Subchapter B - Communications

26 USC 4251 - Imposition of tax

(a) Tax imposed

(1) In general
There is hereby imposed on amounts paid for communications services a tax equal to the applicable percentage of amounts so paid.

(2) Payment of tax
The tax imposed by this section shall be paid by the person paying for such services.

(b) Definitions
For purposes of subsection (a)

(1) Communications services
The term communications services means

(A) local telephone service;

(B) toll telephone service; and

(2) Applicable percentage
The term applicable percentage means 3 percent.

(c) Special rule
For purposes of subsections (a) and (b), in the case of communications services rendered before November 1 of a calendar year for which a bill has not been rendered before the close of such year, a bill shall be treated as having been first rendered on December 31 of such year.

(d) Treatment of prepaid telephone cards

(1) In general
For purposes of this subchapter, in the case of communications services acquired by means of a prepaid telephone card

(A) the face amount of such card shall be treated as the amount paid for such communications services, and

(B) that amount shall be treated as paid when the card is transferred by any telecommunications carrier to any person who is not such a carrier.

(2) Determination of face amount in absence of specified dollar amount
In the case of any prepaid telephone card which entitles the user other than to a specified dollar amount of use, the face amount shall be determined under regulations prescribed by the Secretary.

(3) Prepaid telephone card
For purposes of this subsection, the term prepaid telephone card means any card or any other similar arrangement which permits its holder to obtain communications services and pay for such services in advance.

26 USC 4252 - Definitions

(a) Local telephone service
For purposes of this subchapter, the term local telephone service means

(1) the access to a local telephone system, and the privilege of telephonic quality communication with substantially all persons having telephone or radio telephone stations constituting a part of such local telephone system, and

(2) any facility or service provided in connection with a service described in paragraph (1).

The term local telephone service does not include any service which is a toll telephone service or a private communication service as defined in subsections (b) and (d).

(b) Toll telephone service
For purposes of this subchapter, the term toll telephone service means

(1) a telephonic quality communication for which

(A) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and

(B) the charge is paid within the United States, and

(2) a service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located.

(c) Teletypewriter exchange service
For purposes of this subchapter, the term teletypewriter exchange service means the access from a teletypewriter or other data station to the teletypewriter exchange system of which such station is a part, and the privilege of intercommunication by such station with substantially all persons having teletypewriter or other data stations constituting a part of the same teletypewriter exchange system, to which the subscriber is entitled upon payment of a charge or charges (whether such charge or charges are determined as a flat periodic amount, on the basis of distance and elapsed transmission time, or in some other manner). The term teletypewriter exchange service does not include any service which is local telephone service as defined in subsection (a).

(d) Private communication service
For purposes of this subchapter, the term private communication service means

(1) the communication service furnished to a subscriber which entitles the subscriber

(A) to exclusive or priority use of any communication channel or groups of channels, or

(B) to the use of an intercommunication system for the subscribers stations,

regardless of whether such channel, groups of channels, or intercommunication system may be connected through switching with a service described in subsection (a), (b), or (c),

(2) switching capacity, extension lines and stations, or other associated services which are provided in connection with, and are necessary or unique to the use of, channels or systems described in paragraph (1), and

(3) the channel mileage which connects a telephone station located outside a local telephone system area with a central office in such local telephone system,

except that such term does not include any communication service unless a separate charge is made for such service.

26 USC 4253 - Exemptions

(a) Certain coin-operated service
Service paid for by inserting coins in coin-operated telephones available to the public shall not be subject to the tax imposed by section 4251 with respect to local telephone service, or with respect to toll telephone service if the charge for such toll telephone service is less than 25 cents; except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be subject to the tax.

(b) News services
No tax shall be imposed under section 4251, except with respect to local telephone service, on any payment received from any person for services used in the collection of news for the public press, or a news ticker service furnishing a general news service similar to that of the public press, or radio broadcasting, or in the dissemination of news through the public press, or a news ticker service furnishing a general news service similar to that of the public press, or by means of radio broadcasting, if the charge for such service is billed in writing to such person.

(c) International, etc., organizations
No tax shall be imposed under section 4251 on any payment received for services furnished to an international organization, or to the American National Red Cross.

(d) Servicemen in combat zone
No tax shall be imposed under section 4251 on any payment received for any toll telephone service which originates within a combat zone, as defined in section 112, from a member of the Armed Forces of the United States performing service in such combat zone, as determined under such section, provided a certificate, setting forth such facts as the Secretary may by regulations prescribe, is furnished to the person receiving such payment.

(e) Items otherwise taxed
Only one payment of tax under section 4251 shall be required with respect to the tax on any service, notwithstanding the lines or stations of one or more persons are used in furnishing such service.

(f) Common carriers and communications companies
No tax shall be imposed under section 4251 on the amount paid for any toll telephone service described in section 4252 (b)(2) to the extent that the amount so paid is for use by a common carrier, telephone or telegraph company, or radio broadcasting station or network in the conduct of its business as such.

(g) Installation charges
No tax shall be imposed under section 4251 on so much of any amount paid for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment as is properly attributable to such installation.

(h) Nonprofit hospitals
No tax shall be imposed under section 4251 on any amount paid by a nonprofit">nonprofit hospital for services furnished to such organization. For purposes of this subsection, the term nonprofit">nonprofit hospital means a hospital referred to in section 170 (b)(1)(A)(iii) which is exempt from income tax under section 501 (a).

(i) State and local governmental exemption
Under regulations prescribed by the Secretary, no tax shall be imposed under section 4251 upon any payment received for services or facilities furnished to the government of any State, or any political subdivision thereof, or the District of Columbia.

(j) Exception for nonprofit">nonprofit educational organizations
Under regulations prescribed by the Secretary, no tax shall be imposed under section 4251 on any amount paid by a nonprofit">nonprofit educational organization for services or facilities furnished to such organization. For purposes of this subsection, the term nonprofit">nonprofit educational organization means an educational organization described in section 170 (b)(1)(A)(ii) which is exempt from income tax under section 501 (a). The term also includes a school operated as an activity of an organization described in section 501 (c)(3) which is exempt from income tax under section 501 (a), if such school normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.

(k) Exemption for qualified blood collector organizations
Under regulations provided by the Secretary, no tax shall be imposed under section 4251 on any amount paid by a qualified blood collector organization (as defined in section 7701 (a)(49)) for services or facilities furnished to such organization.

(l) Filing of exemption certificates

(1) In general
In order to claim an exemption under subsection (c), (h), (i), (j), or (k), a person shall provide to the provider of communications services a statement (in such form and manner as the Secretary may provide) certifying that such person is entitled to such exemption.

(2) Duration of certificate
Any statement provided under paragraph (1) shall remain in effect until

(A) the provider of communications services has actual knowledge that the information provided in such statement is false, or

(B) such provider is notified by the Secretary that the provider of the statement is no longer entitled to an exemption described in paragraph (1).

If any information provided in such statement is no longer accurate, the person providing such statement shall inform the provider of communications services within 30 days of any change of information.

26 USC 4254 - Computation of tax

(a) General rule
If a bill is rendered the taxpayer for local telephone service or toll telephone service

(1) the amount on which the tax with respect to such services shall be based shall be the sum of all charges for such services included in the bill; except that

(2) if the person who renders the bill groups individual items for purposes of rendering the bill and computing the tax, then

(A) the amount on which the tax with respect to each such group shall be based shall be the sum of all items within that group, and

(B) the tax on the remaining items not included in any such group shall be based on the charge for each item separately.

(b) Where payment is made for toll telephone service in coin-operated telephones
If the tax imposed by section 4251 with respect to toll telephone service is paid by inserting coins in coin-operated telephones, tax shall be computed to the nearest multiple of 5 cents, except that, where the tax is midway between multiples of 5 cents, the next higher multiple shall apply.

(c) Certain State and local taxes not included
For purposes of this subchapter, in determining the amounts paid for communications services, there shall not be included the amount of any State or local tax imposed on the furnishing or sale of such services, if the amount of such tax is separately stated in the bill.