2005 North Carolina Code - General Statutes § 105-164.4C. Tax on telecommunications.

§ 105‑164.4C.  Tax on telecommunications.

(a)       General. – The gross receipts derived from providing telecommunications service in this State are taxed at the rate set in G.S. 105‑164.4(a)(4c). Telecommunications service is provided in this State if the service is sourced to this State under the sourcing principles set out in subsections (a1) and (a2) of this section. The definitions and provisions of the federal Mobile Telecommunications Sourcing Act apply to the sourcing and taxation of mobile telecommunications services.

(a1)     General Sourcing Principles. – The following general sourcing principles apply to telecommunications services. If a service falls within one of the exceptions set out in subsection (a2) of this section, the service is sourced in accordance with the exception instead of the general principle.

(1)       Flat rate. – A telecommunications service that is not sold on a call‑by‑call basis is sourced to this State if the place of primary use is in this State.

(2)       General call‑by‑call. – A telecommunications service that is sold on a call‑by‑call basis and is not a postpaid calling service is sourced to this State in the following circumstances:

a.         The call both originates and terminates in this State.

b.         The call either originates or terminates in this State and the telecommunications equipment from which the call originates or terminates and to which the call is charged is located in this State. This applies regardless of where the call is billed or paid.

(3)       Postpaid. – A postpaid calling service is sourced  to the origination point of the telecommunications signal as first identified by either the seller's telecommunications system or, if the system used to transport the signal is not the seller's system, by information the seller receives from its service provider.

(a2)     Sourcing Exceptions. – The following telecommunications services and products are sourced in accordance with the principles set out in this subsection:

(1)       Mobile. – Mobile telecommunications service is sourced to the place of primary use, unless the service is authorized by a prepaid telephone calling service or is air‑to‑ground radiotelephone service. Air‑to‑ground radiotelephone service is a postpaid calling service that is offered by an aircraft common carrier to passengers on its aircraft and enables a telephone call to be made from the aircraft. The sourcing principle in this subdivision applies to a service provided as an adjunct to mobile telecommunications service if the charge for the service is included within the term "charges for mobile telecommunications services" under the federal Mobile Telecommunications Sourcing Act.

(2)       Prepaid. – Prepaid telephone calling service is sourced in accordance with G.S. 105‑164.4B.

(3)       Private. – Private telecommunications service is sourced in accordance with subsection (e) of this section.

(b)       Included in Gross Receipts. – Gross receipts derived from telecommunications service include the following:

(1)       Receipts from flat rate service, service provided on a call‑by‑call basis, mobile telecommunications service, and private telecommunications service.

(2)       Charges for directory assistance, directory listing that is not yellow‑page classified listing, call forwarding, call waiting, three‑way calling, caller ID, voice mail, and other similar services.

(3)       Customer access line charges billed to subscribers for access to the intrastate or interstate interexchange network.

(4)       Charges billed to a pay telephone provider who uses the telecommunications service to provide pay telephone service.

(c)       Excluded From Gross Receipts. – Gross receipts derived from telecommunications service do not include any of the following:

(1)       Charges for telecommunications services that are a component part of or are integrated into a telecommunications service that is resold. Examples of services that are resold include carrier charges for access to an intrastate or interstate interexchange network, interconnection charges paid by a provider of mobile telecommunications service, and charges for the sale of unbundled network elements. An unbundled network element is a network element, as defined in 47 U.S.C. § 153(29), to which access is provided on an unbundled basis pursuant to 47 U.S.C. § 251(c)(3).

(2)       Telecommunications services that are resold as part of a prepaid telephone calling service.

(3)       911 charges imposed under G.S. 62A‑4 or G.S. 62A‑23 and remitted to the Emergency Telephone System Fund under G.S. 62A‑7 or the Wireless Fund under G.S. 62A‑24.

(4)       Allowable surcharges imposed to recoup assessments for the Universal Service Fund.

(5)       Receipts of a pay telephone provider from the sale of pay telephone service.

(6)       Charges for commercial, cable, mobile, broadcast, or satellite video or audio service unless the service provides two‑way communication, other than the customer's interactive communication in connection with the customer's selection or use of the video or audio service.

(7)       Paging service, unless the service provides two‑way communication.

(8)       Charges for telephone service made by a hotel, motel, or another entity whose gross receipts are taxable under G.S. 105‑164.4(a)(3) when the charges are incidental to the occupancy of the entity's accommodations.

(9)       Receipts from the sale, installation, maintenance, or repair of tangible personal property.

(10)     Directory advertising and yellow‑page classified listings.

(11)     Repealed by Session Laws 2005‑276, s. 33.7, effective October 1, 2005.

(12)     Information services. – An information service is a service that can generate, acquire, store, transform, process, retrieve, use, or make available information through a communications service. Examples of an information service include an electronic publishing service and a web hosting service.

(13)     Internet access service, electronic mail service, electronic bulletin board service, or similar on‑line services.

(14)     Billing and collection services.

(15)     Charges for bad checks or late payments.

(16)     Charges to a State agency or to a local unit of government for the North Carolina Information Highway and other data networks owned or leased by the State or unit of local government.

(d)       Bundled Services. – When a taxable telecommunications service is bundled with a service that is not taxable, the tax applies to the gross receipts from the taxable service in the bundle as follows:

(1)       If the service provider offers all the services in the bundle on an unbundled basis, tax is due on the unbundled price of the taxable service, less the discount resulting from the bundling. The discount for a service as the result of bundling is the proportionate price decrease of the service, determined on the basis of the total unbundled price of all the services in the bundle compared to the bundled price of the services.

(2)       If the service provider does not offer one or more of the services in the bundle on an unbundled basis, tax is due on the taxable service based on a reasonable allocation of revenue to that service. If the service provider maintains an account for revenue from a taxable service, the service provider's allocation of revenue to that service for the purpose of determining the tax due on the service must reflect its accounting allocation of revenue to that service.

(e)       Private Line. – The gross receipts derived from private telecommunications service are sourced as follows:

(1)       If all the customer's channel termination points are located in this State, the service is sourced to this State.

(2)       If all the customer's channel termination points are not located in this State and the service is billed on the basis of channel termination points, the charge for each channel termination point located in this State is sourced to this State.

(3)       If all the customer's channel termination points are not located in this State and the service is billed on the basis of channel mileage, the following applies:

a.         A charge for a channel segment between two channel termination points located in this State is sourced to this State.

b.         Fifty percent (50%) of a charge for a channel segment between a channel termination point located in this State and a channel termination point located in another state is sourced to this State.

(4)       If all the customer's channel termination points are not located in this State and the service is not billed on the basis of channel termination points or channel mileage, a percentage of the charge for the service is sourced to this State. The percentage is determined by dividing the number of channel termination points in this State by the total number of channel termination points.

(f)        Call Center Cap. The gross receipts tax on telecommunications service that originates outside this State, terminates in this State, and is provided to a call center that has a direct pay permit issued by the Department under G.S. 105‑164.27A may not exceed fifty thousand dollars ($50,000) a calendar year. This cap applies separately to each legal entity.

(g)       Credit. – A taxpayer who pays a tax legally imposed by another state on a telecommunications service taxable under this section is allowed a credit against the tax imposed in this section.

(h)       Definitions. – The following definitions apply in this section:

(1)       Call‑by‑call basis. – A method of charging for a telecommunications service whereby the price of the service is measured by individual calls.

(2)       Call center. – Defined in G.S. 105‑164.27A.

(3)       Mobile telecommunications service. – Defined in G.S. 105‑164.3.

(4)       Place of primary use. – Defined in G.S. 105‑164.3.

(5)       Postpaid calling service. – A telecommunications service that is charged on a call‑by‑call basis and is obtained by making payment at the time of the call either through the use of a credit or payment mechanism, such as a bank card, travel card, credit card, or debit card, or by charging the call to a telephone number that is not associated with the origination or termination of the telecommunications service. A postpaid calling service includes a service that meets all the requirements of a prepaid telephone calling service, except the exclusive use requirement.

(6)       Prepaid telephone calling service. – Defined in G.S. 105‑164.3.

(7)       Private telecommunications service. – Telecommunications service that entitles a subscriber of the service to exclusive or priority use of a communications channel or group of channels.

(8)       Telecommunications service. – Defined in G.S. 105‑164.3. (2001‑430, s. 6; 2001‑487, ss. 67(a), (c), 69(b); 2002‑16, s 10; 2002‑16, ss. 6, 7, 8, 9, 11, 14; 2003‑416, s. 16(a); 2005‑276, ss. 33.6, 33.7.)