Is a teleconferencing service provided by a company that isn't a telephone carrier a taxable telecommunications service in Connecticut?

Note: DRS marks this Ruling as not current ("provided for reference purposes only") and cautions that it should not be relied upon to the extent it conflicts with the federal Telecommunications Act of 1996. Treat it as historical guidance on how DRS distinguished a telecommunications carrier from a mere user of telecom, and confirm current rules for modern conferencing/VoIP services.

Plain-English summary

An out-of-state company with a Connecticut conferencing office ran teleconferences. It joined multiple phone calls at one point using a computerized "audio bridge," and its own coordinators introduced the participants, monitored audio quality, ran roll calls and polls, and recorded meetings. Critically, the actual phone connections were carried by the participants' and the Company's own telephone carriers — the Company just bridged and managed them, billing a flat per-minute rate. DRS was asked whether that was a taxable telecommunications service.

No. Connecticut taxes "the rendering of telecommunications service" (§ 12-407(2)(k)), defined as the "transmission of any interactive electromagnetic communications" by wire, cable, microwave, radio wave, etc. (§ 12-407(26)(a)). Reading "transmission" in its ordinary sense (§ 1-1(a)), DRS found the Company isn't transmitting anything — the carriers transmit the communications. The Company uses the carriers' telecommunications service to provide conferencing; it isn't providing basic or toll telephone service itself.

DRS reinforced this with legislative history. When 1989 Conn. Pub. Acts 251 first made telecommunications a taxable "sale," it repealed the old gross-earnings tax on regulated telephone companies and the gross-receipts tax on unregulated ones, and imposed the sales tax "in lieu of" those — on the same taxpayers (the bill's proponents said so on the floor). That shows the legislature meant only telecommunications carriers to be treated as sellers of telecommunications service. Since the teleconferencing Company is not a carrier, its charges are not taxable telecom.

This carrier-vs-user distinction was later cited in Ruling 96-1 (satellite "data communications" — likewise not taxable telecom because the provider wasn't a regulated carrier, though taxable there as a computer/data-processing service).

What this means for you

Conferencing, bridging, and similar service providers

If your service rides on top of telephone carriers' networks — you bridge, host, or manage calls but the carriers do the actual transmission — this 1993 ruling treated you as a user of telecom, not a seller of it, so your charges weren't taxable telecommunications service. But the ruling is expressly non-current and yields to the 1996 federal Telecommunications Act, so verify how your modern service is classified today.

The line was "carrier vs. user"

DRS's key move was that only a telecommunications carrier is a seller of taxable telecommunications service; merely using carriers' networks to deliver another service isn't. That reasoning still illuminates how DRS separates telecom from over-the-top services, even as the statutes and federal law have evolved.

Don't assume the same result today

Given the explicit obsolescence flag and the intervening federal law (and later DRS guidance on computer/data-processing and telecom), treat this as historical. Get current advice before concluding a modern conferencing or VoIP offering is outside Connecticut telecom tax.

Common questions

Q: Is teleconferencing a taxable telecommunications service in Connecticut?
A: Under this 1993 ruling, no — because the provider wasn't a telephone carrier and didn't transmit the communications; it used the carriers' networks. Note the ruling is marked not current and defers to the 1996 federal Telecommunications Act.

Q: Why does being a "carrier" matter?
A: DRS read the 1989 law (which replaced the old telephone-company taxes with the sales tax) as intending to tax only telecommunications carriers as sellers of telecommunications service. A company that merely uses carriers' networks isn't such a seller.

Q: Can I rely on this for a modern conferencing or VoIP service?
A: Be careful. DRS flags the ruling as not current and says not to rely on it where it conflicts with the federal Telecommunications Act of 1996. Confirm current treatment before relying on it.

Q: How does this connect to Ruling 96-1?
A: Ruling 96-1 cited 93-25 for the point that a non-carrier isn't providing taxable telecom — though in 96-1 the satellite "data communications" service was still taxable as a computer and data processing service.

Citations and references

Statutes and legislative history:

• Conn. Gen. Stat. § 12-407(2)(k) (tax on rendering telecommunications service); § 12-407(26)(a) (definition)
• Conn. Gen. Stat. § 1-1(a) (commonly approved usage of words)
• 1989 Conn. Pub. Acts 251 (replaced telephone-company gross-earnings/gross-receipts taxes with the sales tax on telecommunications)

Related guidance (described in prose, not linked):

• Ruling No. 96-1 (cites this Ruling; satellite data communications not taxable telecom but taxable as computer/data-processing service)
• Federal Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (this Ruling defers to it)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 93-25

Original ruling text

Ruling 93-25, Sales and Use Taxes / Telecommunications Service / Computer and Data Processing Services

This information is not current and is being provided for reference purposes only

This Ruling is cited in Ruling 96-1

NOTE:  This ruling should not be relied upon to the extent it conflicts with

The Telecommunications Act of 1996, Pub. Law No. 104-104, 110 Stat. 56 (1996)

FACTS:

An out-of-state company (hereinafter referred to as "the Company"), with a conferencing office in Connecticut, provides several types of teleconferencing services by joining multiple telephone calls at a single connection point through the use of a computerized device known as an audio bridge. In each type of service, the Company's conference coordinators personally introduce the participants and close the conference meetings, and monitor and maintain the audio quality of the conference as well as providing other services, such as performing special roll calls, polling the participants, or recording the conference. The Company, and, depending upon the type of service being provided by the Company, each conference participant, is being provided with telecommunications services by, and is using, its own telecommunications carrier and is being charged for these services by its own carrier during the conference call. In each type of service, the Company bills its customers for its teleconferencing services at a standard rate per minute.

ISSUE:

Whether teleconferencing services that are provided other than by a telecommunications carrier are telecommunications services, as defined in Conn. Gen. Stat. § 12-407(26)(a), and therefore taxable under Conn. Gen. Stat. § 12-407(2)(k).

DISCUSSION:

Conn. Gen. Stat. § 12-407(2)(k) includes in the definition of "sale" and "selling" "the rendering of telecommunications service, as defined in [Conn. Gen. Stat. § 12-407(26)], for a consideration..." "Telecommunications service" is defined by Conn. Gen. Stat. § 12-407(26)(a) as:

the transmission of any interactive electromagnetic communications ... by means of but not limited to wire, cable, including fiber optical cable, microwave, radio wave or any combinations of such media, and the leasing of any such service, [and] includes but is not limited to basic telephone service, ... toll telephone service and teletypewriter or computer exchange service ... directory assistance, two-way cable television service, cellular mobile telephone or telecommunication service, specialized mobile radio and pagers and paging service, including any form of mobile two-way communication.

If the word "transmission" is construed according to the commonly approved usage of the language; Conn. Gen. Stat. § 1-1(a); it means "an act, process, or instance of transmitting: as ... the passage of radio waves in the space between transmitting and receiving stations ...." Webster, Third New International Dictionary . Here, the interactive electromagnetic communications are being transmitted by the Company's or its customers' telecommunications carrier. Furthermore, the Company is not providing basic telephone service or toll telephone service, as these terms were formerly defined in now repealed Conn. Gen. Stat. § § 12-255a(b) and (c) and 12-256a(b) and (c) (relating to the Telecommunications Service Company Tax); once again, these services are being provided by the Company's or its customers' telecommunications carrier.

Thus, the Company is not providing a service described in the definition of "telecommunications services" in Conn. Gen. Stat. § 12-407(26)(a). The Company merely uses the telecommunications service that is provided by telecommunications carriers in providing its teleconferencing services. Therefore, the Company is not a telecommunications service provider and its services are not a "sale" or "selling" under Conn. Gen. Stat. § 12-407(2)(k).

The legislative history of 1989 Conn. Pub. Acts 251, which first treated telecommunications services as a "sale" and "selling" for purposes of the Sales and Use Taxes Act, supports this conclusion as well as the broader proposition that no company other than a telecommunications carrier was intended by the General Assembly to be treated as a seller of telecommunciations services. Until the passage of the Public Act, regulated telecommunications service companies were subject to a gross earnings tax under Conn. Gen. Stat. § 12-256 et seq ., and unregulated telecommunications service companies were subject to a gross receipts tax under Conn. Gen. Stat. § 12-255a et seq. These taxes on these companies were repealed by the Public Act. The intent to replace one type of tax with another, and to impose the new tax on the same taxpayers on which the old tax was imposed, was indicated by the chief proponent of Senate Bill No. 1068 (which became 1989 Conn. Pub. Acts 251) in each chamber: "We are eliminating the gross receipts tax of 9% on regulated telephone companies and 6 1/2% on nonregulated telephone companies and imposing a sales tax in lieu of that on the services provided by both regulated and nonregulated companies, at the rate, in the Senate package, of 7 1/2%." 32 H.R. Proc., Pt. 28, 1989 Sess., p. 9816 (remarks of Rep. Cibes, House Co-Chairman, Finance, Revenue and Bonding Committee). See 32 S. Proc., Pt. 7, 1989 Sess., pp. 2457-2458, for similar remarks by Sen. DiBella, Senate Co-Chairman, Finance, Revenue and Bonding Committee.

RULING:

Teleconferencing services rendered by a service provider other than a telecommunications carrier are not a "telecommunications service" as defined in Conn. Gen. Stat. § 12-407(26)(a), and therefore are not taxable under Conn. Gen. Stat. § 12-407(2)(k).

LEGAL DIVISION

December 17, 1993