https://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=112141
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/passed-through-telecommunications-fees-were-subject-to-service-provider-tax-300360824.html