42-5064

42-5064. Telecommunications classification;
definitions

A. The telecommunications classification is comprised of the business of providing
intrastate telecommunications services. The telecommunications classification does not
include:

1. Sales of intrastate telecommunications services by a cable television system as
defined in section 9-505 or by a microwave television transmission system that transmits
television programming to multiple subscribers and that is operated pursuant to 47 Code
of Federal Regulations parts 21 and 74.

2. Sales of internet access or application services to the person's
subscribers and customers. For the purposes of this paragraph:

(a) "Application services" means software applications provided remotely using
hypertext transfer protocol or another network protocol and purchased by or for any
school district, charter school, community college or state university to assess or test
student learning or to promote curriculum design or enhancement.

(b) "Curriculum design or enhancement" means planning, implementing or reporting on
courses of study, lessons, assignments or other learning activities.

B. The tax base for the telecommunications classification is the gross proceeds of
sales or gross income derived from the business, including the gross income derived from
tolls, subscriptions and services on behalf of subscribers or from the publication of a
directory of the names of subscribers. However, the gross proceeds of sales or gross
income derived from the following shall be deducted from the tax base:

1. Sales of intrastate telecommunications services to:

(a) Other persons engaged in businesses classified under the telecommunications
classification for use in such business.

(b) A direct broadcast satellite television or data transmission service that
operates pursuant to 47 Code of Federal Regulations part 25 for use in its direct
broadcast satellite television or data transmission operation by a facility described in
section 42-5061, subsection B, paragraph 16, subdivision (b).

2. End user common line charges established by federal communications commission
regulations (47 Code of Federal Regulations section 69.104(a)).

3. Carrier access charges established by federal communications commission
regulations (47 Code of Federal Regulations sections 69.105(a) through 69.118).

4. Sales of direct broadcast satellite television services pursuant to 47 Code of
Federal Regulations part 25 by a direct broadcast satellite television service that
operates pursuant to 47 Code of Federal Regulations part 25.

5. Telecommunications services purchased with a prepaid calling card, or a prepaid
authorization number for telecommunications services, that is taxable under section
42-5061.

C. A person that is engaged in a transient lodging business subject to taxation
under section 42-5070 and that provides telephone, fax or internet access services to its
customers at an additional charge, which is separately stated on the customer invoice, is
considered to be engaged in business subject to taxation under this section for the
purposes of taxing the gross proceeds of sales or gross income derived from providing
those services.

D. The gross proceeds of sales or gross income derived from a bundled transaction
of services that are taxable pursuant to section 42-5023 are subject to the following:

1. A telecommunications service provider who can reasonably identify the portion of
the sales price of the bundled transaction derived from charges for nontaxable services
is subject to tax only on the gross proceeds of sales or gross income derived from the
taxable services. For the purposes of this section, the telecommunications service
provider may elect to reasonably identify the portion of the sales price of the bundled
transaction derived from charges for nontaxable services by using allocation percentages
derived from the telecommunications service provider's entire service area, including
territories outside of this state. On request, the department may require the
telecommunications service provider to provide this allocation information. The
reasonableness of the allocation is subject to audit by the department.

2. Notwithstanding sections 42-1118, 42-1120 and 42-1121, the telecommunications
service provider shall waive the right to file a claim for a refund of taxes paid on the
bundled transaction if the taxes paid are based on the allocation percentage the
telecommunications service provider had determined to be reasonable at the beginning of
the tax period at issue.

3. The burden of proof is on the telecommunications service provider to establish
that the gross proceeds of sales or gross income is derived from charges for nontaxable
services.

E. For the purposes of this section:

1. "Bundled transaction" means a sale of multiple services in which both of the
following apply:

(a) The sale consists of both taxable and nontaxable services.

(b) The telecommunications service provider charges a customer one sales price for
all services that are sold instead of separately charging for each individual service.

2. "Internet" means the computer and telecommunications facilities that comprise
the interconnected worldwide network of networks that employ the transmission control
protocol or internet protocol, or any predecessor or successor protocol, to communicate
information of all kinds by wire or radio.

3. "Internet access" means a service that enables users to access content,
information, electronic mail or other services over the internet. Internet access does
not include telecommunications services provided by a common carrier.

4. "Intrastate telecommunications services" means transmitting signs, signals,
writings, images, sounds, messages, data or other information of any nature by wire,
radio waves, light waves or other electromagnetic means if the information transmitted
originates and terminates in this state.