Is a radio paging company subject to New York's gross receipts utility tax when customers reach subscribers by dialing a phone number that automatically links into the radio paging system?

Plain-English summary

Fulmont Communications, Inc. runs a radio paging service, mainly for physicians and contractors: a caller dials a phone number assigned to the subscriber, which is tied into the radio system so the call automatically triggers a page to the subscriber (previously, a human operator relayed messages by radio instead). Fulmont argued it shouldn't owe New York's § 186-a gross receipts utility tax because its core service is radio paging, with the telephone link merely incidental — and even if taxable, it argued only the telephone portion of the service (not the radio portion) should be taxed.

The Department disagreed on the exemption question but agreed on the scope of tax. Section 186-a's definition of "utility" is broad — it covers anyone who sells or furnishes telephone, telegraph, gas, electric, steam, water, or refrigeration service by wire or similar means, "regardless of whether such activities are the main business of such person or are only incidental thereto." Because Fulmont operates as a radio common carrier (assigning subscribers phone numbers that activate wireline-connected radio transmitters), it's a taxable utility under § 186-a, and the "incidental" telephone link-up argument doesn't create an exemption — the statute explicitly reaches incidental utility activities too. However, the Department did narrow the tax base: it applies only to Fulmont's gross income from its own airtime/service income, and any income attributable to service Fulmont sells for resale (e.g., to another carrier) is excluded from the tax entirely.

What this means for you

Radio paging, common-carrier, or similar telecommunications businesses

Describing your core service as "radio," "wireless," or otherwise non-telephone doesn't avoid § 186-a if any telephone-network component (even a fully automated one) is part of how the service reaches customers — the "incidental" characterization doesn't create an exemption under this broad utility definition.

Accountants and tax professionals

The favorable half of this ruling is the tax-base limitation: gross income for § 186-a purposes here is confined to the company's own airtime/service income, explicitly excluding revenue from services sold for resale. That resale exclusion is worth flagging for any radio common carrier or similar utility with wholesale or reseller revenue streams.

Common questions

Q: Does it matter that the telephone component is "incidental" to the main paging business?
A: No — § 186-a's utility definition specifically covers activities that are "only incidental" to a company's main business, so incidental telephone functionality doesn't create an exemption.

Q: Is the entire paging service taxed, or just the telephone portion?
A: The full airtime/service income is taxed as a radio common carrier, not just the telephone-link portion — but income from services sold for resale is excluded from the gross income base entirely.

Q: Can another paging or radio common carrier rely on this ruling?
A: No. This opinion binds the Department only for Fulmont's specific facts; other carriers should confirm their own structure and revenue streams independently.

Citations and references

Statutes:

• Tax Law § 186-a (utility services gross income tax; broad "utility" definition; resale exclusion)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a87_32c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87 (32) C
Corporation Tax
December 15, 1987

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C870728A

On July 28, 1987, a Petition for Advisory Opinion was received from Fulmont
Communications, Inc., 71 Guy Park Avenue, Amsterdam, New York 12010.
The issue raised is whether the gross receipts tax under section 186-a of Article 9 of the Tax
Law is imposed on a radio paging service in which telephone service establishes the radio service
from a caller to the customer of the radio paging service.
Petitioner owns and operates a radio paging service used primarily by physicians and
contractors. In order for a caller to reach Petitioner's subscriber, the caller dials a telephone number
assigned to the subscriber. The telephone line is tied into the radio system so that what is spoken into
the telephone automatically goes by radio to the subscriber.
Petitioner contends that it is not subject to the gross receipts tax because the service it
provides is a radio paging service and that the telephone link-up is only incidental to such service.
Prior to the time when the above automatic link-up was installed, callers telephoned a human
operator employed by Petitioner who thereupon passed on the message by the radio service.
Petitioner contends further that if it is subject to the gross receipts tax, such tax should be
applicable only to that portion of Petitioner's service carried out by telephone, and should not be
applicable to the radio portion.
Section 186-a of the Tax Law imposes a tax on the furnishing of utility services. The tax is
equal to three percent of the gross income of every utility doing business in New York State which
is subject to the supervision of the New York State Department of Public Service and which has an
annual gross income in excess of $500, with certain exceptions not pertinent herein. It also imposes
a tax equal to three percent of the gross operating income of every other utility doing business in
New York State which has annual gross operating income in excess of $500.
A utility includes every person (whether or not subject to the supervision of the Department
of Public Service) who sells gas, electricity, steam, water, refrigeration, telephony or telegraphy,
delivered through mains, pipes or wires, or furnishes gas, electric, steam, water, refrigeration,
telephone or telegraph service, by means of mains, pipes, or wires, regardless of whether such
activities are the main business of such person or are only incidental thereto.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-87 (32) C
Corporation Tax
December 15, 1987

Radio common carriers utilize radio frequencies assigned to them by the Federal
Communications Commission and typically provide two types of message service to the public:
1.

Two-way mobile radio service which permits a complete two-way
conversation between the mobile subscriber and a party using a telephone or
other mobile radio.

2.

One-way paging service in which the subscriber carries a pocket size receiver
which is activated by a radio wave which may emit a beep (tone only), a beep
plus a brief oral message (tone and voice) or a beep followed by a ten-digit
number which can be stored in the receiver (digital).

Service is provided to subscribers through the use of transmitters which emit radio waves
which are controlled from a terminal facility. Each subscriber is assigned a seven-digit telephone
number which, when dialed, activates the subscriber's unit through the wireline telephone network
and the radio common carrier's terminal and transmitters.
It is apparent from Petitioner's description of activities, that it is a radio common carrier.
Accordingly, Petitioner is subject to the tax imposed by section 186-a of the Tax Law. The amount
of tax imposed should be computed upon the gross income of Petitioner derived from service income
(air time) only. However, all income attributable to service sold for resale should be excluded from
gross income.

DATED: December 15, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.