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To Be Taxed or Not to Be Taxed? Ancillary Telephone Charges Examined for Purposes of Pennsylvania's Gross Receipts Tax

By Shane Lord

The Commonwealth Court of Pennsylvania held that gross receipts received by Verizon in connection with nonrecurring service charges—including telephone line installation, moves of

July 17, 2013

By Shane Lord

The Commonwealth Court of Pennsylvania held that gross receipts received by Verizon in connection with nonrecurring service charges—including telephone line installation, moves of or changes to telephone lines and service, and repairs of telephone lines—were not taxable under the Commonwealth’s gross receipts tax on telephone companies. The court distinguished these nonrecurring services from Verizon’s provision of private telephone lines and directory assistance services, which the court held were taxable. Gross receipts from private telephone lines were held to be taxable because such services were provided for the sole purpose of transmitting telephone messages, while gross receipts from directory assistance services were held to be taxable because such services allowed Verizon to transmit telephone messages more effectively and satisfactorily and therefore were also services provided for the sole purpose of transmitting telephone messages. In contrast, the court determined that gross receipts from Verizon’s nonrecurring services were not taxable because the services: (1) did not include a transmission of telephone messages; (2) were separately billed to customers; and (3) where inside wiring was required, the work did not have to be done by Verizon (i.e., it could be completed by the customer or through a third party). In holding for Verizon on the nonrecurring service charge issue, the court emphasized that, as a tax imposition statute, the law had to be strictly construed with any ambiguity resolved in favor of the taxpayer. Verizon Pennsylvania, Inc. v. Commonwealth, No. 266 F.R. 2008 (Pa. Commw. Ct. July 5, 2013).

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