Is a telecommunications carrier protected from the section 186-e excise tax if it accepts a resale certificate from a foreign carrier that has no certificate-of-authority number?

Plain-English summary

A telecommunications carrier sells services to other carriers - including foreign carriers that resell abroad and have no U.S. certificate of authority (COA). It asked whether accepting a resale certificate (Form CT-120) that lacks the purchaser's COA number protects it from the section 186-e telecommunications excise tax.

The Office of Counsel concluded no. Under Tax Law § 186-e.2(b)(1)(ii), a resale certificate is not properly completed unless it includes the purchaser's COA number (issued under Tax Law § 1134). All gross receipts are presumed taxable unless the seller timely takes a properly completed resale certificate; an incomplete one cannot rebut that presumption. The carrier should collect the § 186-e tax from any purchaser without a COA (the purchaser may seek a credit if the purchase was truly for resale), or the foreign carrier may voluntarily register for a COA (and then file zero-remittance returns). The Department also noted its 2001 opinion (TSB-A-01(16)C) was superseded by a 2008 law change effective January 1, 2009.

What this means for you

Telecom carriers selling wholesale/resale services

Don't treat a sale as exempt-for-resale on a resale certificate that's missing the buyer's COA number - it won't protect you, and you can owe the tax plus interest and penalties. Collect the § 186-e tax from buyers who lack a COA; they can claim a resale credit themselves.

Accountants and tax/regulatory teams

Verify Form CT-120 is complete, COA number included, within 90 days. Foreign carriers without U.S. operations typically lack a COA; either collect the tax or have them voluntarily register. The pre-2009 exempt-treatment opinion no longer applies.

Common questions

Q: The buyer really is reselling - isn't that enough?
A: Not to shift the burden via certificate. Without a COA number the certificate is incomplete; collect the tax, and the buyer can seek a resale credit.

Q: Can a foreign carrier fix this?
A: Yes - it can voluntarily register in New York to obtain a COA, but must then file zero-remittance returns to stay in good standing.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

Statutes and regulations:
- Tax Law § 186-e.2(b)(1); § 1134
- Form CT-120; Ch. 297, Laws of 2008; TSB-M-09(2)C (superseding TSB-A-01(16)C)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a15_3c_4i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(3)C
Corporation Tax
TSB-A-15(4)I
Income Tax
March 12, 2015

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M140509A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
“Petitioner” REDACTED REDACTED. Petitioner is a telecommunication carrier and it asks
whether it would be protected from liability for the excise tax imposed by Tax Law § 186-e by
its acceptance of a resale certificate from a foreign carrier that lacks the purchaser’s vendor
identification number. We conclude that, without the customer’s Certificate of Authority
number, the resale certificate is not complete and will not rebut the presumption that the sale is
subject to §186-e tax.
Facts
Petitioner is a Delaware corporation and a licensed common carrier by the New York
Public Service Commission ("PSC") and sells telecommunication services that are subject to the
186-e telecommunication excise tax.
Certain of Petitioner’s customers are other
telecommunication carriers that purchase Petitioner’s services for resale. These resale carrier
customers include foreign carriers that use Petitioner’s services for resale to their ultimate end
users in foreign countries. Petitioner’s domestic carrier customers can provide Petitioner with a
completed § 186-e tax resale certificate form (Form CT-120). According to Petitioner, however,
the foreign carriers cannot provide a completed Form CT-120, because this form requires the
reseller to provide the number of the reseller’s Certificate of Authority ("COA"), which this
Department issues to persons required to collect sales tax pursuant to Tax Law § 1134.
These carriers often do not have U.S. operations or even a presence in the U.S. They
do not serve customers in New York. Rather, they offer services in their home countries and
use Petitioner’s services to facilitate the provision of these telecommunication services
abroad. As a result, these foreign customers have no need for a COA and in many cases do
not have a COA.
Analysis
As relevant here, Tax Law § 186-e imposes an excise tax on a
telecommunication service provider’s gross receipts from sales of the following: (1)
intrastate telecommunication service; (2) interstate and international telecommunication
service if the service originates or terminates in New York and is charged to a service address
in New York; and (3) private telecommunication services attributable to New York, or any
combination thereof.
Tax Law § 186-e.2(b)(1)(i) further provides that “[a]ll gross receipts are deemed taxable
to the provider of telecommunication services under this section, unless the provider, within
ninety days after the provision of telecommunication services, has taken from the purchaser a
certificate of resale in the form the commissioner has prescribed, to document that the

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TSB-A-15(3)C
Corporate Tax
TSB-A-15(4)I
Income Tax
March 12, 2015

telecommunication services were purchased for resale as telecommunication services.” Under
Tax Law § 186-e.2(b)(1)(ii), however, “[a] certificate of resale is not properly completed if it
does not include the purchaser’s certificate of authority number issued pursuant to [Tax Law §
1134].” Consistent with this provision, the § 186-e tax resale certificate form created by the
Department, the CT-120, requires the purchaser’s COA number.
Thus, § 186-e.2(b)(1) presumes that the gross receipts from the sale of
telecommunication services are taxable unless the purchaser timely supplies the seller with a
properly completed resale certificate that the seller accepts in good faith. To be properly
completed, the resale certificate must include the purchaser’s COA number issued in accordance
with Tax Law § 1134. Therefore, when Petitioner accepts a resale certificate that lacks the
purchaser’s COA number, the resale certificate is not properly completed and, thus, cannot rebut
the presumption of taxability in § 186-e.2(b)(1)(ii).
Absent a properly completed resale certificate, the sale of telecommunications services is
presumed to be taxable, and failure to pay these taxes may subject Petitioner to interest and
penalty liabilities. Petitioner may attempt to prove, through a refund claim or on audit, that the
sale to the carrier was for resale, but the burden of proof remains on it. To avoid possible
liability for penalties and interest, Petitioner should collect the § 186-e tax from any purchaser
that does not have a COA, since the purchaser is entitled to seek a credit pursuant to § 186e.2(b)(1)(v) to the extent that it can show that the purchase was for resale. Alternatively, a
foreign carrier may voluntarily register as a vendor in the State of New York and obtain a COA.
However, once a foreign carrier voluntarily registers, it would be required to file zero remittance
tax returns in order to be in good standing and retain its COA.
Finally, according to Petitioner, its foreign carrier customers have repeatedly insisted that
TSB-A-01(16)C continues to allow Petitioner to treat the sales to these carriers as exempt sales
for resale, even though the resale customers do not have a COA and, thus, cannot complete Form
CT-120. That 2001 Advisory Opinion has been superseded by a change in the Tax Law, namely
Chapter 297 of the Laws of 2008, which amended the § 186-e resale provision, effective January
1, 2009, to allow for the use of resale certificates to substantiate that a purchase of
telecommunication services was for resale. See TSB-M-09(2)C. Included in that legislation was
the resale provision in Tax Law § 186-e.2(b)(1)(ii) that requires a COA number, as discussed
above. Therefore, TSB-A-01(16)C has no relevance to sales to telecommunication services
occurring on or after January 1, 2009.

DATED: March 12, 2015

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and

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TSB-A-15(3)C
Corporate Tax
TSB-A-15(4)I
Income Tax
March 12, 2015

accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.