What are 'telephone communication services' subject to Nebraska sales tax, and which telecom charges are taxable or exempt?

Plain-English summary

Nebraska taxes the gross receipts of a public utility that furnishes telephone service. Revenue Ruling 01-09-3 defines what "telephone communication services" means for that tax, because the statute imposing the tax (Neb. Rev. Stat. § 77-2701.16(2)(a)(i)) uses the phrase but does not define it.

The definition. "Telephone communication services" means using a network capable of providing voice communications to furnish communication services to subscribers by electronic means. It includes:

• intrastate telecommunications services -- except value-added, non-voice data service; and
• ancillary services (such as directory assistance and call waiting) -- except conference bridging services,

using those terms as defined in Neb. Rev. Stat. § 77-2703.04(7).

What's taxable vs. exempt.

• Charges for the covered intrastate and ancillary services, provided as part of telephone communication services, are taxable.
• Charges for interstate telecommunications services are exempt from sales tax if the retailer separately states them, or can identify them by reasonable and verifiable means from its books and records.

Why the ruling was issued. Effective October 1, 2009, 2009 Legislative Bill 165 replaced the older statutory terms "local exchange telephone service" and "intrastate message toll telephone service" with more current industry terminology. The ruling makes clear that taxability did not change -- the same receipts remain taxable -- and that all of the telecommunications definitions in § 77-2703.04(7) apply throughout the sales tax provisions (Neb. Rev. Stat. §§ 77-2701 through 77-2713).

What this means for you

Telephone and telecom providers

Charge Nebraska sales tax on the gross receipts from telephone communication services -- including taxable ancillary services (directory assistance, call waiting) and intrastate telecommunications services. To keep interstate charges exempt, separately state them on the bill, or be able to identify them from your books and records by reasonable and verifiable means. Value-added non-voice data service and conference bridging service are excluded from the taxable definition.

Business and residential customers

Expect Nebraska sales tax on intrastate and ancillary telephone charges. Interstate charges should not be taxed when they are separately stated (or otherwise verifiably identified). The 2009 terminology update did not add or remove tax -- it modernized the wording.

Common questions

Q: What counts as "telephone communication services"?
A: Using a network capable of voice communications to furnish communication services to subscribers by electronic means -- including intrastate telecommunications services (except value-added, non-voice data service) and ancillary services (except conference bridging).

Q: Are call waiting and directory assistance taxable?
A: Yes. Those are ancillary services taxable when provided as part of telephone communication services. Conference bridging service is the excepted ancillary service.

Q: Is interstate calling taxed?
A: No, if the retailer separately states the interstate charges or can identify them by reasonable and verifiable means from its books and records.

Q: Did the 2009 law change what is taxed?
A: No. LB 165 (effective October 1, 2009) modernized the statutory terminology; taxability was not changed.

Citations and references

• Neb. Rev. Stat. § 77-2701.16(2)(a)(i) -- the definition of taxable telephone communication services (terminology modernized by 2009 LB 165, effective October 1, 2009).
• Neb. Rev. Stat. § 77-2703(1) -- imposes sales tax on the gross receipts of a public utility furnishing telephone communication services.
• Neb. Rev. Stat. § 77-2703.04(7) -- the telecommunications definitions, specifically incorporated and applied throughout Neb. Rev. Stat. §§ 77-2701 through 77-2713.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr010903.pdf

Original ruling text

Revenue Ruling 01-09-3
Nebraska Sales and Use Tax

December 11, 2009
TELEPHONE COMMUNICATION SERVICES
Issue:
Pursuant to Neb. Rev. Stat.§§77-2701.16 and 77-2703(1), sales tax is imposed on the gross receipts
of every person engaged as a public utility furnishing telephone communication services. This ruling
defines the term “telephone communication services.”
Conclusion:
Telephone communication services means using a network capable of providing voice communications
to furnish communication services to subscribers by electronic means. Telephone communication
services includes any services that are considered intrastate telecommunications services (except for
value-added, non‑voice data service) and ancillary services (except for conference bridging services)
as those terms are used in Neb. Rev. Stat. §77-2703.04(7).
Analysis:
Pursuant to Laws 2009, LB 165, more current communication industry terminology replaced
the terms “local exchange telephone service” and “intrastate message toll telephone service” in
Neb. Rev. Stat. §77-2701.16(2)(a)(i), effective October 1, 2009. Taxability was not changed, and sales
and use taxes continue to be imposed on the gross receipts of every person engaged as a public utility in
the furnishing of telephone communication services, including charges for “ancillary services” (except
for conference bridging services), and “intrastate telecommunications services” (except for valueadded, non-voice data service) as those terms are used in Neb. Rev. Stat. §77-2703.04(7). Charges
for interstate telecommunications services are exempt from sales tax if the retailer separately states
the interstate charges, or can identify them by reasonable and verifiable means from its books and
records.
Neb. Rev. Stat. §77-2703.04 does not define “telephone communication services.” For purposes of
Neb. Rev. Stat. §77-2701.16(2)(a)(i), the term “telephone communication services” means using a
network capable of providing voice communications to furnish communication services to subscribers
by electronic means.
Any charges for ancillary services (except for conference bridging services), such as directory assistance
and call waiting, are subject to tax when provided as part of telephone communication services. Any
charges for intrastate telecommunications services (except for value-added, non‑voice data service) are
also subject to tax when provided as part of telephone communication services.
This ruling also specifically declares that all the definitions regarding telecommunications that
are in Neb. Rev. Stat. §77-2703.04(7) are applicable to the imposition and enforcement of the sales
tax. These definitions are specifically incorporated and apply throughout Neb. Rev. Stat. §§77-2701
through 77-2713.
APPROVED:

Douglas A. Ewald
Tax Commissioner
December 11, 2009

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818