Are Internet-based click-to-call and voice mail services taxable as telephone or telephone-answering services in Kansas?

Plain-English summary

A representative described a client's Internet-based services and asked whether they are taxable in Kansas. In the scenario, a website visitor clicks an icon and enters a phone number; the provider's switch then contacts the web-page owner and connects a call between the owner and the visitor, billing the web-page owner per minute. The client also offers a voice mail service (with the voice mail server housed in Florida), toll and toll-free retrieval options, and combined reach services, along with a one-time set-up fee and a monthly recurring fee. The Department's opinion is that these services are not taxable telephone or telephone-answering services under Kansas law.

The Department identified the two provisions that tax telecommunications: Kansas imposes sales tax on "the gross receipts from intrastate telephone or telegraph services . . . interstate telephone service" (K.S.A. 79-3603(b)) and on "the gross receipts received for telephone answering services, including mobile phone services, beeper services and other similar services" (K.S.A. 79-3603(t)).

Measuring the described services against those provisions, the Department concluded: "the services described in your letter do not constitute telephone or telephone answering services as contemplated by Kansas law and are not subject to Kansas sales tax. Your client is providing nontaxable service." It added an important companion point: "Your client is the consumer of all tangible personal property and services consumed in Kansas and must pay or accrue sales or compensating tax on all taxable purchases of tangible personal property or taxable services."

What this means for you

Internet and web-service providers

Simply connecting parties or handling messages over the Internet is not automatically a taxable "telephone" or "telephone answering" service in Kansas. The Department looked at the substance of the click-to-call and voice mail offerings and found they fell outside the enumerated telecommunications categories.

You still owe tax on your inputs

A nontaxable service provider is treated as the consumer of what it buys to run its business. You must pay Kansas sales tax — or accrue compensating (use) tax — on the taxable tangible personal property and services you consume in Kansas, even though you do not charge your customers sales tax.

Facts and law can change

This opinion turned on the specific services described and the law as it stood in 1999. Telecommunications definitions have evolved considerably since; evaluate current statutes for any similar service today.

Common questions

Q: Are Internet click-to-call and voice mail services taxable telephone services in Kansas?
A: Under this opinion, no. The Department found they are not telephone or telephone-answering services under K.S.A. 79-3603(b) or (t), so they are not subject to Kansas sales tax.

Q: Does the provider charge its customers sales tax?
A: No, because the service is nontaxable. But the provider must pay or accrue tax on its own taxable purchases used in Kansas.

Q: What makes a service a taxable "telephone answering service" in Kansas?
A: K.S.A. 79-3603(t) taxes telephone answering services, mobile phone, beeper, and similar services — the Department concluded these Internet offerings were not among them.

Citations and references

• K.S.A. 79-3603(b) — imposes sales tax on intrastate and interstate telephone and telegraph services.
• K.S.A. 79-3603(t) — imposes sales tax on telephone answering services, including mobile phone, beeper, and similar services.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1999-13

Original ruling text

Opinion Letter

Body:

Office of Policy and Research

June 4, 1999

XXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXX

Dear XXXXXXXXX:

I have been asked to respond to your letter of March 18, 1999. In it, you ask about the sales and use tax responsibilities of your client in regard to telecommunications and the Internet.

In your letter you described the following scenario:

An Internet user, on a worldwide web, would like further information on the company or product shown on a specific web page. There is an icon on the screen whereby the user can click their mouse on this icon, thus generating a screen requesting a phone number where the user can be reached. Once the telephone number has been given, the user has your option of receiving a return phone call immediately or schedule it for another time.

Upon completing these actions, a message is sent to X’s switch that a call needs to be initiated. X’s switch contacts the owner of the web page and informs them of the call. Upon connection with the web page owner, the switch that establishes a call with the Internet user.

X’s invoices its customers, the web page owner, on a per minute basis for the call that is connected between the web page owner and the Internet surfer.

X also provides a voice mail service that can be used in connection with a call initiation. If the web surfer requests the call during non-business hours, the Internet user has the option to leave a voice mail message. The voice mail messages are kept on X’s computer systems.

X invoices its customers, the web page owner, on a per minute basis for the call between the Internet surfer and the voice mail server. The voice mail server is housed in XXX, Florida.

Voice mail messages can be retrieved by directly dialing a toll telephone number into the voice mail network. There is no charge to the customer for this type of access. If the customer is located in the United States, messages may also be retrieved by dialing a toll free number. The customer will be charged a fee on a per minute basis.

If the customer is located outside the United States, the customer may access a web page with an icon that will initiate a call between the customer and the voice mail network. The customer is billed on a per minute basis.

X also offers a service where web page owners can be reached by calling his personal toll free number or XXX, Fla. exchange. Internet users can speak, page, fax, leave a voice mail.

X invoices its customers on a per minute basis for the call that is connected. There is a one time set up fee charged to the customer for placing the icon on the web page. There is also a monthly recurring fee for the services described above.

Kansas law imposes Kansas retailers’ sales tax on “the gross receipts from intrastate telephone or telegraph services. . . interstate telephone service. . .” K.S.A. 79-3603(b). Kansas also imposes sales tax on “the gross receipts received for telephone answering services, including mobile phone services,
beeper services and other similar services. . .” K.S.A. 79-3603(t).

It is the opinion of the Kansas Department of Revenue that the services described in your letter do not constitute telephone or telephone answering services as contemplated by Kansas law and are not subject to Kansas sales tax. Your client is providing nontaxable service. Your client is the consumer of all tangible personal property and services consumed in Kansas and must pay or accrue sales or compensating tax on all taxable purchases of tangible personal property or taxable services.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 06/22/1999 Date Modified: 10/10/2001

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