Are charges for audio-conference bridging services -- conference management without providing the transmission -- subject to New York sales tax or to the section 186-e and 186-a gross receipts taxes?

Plain-English summary

MCI Telecommunications (MCIT) provides audio-conferencing. This opinion covers only the situation where MCIT supplies bridging services alone -- it reserves and programs a conference bridge, issues a dial-in number and passcode, verifies each participant, and assists those who enter wrong codes -- while the participants buy their own transmission (the actual phone connection) from other carriers like Bell Atlantic or AT&T. MCIT asked whether its standalone bridging charges are subject to sales tax or to the section 186-e / 186-a gross receipts taxes.

The Department held the standalone bridging charges are not taxable:

• Sales tax (section 1105(b)). Section 1105(b) and 20 NYCRR 527.2(d) tax intrastate telephone/telegraph service. MCIT's bridging is a conference-management service, not one of the enumerated taxable services -- so no sales tax is collected on it.
• Section 186-e. The bridging service is not a "telecommunication service" as defined in section 186-e.1(g), so it is not subject to the section 186-e excise.
• Section 186-a. If MCIT is not subject to PSC supervision, it is not subject to section 186-a. If it is PSC-supervised, the receipts from this activity for ultimate use in New York are part of its section 186-a gross income.

The key is that MCIT is not providing the transmission -- the customer pays a different carrier for that.

What this means for you

Managing a conference is not "telephone service"

When a provider only coordinates the conference (bridge, passcodes, verification) and does not carry the call, its charge is not a taxable telephone service and not a section 186-e telecommunication service.

The transmission/management split is decisive

If the same provider had supplied the underlying transmission, the analysis would differ. Here participants buy transmission separately, isolating the bridging as a management service.

Section 186-a can still reach a regulated utility

A PSC-supervised utility includes such management receipts (for New York use) in its section 186-a gross income, even though they are not section 186-e telecommunication receipts.

Common questions

Q: Is standalone audio-conference bridging subject to New York sales tax?
A: No. It is a conference-management service, not an enumerated taxable telephone service under section 1105(b).

Q: Is it subject to the section 186-e telecom excise?
A: No. It is not a telecommunication service as defined in section 186-e.

Q: Could section 186-a ever apply?
A: Only if the provider is PSC-supervised; then the New York-use receipts are part of its section 186-a gross income.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 1105(b) (sales tax on telephony and telephone service)
- 20 NYCRR 527.2(d) (telephone and telegraph service)
- Tax Law section 186-a (gross income tax on utilities)
- Tax Law section 186-e (excise tax on telecommunication services)
- MCI Communications Corporation and MCI Telecommunications Corporation, TSB-A-99(35)S, TSB-A-99(20)C (July 14, 1999)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a99_35s_20c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(35)S
Sales Tax
TSB-A-99(20)C
Corporation Tax
July 14, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. Z980319A

On March 19, 1998, a Petition for Advisory Opinion was received from MCI
Communications Corporation ("MCI") and MCI Telecommunications Corporation ("MCIT"), 1133
19th Street, NW, Washington, D.C. 20036.
The issues raised by Petitioners are the applicability of sales tax and gross receipts tax to
MCIT's bridging services. The specific questions are:
(1) Whether MCIT’s charges for bridging services provided for audio conferences are
subject to New York sales tax where a telecommunications company other than MCIT provides the
transmission.
(2) If MCIT's bridging services are determined to be taxable telephone services under New
York's sales tax, under what circumstances are these services taxable?
(3) Whether MCIT's charges for bridging services provided for audio conferences are subject
to New York State's gross receipts taxes under sections 186-e and 186-a of the Tax Law on utilities
and telecommunication service providers where a telecommunications company other than MCIT
provides the transmission.
Petitioners submit the following facts as the basis for this Advisory Opinion.
MCI is a corporation organized under the laws of Delaware, with its principal officers located
in Washington, D.C. MCIT is a wholly owned operating subsidiary of MCI.
MCIT provides audio conferencing services that allow numerous callers to participate in the
same telephone conversation from different geographic locations. In order to receive audio
conferencing services, a customer (conference leader) calls MCIT to reserve a specified date, time
and duration for an audio conference. MCIT provides the conference leader with a telephone
number and a call-specific numeric passcode for participants to use in order to take part in an audio
conference.
In some instances, MCIT provides participants with both the underlying transmission and
bridging services. In other instances, MCIT provides only bridging services. This advisory opinion
is limited to the instances when MCIT provides only bridging services. When MCIT provides only

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bridging services, the participants use a telecommunications company other than MCIT (e.g., Bell
Atlantic, AT&T, Sprint) for the transmission service to participate in an audio conference and the
conference leader is only paying MCIT for "bridging services".
Bridging services include much more than merely using MCIT's bridges to link participants
together on the same audio conference. There are many elements of the service that are provided
by MCIT employees such as:
(1) reserving a bridge for a conference leader for a scheduled time, duration and
number of participants;
(2) providing the conference leader with a telephone number in order to reach an
MCIT bridge and a conference-specific passcode;
(3) programming the appropriate bridge to verify each participant's passcode at the
proper date and time;
(4) providing assistance if a participant enters an incorrect passcode or calls in at a
time other than the scheduled time.
When a participant dials the MCIT-provided telephone number, the person is connected with
MCIT's bridge and prompted for the conference's passcode. The bridge verifies the passcode entered
by the participant and links the person together with all other participants on the audio conference.
A participant that enters an incorrect passcode or calls in to a conference other than at the scheduled
time is connected with an MCIT employee for assistance. Once the participant enters the proper
passcode, other participants that are already on the audio conference hear a tone notifying them that
a new participant has entered the conference.
MCIT has bridges in several states. One of the bridges is located in New York State. Audio
conference participants situated in New York may be linked together at an MCIT bridge located in
New York or some other state. Bridges do not change the form, content or composition of the
communications.
MCIT's charges for bridging services are a per minute charge based on the number of minutes
that participants are connected together on an audio conference. For example, three participants
engage in an audio conference; two participants are linked to the audio conference for 10 minutes
and one is linked for five minutes. The total bridging service charges billed to the conference leader
would be the per minute charge times 25 minutes (2 participants x 10 minutes + 1 participant x 5
minutes).

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In the event that an audio conference is scheduled, and the conference leader fails to cancel
the conference within 30 minutes of the scheduled start time, the conference leader will be charged
a cancellation fee.
Each audio conference participant is responsible for paying his or her own
telecommunication service charges (transmission charges) to a company other than MCIT, including
all applicable taxes.
Applicable Law & Regulations
Section 1105(b) of the Tax Law imposes a tax upon:
The receipts from every sale, other than for resale, of gas, electricity,
refrigeration and steam, and gas, electric, refrigeration and steam service of whatever
nature, and from every sale, other than for resale, of telephony and telegraphy and
telephone and telegraph service of whatever nature except interstate and international
telephony and telegraphy and telephone and telegraph service and from every sale,
other than sales for resale, of a telephone answering service.
Section 527.2(d) of the Sales and Use Tax Regulations provides, in part:
Telephone and telegraphy; and telephone and telegraph service. (1) The
provisions of section 1105(b) of the Tax Law with respect to telephony and
telegraphy and telephone and telegraph service impose a tax on receipts from
intrastate communication by means of devices employing the principles of telephony
and telegraphy.
(2) The term telephony and telegraphy includes use or operation of any
apparatus for transmission of sound, sound reproduction or coded or other signals.
Section 186-a of the Tax Law imposes a tax on the furnishing of utility services that is equal
to three and one-quarter percent, from October 1, 1998 through December 31, 1999, of the gross
income of a utility that is subject to the supervision of the PSC or the gross operating income of
every other utility doing business in New York State. For purposes of section 186-a, a "utility"
includes a person subject to the supervision of the PSC and every person (whether or not such person
is subject to such supervision) who sells or furnishes gas, electricity, steam, water or refrigeration,
by means of mains, pipes, or wires, regardless of whether such activities are the main business of
such person or are only incidental thereto. The receipts from the provision of telecommunication
services that are subject to tax under section 186-e of the Tax Law are not subject to tax under

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section 186-a of the Tax Law. However, a utility subject to the supervision of the PSC is subject to
the tax imposed under section 186-a on its other gross income, which includes "receipts received in
or by reason of any sale ... made or service rendered for ultimate consumption or use by the
purchaser in this state...."
Section 186-e.1(g) of the Tax Law defines "telecommunication services" as "telephony or
telegraphy, or telephone or telegraph service, including, but not limited to, any transmission of voice,
image, data, information and paging, through the use of wire, cable, fiber-optic, laser, microwave,
radio wave, satellite or similar media or any combination thereof and shall include services that are
ancillary to the provision of telephone service ... and also include any equipment and services
provided therewith. Provided, the definition of telecommunication services shall not apply to
separately stated charges for any service which alters the substantive content of the message received
by the recipient from that sent."
Section 186-e.2(a) of the Tax Law imposes an excise tax "on the sale of telecommunication
services by any person which is a provider of telecommunication services" from any intrastate
telecommunication services and any interstate and international telecommunication services (other
than interstate and international private telecommunication services) which originate or terminate
in New York State and which telecommunication services are charged to a service address in New
York State regardless of where the amounts charged for the services are billed or ultimately paid.
Section 186-e.1(e) of the Tax Law defines "provider of telecommunication services" as "any
person who furnishes or sells telecommunications services regardless of whether such activities are
the main business of such person or are only incidental thereto."
Opinion
MCIT’s audio conferencing service is not a telephone or telegraph service for purposes of
section 1105(b) of the Tax Law and section 527.2(d) of the Sales and Use Tax Regulations. MCIT
is providing a conference management service that is not one of the enumerated services subject to
tax under section 1105 of the Tax Law. Accordingly, MCIT is not required to collect sales tax on
the sale of this service.
In addition, MCIT’s audio conferencing service does not constitute a telecommunication
service for purposes of section 186-e.1(g) of the Tax Law. Accordingly, MCIT is not subject to the
excise tax imposed under section 186-e on the receipts from the provision of this service. If MCIT
is not subject to the supervision of the PSC, it would not be subject to tax under section 186-a. If

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MCIT is subject to supervision of the PSC, the receipts from this activity for ultimate consumption
or use by the purchaser in this state would be included in MCIT’s gross income subject to tax under
section 186-a of the Tax Law.

DATED: July 14, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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