Were vehicle telematics plans limited to communication with a call center subject to Illinois Telecommunications Excise Tax?

Plain-English summary

A vehicle-telematics provider sold emergency, roadside, navigation, traffic, security, and concierge plans. The vehicle unit connected only to the provider's out-of-state call centers. Customers could not place or receive ordinary public-switched-network calls through the unit, and the call center could not call back through the telematics device.

IDOR treated those plans as information services, not taxable retail telecommunications. The customer-facing telematics charge therefore was not subject to Telecommunications Excise Tax under the facts described.

The tax shifted upstream: the telematics provider was the consumer of the communication lines it bought from carriers and owed Telecommunications Excise Tax on those underlying telecommunications purchases.

The letter also repeated the rule that qualifying value-added or data-processing services had to be disaggregated from taxable telecommunications when a telecommunications retailer supplied both; otherwise the entire charge could be taxable.

Common questions

Were the telematics plans taxed as telecommunications? No, under the call-center-only facts.

Who paid tax on the carrier lines? The telematics provider.

Would ordinary phone-call capability matter? The conclusion expressly depended on the device not connecting customers to the public switched telephone network.

Citations and references

• 35 ILCS 630/2 through 4
• 35 ILCS 636/5-10 and 5-15
• 86 Ill. Adm. Code 495.100(c)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0041.pdf

Original ruling text

ST 12-0041-GIL 07/27/2012 TELECOMMUNICATIONS EXCISE TAX
Telecommunications Excise Tax is imposed upon the act or privilege of originating or
receiving intrastate or interstate telecommunications in Illinois at the rate of 7% of the
gross charges for such telecommunications purchased at retail from retailers. See 35
ILCS 630/1 et seq. (This is a GIL.)
July 27, 2012
Dear:
This letter is in response to your letter dated July 5, 2012, in which you request information. The
Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with a GIL.
In your letter you have stated and made inquiry as follows:
COMPANY1 is a provider of vehicle telematics services in the state of Illinois.
Telematics service is one whereby a person in a vehicle (equipped with a preinstalled
telematics device) can summon help or information as the need arises. In order to
provide this service, we purchase (as the end user or consumer) lines of communication
from COMPANY2 or COMPANY3. These lines are not connected to the public switch
network.
We offer our customers a choice of two service plans. The first pacakage [sic] is the
“basic” package. The second is the “plus” package which includes everything in the
“basic” package plus additional services. The services provided in each package are as
follows:
Basic package:
● Automatic Collision Notification

● Remote Door Lock & Unlock

● Roadside Assistance

● Search & Send Driving Directions

● Safe Ride – call cab service for customers

● Emergency Call Response

● Severe weather & disaster information

● Automatic Alarm Notification

● Stolen Vehicle Location Assistance

ST 12-0041-GIL
July 27, 2012
Page 2

Plus package (Basic plus the following):
● Location-Based Traffic Information
● Route Assistance & Driving Directions

● Location-Based Traffic
Information
● Concierge Services – services
include airline & car rental
reservations, hotel
recommendations, dining
recommendations.

Our Telematics service is considered standard or telematics-only model as our customers are
only able to connect to our call centers, none of which are located in Illinois, from their vehicle
telematics control unit.
There are two events that can cause a connection to occur. The first is through an automatic
alert in the case of a collision or second through the press of the button for non-collision
events. In the case of a collision using automatic alert, the vehicle still initiates communication
with the call center. The call centers do not have the ability to contact the customer through
the vehicle Telematics control unit. If the call center needs to contact the customer they can
only do so by calling the contact number that the customer has provided. In addition, the
customer does not have the ability to make outbound calls or receive inbound calls as the
telematics unit is not connected to the Public Switched Telephone Network.
Currently COMPANY1 is collecting and remitting tax on the Illinois Telecommunications Tax
Return under License X as well as the Illinois Telecommunications Infrastructure Maintenance
Fee under License XX. We do not believe our services constitute telecommunications
services but rather we consume the telecommunications services provided by companies like
COMPANY2 or COMPANY3 (who provide the underlying transmission service) to provide our
services. (See 35 ILCS 630/2c telecommunications shall not include 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). Therefore we believe our
services are not telecomunication [sic] services and we believe we are not liable to collect the
tax or fee.
Please confirm our understanding and let us know if you agree that COMPANY1 should
discontinue the collection of the Illinois Telecommunications Tax and the Illinois
Telecommunications Infrastructure Maintenance Fee.
Thank you for your assistance in the matter.
information, please contact Ms. Z at X.

If you have any questions or need further

DEPARTMENT’S RESPONSE:
The Illinois Telecommunications Excise Tax Act imposes a tax on the act or privilege of originating or
receiving intrastate or interstate telecommunications by persons in Illinois at the rate of 7% of the
gross charges for such telecommunications purchased at retail from retailers by such persons. 35
ILCS 630/3 and 4. The Simplified Municipal Telecommunications Tax Act allows municipalities to

ST 12-0041-GIL
July 27, 2012
Page 3
impose a tax on the act or privilege of originating in such municipality or receiving in such municipality
intrastate or interstate telecommunications by persons in Illinois at a rate not to exceed 6% for
municipalities with a population of less than 500,000, and at a rate not to exceed 7% for municipalities
with a population of 500,000 or more, of the gross charges for such telecommunications purchased at
retail from retailers by such persons. 35 ILCS 636/5-10 and 5-15.
“Telecommunications,” in addition to the meaning ordinarily and popularly ascribed to it, includes,
without limitation, messages or information transmitted through use of local, toll and wide area
telephone service; private line services; channel services; telegraph services; teletypewriter;
computer exchange services; cellular mobile telecommunications service; specialized mobile radio;
stationary two way radio; paging service; or any other form of mobile and portable one-way or twoway communications; or any other transmission of messages or information by electronic or similar
means, between or among points by wire, cable, fiber-optics, laser, microwave, radio, satellite or
similar facilities. “Telecommunications” do not include “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.” See 35 ILCS 630/2(a) and 2(c). If telecommunications retailers
provide these services, the charges for each service must be disaggregated and separately stated
from telecommunications charges in the books and records of the retailers. If these charges are not
thus disaggregated, the entire charge is taxable as a sale of telecommunications.
“Gross charges” 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 such telecommunications, the cost of materials used, labor or service costs or any other
expense whatsoever. “Gross charges” do not include “charges for the storage of data or information
for subsequent retrieval or the processing of data or information intended to change its form or
content.” See 86 Ill. Adm. Code 495.100(c).
Telematic services that allow only voice and data communications between a customer vehicle and a
call center and do not permit the customer to make calls to, or receive calls from, the public switched
telephone network are considered information services and are not subject to Telecommunications
Excise Tax.
In those situations, the telematics service provider would be liable for
Telecommunications Excise Tax on telecommunications services purchased from vendors and used
by it to provide telematic services.
I hope this information is helpful. If you require additional information, please visit our website at
www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Richard S. Wolters
Associate Counsel