Is a telecommunications utility wholly owned and operated by a foreign government (here, Australia) exempt from New York's franchise tax on foreign transportation and transmission corporations just because it's a government utility, if it maintains a small liaison office in New York?

Plain-English summary

The Overseas Telecommunications Commission (Australia), a body corporate created by Australian statute and owned/operated by the Australian federal government, provides international telephone, text, television, facsimile, and maritime communications from Australia via its own cable, satellite, and radio networks. It set up a small "business liaison office" in White Plains, New York, staffed by Australian government employees on official-duty (A2) visas, whose role was limited to liaison with customers, U.S. carriers, and organizations like INTELSAT, plus market intelligence and support for visiting staff — the White Plains staff had no authority to sign contracts, and all service agreements were concluded in Australia. The Commission provided no actual telecommunications service within New York. It argued that an administrative Department policy exempts foreign utilities that are both government-owned and operated as a division/commission of that government.

The Department found no such statutory exemption. Sections 183 and 184 impose franchise tax on foreign transportation/transmission corporations based on any of several activities, including simply "maintaining an office in New York State" — and neither section carves out an exception for government-owned foreign utilities. Because the Commission maintained the White Plains liaison office, that alone was sufficient activity to make it subject to tax under both sections, regardless of the office's limited representative role and lack of contract authority. Separately, § 186-a's tax on furnishing utility services only reaches gross operating income from services actually provided for consumption within New York — since the Commission had no such income (providing no telecommunications service within the state), it owed nothing under that section.

What this means for you

Foreign government-owned utilities and telecommunications companies with a U.S. presence

A representative or liaison office — even one with no contracting authority, staffed by foreign civil servants, and doing no actual service delivery in New York — is enough activity to trigger New York's §§ 183/184 franchise tax on foreign transportation and transmission corporations. Government ownership provides no automatic exemption from that tax, regardless of any informal administrative practice a taxpayer may believe exists.

Accountants and tax professionals

Note the split result: liability under §§ 183/184 turns on the broad "doing business/employing capital/owning property/maintaining an office" test, satisfied here by the mere existence of an office; but § 186-a liability requires actual New York gross operating income from utility services, which was entirely absent. A foreign utility can owe one without the other.

Common questions

Q: Does government ownership of a foreign utility create any New York tax exemption?
A: No — the Department found no such exemption in either § 183 or § 184, rejecting the taxpayer's claim that an administrative policy provided one.

Q: Does a liaison office with no contract-signing authority still count as "maintaining an office"?
A: Yes — the opinion treats the mere maintenance of the office as sufficient activity, without regard to the limited scope of the staff's authority.

Q: Why doesn't the company owe section 186-a tax if it's a utility?
A: Because § 186-a is based on gross operating income from utility services actually furnished for consumption within New York, and the Commission provided no telecommunications service within the state at all.

Q: Can another foreign government-owned utility rely on this specific outcome?
A: No. This opinion binds the Department only for this petitioner's facts; other government-owned utilities with different New York activities should evaluate their own facts independently.

Citations and references

Statutes:

• Tax Law § 183 (franchise tax on foreign transportation/transmission corporations)
• Tax Law § 184 (additional franchise tax)
• Tax Law § 186-a (utility services gross income tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a88_4c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (4)C
Corporation Tax
March 4, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C870811A

On August 11, 1987, a Petition for Advisory Opinion was received from Overseas
Telecommunications Commission (Australia), 50 Main Street, 12th Floor, White Plains, New York
10606.
The issue is whether Petitioner is exempt from the tax imposed by sections 183, 184 and 186­
a of the Tax Law because it is a utility owned and operated as a commission of a foreign
government.
Petitioner is a body corporate created in 1946 pursuant to the Overseas Telecommunications
Act of the Commonwealth of Australia and its headquarters is located in Sydney, Australia.
Petitioner is a business enterprise owned and operated by the Australian government under the
auspices of Australia's Federal Minister for Communications. Petitioner's principal business activity
is to provide international communications services from Australia, including telephone, text
services, television, facsimile and maritime services. These services are provided through Petitioner's
international cable, satellite and radio networks.
Petitioner has established a business liaison office in White Plains, New York. This office
is presently staffed by Australian nationals on temporary assignment. These individuals enter the
United States on A2 visas (official duty visas). Generally, A2 visas are granted only to employees
of foreign governments.
The personnel in the United States perform representative functions such as providing liaison
between the head office and customers and potential customers, liaison with United States carriers
and other agencies such as INTELSAT (an international organization located in Washington, D.C.
involved in promoting telecommunications on a global basis), collecting market intelligence and
providing support for other Petitioner personnel visiting the United States. The personnel assigned
to the White Plains office have no authority to conclude contracts. Ail formal proposals for
communication services emanate from Sydney and all service agreements are concluded with
Australian customers in Australia.
Petitioner does not provide any telecommunications services within New York State, either
through their own lines or through leased lines.
Petitioner contends that an administrative policy exists in the Department of Tax and Finance
which exempts foreign utility companies from taxation if the foreign utility is:
(1)
(2)

owned by a foreign government, and
operated as a division or commission of the foreign government.

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

FRANK J. PUCCIA, DIRECTOR

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER

-2­
TSB-A-88 (4)C
Corporation Tax
March 4, 1988

Section 183 imposes a franchise tax and section 184 imposes an additional
franchise tax on every foreign transportation and transmission corporation if its
activities include one or more of the following:
(i)
(ii)
(iii)
(iv)

doing business in New York State in a corporate or organized
capacity or in a corporate form; or
employing capital in New York State in a corporate or
organized capacity or in a corporate form; or
owning or leasing property in New York State in a corporate
or organized capacity or in a corporate form; or
maintaining an office in New York State.

Petitioner's maintenance of an office in New York State is sufficient activity in New York
to subject it to tax under both section 183 and section 184. Neither section 183 nor section 184
provide that a foreign telecommunications company owned by a foreign government and operated
as a division or commission of such foreign government is exempt from tax.
Section 186-a provides that a tax on the furnishing of utility services is imposed upon every
utility doing business in New York State that is not subject to the supervision of the State
Department of Public Service but does have a gross operating income in excess of $500. G r o s s
operating income includes receipts from sales of gas, electricity, steam, water, refrigeration,
telephony or telegraphy, and from the furnishing of gas, electric, steam, water, refrigeration,
telephone or telegraph service for ultimate consumption or use within New York State.
Based on the description of Petitioner's activities, it appears that Petitioner does not have any
gross operating income and, therefore, is not subject to the tax imposed by section 186-a.
Accordingly, Petitioner must file returns and pay the tax due under both section 183 and
section 184, but is not subject to tax under section 186-a.

DATED: March 4, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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