Were subscriber line charges and primary interexchange carrier charges subject to Illinois Telecommunications Excise Tax?

Plain-English summary

A telecommunications billing-software provider asked about two separately stated phone-bill charges.

IDOR said both generally fell within taxable telecommunications “gross charges”:

• A subscriber line charge (SLC) compensated the local exchange company for part of the network cost of providing telecommunications service to the subscriber. It was taxable.
• A primary interexchange carrier charge (PICC) compensated the local exchange company for providing service to an interexchange carrier. It was taxable unless the carrier supplied an active Illinois resale number for telecommunications bought for resale.

The letter also explained that qualifying charges for storing data for later retrieval or processing data to change its form or content were excluded from gross charges. When a telecommunications retailer provided such services, the charges had to be disaggregated and separately stated in its books and records; otherwise the entire charge was taxable as telecommunications.

Common questions

Was an SLC taxable? Yes.

Was a PICC taxable? Yes, unless supported by the required telecommunications resale number.

Could data-processing charges be excluded? Yes, if they met the exclusion and were separately identified.

Citations and references

• 35 ILCS 630/2 through 4 and 630/8
• 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-12-0047.pdf

Original ruling text

ST 12-0047-GIL 08/20/2012 TELECOMMUNICATIONS EXCISE TAX
The 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.)
August 20, 2012
Dear:
This letter is in response to your letter dated August 2, 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:
Our company, COMPANY, develops billing software for telecommunications carriers.
COMPANY assists its customers in ensuring that their tax databases are up-to-date and
that all taxes are properly applied to subscriber bills.
We are contacting the Illinois Department of Revenue (“Department”) to respectfully
request a General Information Letter (“GIL”). We would like to know if Illinois
telecommunications excise taxes would apply to subscriber line charges (“SLCs”) and
primary interexchange carrier charges (“PICCs) that appear on a subscriber’s phone
bill. Both charges would be separate line items on the subscriber’s bill. I have provided
a description of both charges below:
•

SLCs are usually billed to the subscriber by the local exchange
telecommunications carrier.
This charge serves as additional
compensation to the telecommunications carrier for the costs of using the
local network, specifically that portion of local network costs associated
with interstate service.

•

The PICC fee represents part of the cost local telephone companies
recover from other telecommunications carriers for using the local network
to originate and terminate interstate long distance telephone calls.

Our company requests anonymity should your response be made public. Please do not
hesitate to contact us should you have any questions regarding our inquiry. You may
call us X or via email at XX.

ST 12-0047-GIL
August 20, 2012
Page 2
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
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).
If a person who originates or receives telecommunications in this State claims to be a reseller of such
telecommunications, the person is required to apply to the Department for a resale number. The
applicant must state facts which show the Department why the applicant is not liable for tax on his
purchases. The act or privilege of originating or receiving telecommunications in this State cannot be
made tax free on the ground of being a sale for resale unless the person has an active resale number
from the Department and furnishes that number to the retailer in connection with a sale to such
person. 35 ILCS 630/8.
If a person originating or receiving telecommunications in this State elects not to apply for a resale
number, the act or privilege of originating or receiving telecommunications in this State by such
person cannot be made tax free. If a reseller is purchasing telecommunications services from a
retailer and has not provided the retailer with an active resale number, the retailer is responsible for
collecting the tax from the reseller for calls originating or terminating in this State.

ST 12-0047-GIL
August 20, 2012
Page 3
Newton’s Telecom Dictionary, 23rd Edition, defines the “SLC,” or subscriber line charge, as “[a]
charge on the monthly bill of a phone subscriber in the United States, which produces revenues for
the local exchange company. The money collected from subscriber line charge is used to
compensate the local exchange company for a part of the cost of installation and maintenance of the
telephone wire, poles and other facilities that link your home to the telephone network.” Based on the
description of the SLC contained in your letter and the definition in Newton’s, the SLC is billed to
customers by local exchange companies to recover the local exchange companies’ cost of providing
telecommunications services to customers. This charge is included in “gross charges” and subject to
Telecommunications Excise Tax.
Newton’s defines the “PICC,” or primary interexchange carrier charge, as a “flat-rate charge which
applies to presubscribed IXCs [interexchange carriers] connecting to the end user through LEC [local
exchange company] facilities. …While the LEC bills the end user directly for the SLC, it bills the IXC
for the PICC.” Based on the description of the PICC contained in your letter and the definition in
Newton’s, the PICC is billed to interexchange carriers by the local exchange companies to recover
the local exchange companies’ cost of providing telecommunications services to interexchange
carriers, who are free to recover the cost from their customers. This charge is included in “gross
charges” and subject to Telecommunications Excise Tax, unless an interexchange carrier provides a
resale certificate for the telecommunications services purchased for resale from the local exchange
company.
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