SC REVENUE RULING #89-14
SUBJECT: Communications
(Sales and Use Tax)
EFFECTIVE DATE: Applies to all periods open under statute.
SUPERSEDES: All previous documents and any oral directives
in conflict herewith.
REFERENCE: S.C. Code Ann. Section 12-35-1150 (1976)
S.C. Code Ann. Section 12-35-140 (1976)
AUTHORITY: S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3
SCOPE: A Revenue Ruling is the commission's official
interpretation of how tax law is to be applied
to a specific set of facts. A Revenue Ruling is
public information and remains a permanent docu-
ment until superseded by a Regulation or is re-
scinded by a subsequent Revenue Ruling.
Question:
Are the communication services, listed in Exhibit "A", subject to the
sales and use tax, pursuant to Code Section 12-35-1150?
Facts:
Modern technology has developed many forms and methods of communications,
including telephone, telegraph, facsimile transmissions, database access,
electronic mail, etc.
Code Section 12-35-1150 provides a special tax imposition which reads:
Notwithstanding any other provision of law, the gross proceeds
accruing or proceeding from the charges for the ways or means
for the transmission of the voice or of messages, including the
charges for use of equipment furnished by the seller or supplier
of the ways or means for the transmission of the voice or of
messages, are subject to the license, sales or use tax, as pro-
vided by this chapter.
The term "tangible personal property", as used in Chapter 35 is defined at
Code Section 12-35-140, in part, as "personal property which may be seen,
weighed, measured, felt or touched or which is in any other manner
perceptible to the senses,..." The last paragraph of that Section reads:
For the purposes of this Chapter the term 'tangible personal
property' shall be interchangeable with and apply with equal
force and effect to services, accommodations and intangibles
including communications, as are specifically provided for in
this chapter. (emphasis added)
In addition, the term "retailer" as defined at Code Section 12-35-90(7)
includes "...every person engaged in the business of selling or furnishing
the ways or means for the transmission of the voice or of messages between
persons in this State for a consideration."
Code Section 12-35-550(10) provides the only exemption for the charges
taxed at Section 12-35-1150 . That section exempts "[t]he gross proceeds
from the toll charges for the transmission of voice or messages between
telephone exchanges and telegraph messages, and carrier access charges and
customers access line charges established by the Federal Communications
Commission or the South Carolina Public Service Commission."
Discussion:
One of the primary rules of statutory construction is that words used in a
statute should be taken in their ordinary and popular meaning, unless
there is something in the statute which requires a different interpreta-
tion. Hughes v. Edwards, 265 S.C. 529, 220 S.E. 2d 231(1975); Investors
Premium Corp. v. South Carolina Tax Commission, 260 S.C. 13, 193 SE 2d
642(1973). Also, where the terms of a statute are clear and unambiguous
and leave no room for construction, they must be applied according to
their literal meaning. Mitchell v. Mitchell 266 S.C. 196, 222 S.E. 2d 217
(1976); Green v. Zimmerman, 269 S.C. 535, 238 S.E. 2d 232 (1977).
The Code does not provide definitions for various terms or phrases found
in Section 12-35-1150; therefore, it is necessary to determine their
"ordinary and popular meaning."
It is an accepted practice in South Carolina to resort to the dictionary
to determine the literal meaning of words used in statutes. For cases
where this has been done, see Hay v. South Carolina Tax Commission, 273
S.C. 269, 255 S.E. 2d 837 (1979); Fennell v. South Carolina Tax
Commission, 233 S.C. 43, 102 S.E. 2d 424 (1958); Etiwan Fertilizer co. v.
South Carolina Tax Commission, 217 S.C. 354, 60 S.E. 2d 682 (1950).
The Second College Edition of the American Heritage Dictionary provides
the following definitions:
"Notwithstanding" - In spite of
"Gross" - Exclusive of deductions;
total
"Proceeds" - The amount of money derived from a com-
mercial or fund-raising venture; yield
-2-
"Way" - A manner of doing something
"Means" - A method, course of action, or instrument
by which an act can be accomplished or some
end achieved.
"Transmission" - The act or process of transmitting;
The state of being transmitted; Something
transmitted, as a voice or message
"Transmit" - Electronics: To send (a signal) as by wire
or radio
Substituting the above definitions for terms found in Section 12-35-1150,
the literal meaning becomes - In spite of any other provisions of law, the
total amount of money derived, exclusive of deductions, from a commercial
venture and accruing or proceeding from charges for the manner, method or
instruments for sending a signal of the voice or of messages is subject to
the license, sales or use taxes.
The definition of tangible personal property, as defined in Code Section
12-35-140, includes services and intangibles "specifically provided for"
in Chapter 35. A service or intangible "specifically provided for" in
that section is "communications." The Second College Edition of the
American Heritage Dictionary defines "communication", in part, as "[t]he
exchange of thoughts, messages or information, as by speech, signals or
writing". "Communications" is defined, in part, as, "a means of
communicating esp.: a system of sending and receiving messages, such as
mail, telephone and television".
Furthermore, the Commission, in a Decision dated June 6, 1989 concerning
a company which transmitted stock quotes and other financial information
via leased telephone lines, held that the charges accruing from the
providing of information were subject to the tax.
The Commission held that:
[I]t is established that intangibles "including communi-
cations" are within the meaning of tangible personal
property where as here another provision of the sales
tax law, Section 12-35-1150, taxes such communication.
The question of what is being sold is answered by
reading Sections 12-35-140 and 12-35-1150 together.
Those statutes identify the sale of communication as
being taxable. Since words in a tax statute are to be
understood in their ordinary and popular meaning, it is
appropriate to determine the general usage of the word
"communication." Beach v. Livingston, 248 S.C. 135, 149
S.E.2d 328 (1966). Communication has been generally
defined as the act of communicating, transmission, the
exchange of thoughts, messages or the like, as by
speech, signals or writing. Thus, the act of
transmitting messages cannot be incidental to the
information transmitted where by definition communica-
tion includes both the transmission and the message.
-3-
The message and the transmission are integral and
indivisible parts of communication and hence neither is
incidental to the other. Since extensive use of the
ways and means of transmitting communication is sold by
[XYZ] the value proceeding from the sale of such is
within the meaning of gross proceeds and is subject to
tax.
In summary, charges taxable under Code Section 12-35-1150 include, not
only the charge for sending a message, but, also charges for the
information (message) itself. One cannot be separated from the other.
Furthermore, in 1982 Op. Att'y Gen. No. 82-41, which concluded that
charges for cable television services are taxable, it was stated:
...,the question becomes one of statutory construction.
Where a statute is expressed in broad and general terms
and words of present or future tense are used, it will be
applied, not only to situations existing and known at the
time of the enactment, but also prospectively to things
and conditions that come into existence thereafter.
82 CJS, Statutes, [Section]319
In addition, [section] 2-7-30 provides further guidance
as to the construction of statutes. It states 'words
importing present tense shall apply to the future also'.
Hence, the South Carolina Code of Laws specifically calls
for such prospective or expansive treatment where
applicable.
In other words, the language of Code Section 12-35-1150 is such that it may
be applied to technologies not in existence at the time the Section was
enacted.
Conclusion:
The communication services, listed in Exhibit "A", are within the provi-
sions of Code Section 12-35-1150 and, therefore, subject to the sales and
use tax.
However, it should be noted that Exhibit "A" is not all inclusive and that
other services, whether existing presently or in the future, may be subject
to the tax.
NOTE: If there is a question as to the taxability, under Code
Section 12-35-1150, of services not listed in Exhibit "A",
a written determination can be requested, pursuant to Revenue
Procedure #87-3.
-4-
SOUTH CAROLINA TAX COMMISSION
S. Hunter Howard, Jr., Chairman
A. Crawford Clarkson, Jr., Commissioner
Columbia, South Carolina
19
-5-
Exhibit "A"
Communication Services
Facsimile:
Process of transmitting exact copies of written, printed and
pictorial material over telephone lines (or optical fiber
cables). Images are converted by photoelectric cells, which
read the amount of light reflected from or transmitted through
a document, into electric signals, which are sent through the
transmission network. Signals are picked up by a facsimile
receiver, which reproduces the original document by the reverse
process.
Database Access Transmission:
Transmission of computer database information and programs by
and through a modem and telephone lines, whether automatically
transmitted or transmitted as a result of a subscriber access-
ing a computer. Charges may be based on the amount of time the
transmission is utilized.
Electronic Mail:
Messages that are transmitted from computer to computer over
telephone lines under the direction of an intermediate
service. This service is a "host" computer that receives
messages, holds them and sends them to the proper destination.
Users need a microcomputer, or any computer, a modem, a
printer, a telephone line and an electronic mail service.
Credit Reporting:
Transmission of credit data using electronic means and/or
computers, communication networks, CRT's and printers.
Voice Messaging:
Process of recording messages for a particular person or firm
into a central computer database and activating the message to
that person or firm when the computer is accessed for the
messages.
|
