Is Illinois Telecommunications Excise Tax imposed on fire alarm monitoring services?

Subject

Telecommunications

Plain-English summary

A company that supplies tax compliance software wrote to the Illinois Department of Revenue asking whether the Telecommunications Excise Tax applies to fire alarm monitoring services — the kind of service where equipment is monitored so that, if a fire alarm is triggered and not turned off within a set amount of time, a call goes out to the local fire department. The taxpayer pointed to 35 ILCS 630/3, which imposes a 7% tax on intrastate telecommunications purchased at retail, and to 86 Ill. Adm. Code 495.100, which lists "burglar alarm services provided by telecommunications retailers" as an example of a taxable "gross charge."

The Department's response, issued as a GIL, drew a distinction based on who is doing the billing and for what:

• Alarm services, including fire alarm services, that are provided by telecommunications retailers are subject to the Telecommunications Excise Tax.
• Fire alarm services provided by other (non-telecom) retailers that include reselling telephone services are also subject to the tax.
• However, a company that provides alarm services and does NOT separately charge its customers for the phone line or other transmission charges used to deliver the service is generally not considered a "telecommunications retailer" with respect to that activity. Such a company can instead simply pay tax to its own telecommunications provider on the line/transmission service it purchases.
• If the alarm company DOES separately charge its customers for the line or transmission charges, it should give its telecommunications provider a Certificate of Resale, and then collect and remit the Telecommunications Excise Tax itself on those charges.

As the letter itself notes, this is a General Information Letter, not a Private Letter Ruling — it is not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120).

What this means for you

Fire alarm and monitoring companies

Whether your fire alarm monitoring business owes Telecommunications Excise Tax turns on your billing structure, not just on the fact that you monitor alarms. If you bundle in and separately bill customers for the phone or transmission line used to place the monitoring call, the Department's position is that you're acting as a telecommunications retailer for that piece of the charge — you'd want a Certificate of Resale from (or to) your provider and would need to collect and remit the tax yourself. If instead you absorb the line cost as part of your overall service fee without breaking it out, you generally are not a telecommunications retailer, and your own telecom provider would be the one charging you the tax (which becomes just another cost of doing business, not a pass-through you collect from customers).

Accountants and tax professionals advising alarm or monitoring clients

This GIL is useful for showing that Illinois's Telecommunications Excise Tax exposure for alarm-industry clients hinges on invoice-level detail: whether line/transmission charges are disaggregated and separately identified (35 ILCS 630/2(a)(4)) or folded into a single service charge. Reviewing how a client's invoices are structured — and whether a Certificate of Resale is in place with their telecom carrier — is the practical takeaway from this letter.

Common questions

Q: Does Illinois's Telecommunications Excise Tax apply to fire alarm monitoring services?
A: It can, but not automatically. The Department said alarm services (including fire alarm services) provided by telecommunications retailers are subject to the tax, and so are fire alarm services from other retailers that include reselling telephone services.

Q: What if my alarm company doesn't separately bill for the phone line used to monitor alarms?
A: The letter states that a company providing alarm services that does not, as part of that service, charge customers for the line or other transmission charges used to obtain the service is generally not considered a telecommunications retailer for that activity. In that case, the alarm company just pays tax to its own telecommunications provider.

Q: What if my alarm company does separately charge customers for the line or transmission charges?
A: Then, per the letter, the company should provide its telecommunications provider with a Certificate of Resale, and should itself collect and remit the Telecommunications Excise Tax on those charges.

Q: What statute and regulation does this letter rely on?
A: The Department cited 35 ILCS 630/3 and 630/4 (imposing the tax on intrastate and interstate telecommunications), the definition of "gross charges" in 35 ILCS 630/2(a) (and the equipment-charge exclusion in 630/2(a)(4)), and 86 Ill. Adm. Code 495.100(g), which lists burglar alarm services provided by telecommunications retailers as an example of a taxable gross charge.

Q: Is this letter binding on the Illinois Department of Revenue?
A: No. It is a General Information Letter, which by its own terms is not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120). A taxpayer wanting a binding answer on its specific facts would need a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Q: Does the letter give a bright-line dollar threshold or example for "separately charging" for line costs?
A: No. The letter states the general principle (separately charged line/transmission charges make the alarm company a telecommunications retailer requiring a Certificate of Resale and tax collection) but does not walk through a numeric example or define exactly how a charge must be itemized to count as "separate."

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0033-gil.pdf

Original ruling text

ST 18-0033-GIL 11/28/2018

TELECOMMUNICATIONS

Fire alarm services provided by retailers that include the reselling of telephone services are
subject to the Telecommunications Excise Tax Act. See 35 ILCS 630/3. (This is a GIL.)

November 29, 2018

Dear Xxxxx:
This letter is in response to your letter in which you requested 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:
COMPANY supplies tax compliance software to various industries.
We are currently researching fire alarm monitoring services. Fire alarm monitoring
includes monitoring of equipment to call the fire department when necessary. For
example, when fire alarm is triggered, a call is placed to local fire department if the
alarm isn’t turned off with a certain amount of time.
Per 35 ILCS 630/3: Beginning January 1, 1998, a tax is imposed upon the act or
privilege or originating in this State or receiving in this State intrastate
telecommunications by a person in this State at the rate of 7% of the gross charge for
such telecommunications purchased at retail from a retailer by such person. However,
such tax is not imposed on the act or privilege to the extent such act or privilege may
not, under the Constitution and statutes of the United State, be made the subject of
taxation by the State. Per 86 Ill. Adm. Code 495.100: Gross charges shall include, but
are not limited to, charges for unlisted or unpublished numbers, operator assistance,
directory information, call-waiting, call-forwarding, and burglar alarm services
provided by telecommunications retailers.
Based on the above, is the Telecommunications Excise Tax also imposed on fire alarm
monitoring services?

ST 18-0033-GIL
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 Act defines gross charges as including 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. 35 ILCS 630/2(a). The Act excludes charges for customer
equipment, including equipment that is leased or rented by the customer from any source, when
those charges are disaggregated and separately identified from other charges. 35 ILCS 630/2(a)(4).
Gross charges shall include, but are not limited to, charges for unlisted or unpublished numbers,
operator assistance, directory information, call-waiting, call-forwarding, and burglar alarm services
provided by telecommunications retailers. 86 Ill. Adm. Code 495.100(g).
Alarm services, including fire alarm services, provided by telecommunications retailers are
subject to Telecommunications Excise Tax. Fire alarm services provided by other retailers that
include the reselling of telephone services are also subject to the Telecommunications Excise Tax
Act.
Generally, persons that provide alarm services and who do not, as part of that service, charge
customers for the line or other transmission charges that are used to obtain these services are not
considered to be telecommunications retailers from these activities. Consequently, such an alarm
company may pay its telecommunications provider the tax for telecommunications services it uses to
provide the alarm services. If, however, the alarm company separately charges customers for the
line or other transmission charges, they should provide their telecommunications providers with
Certificates of Resale and should themselves collect and remit tax.

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

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