Indiana has released a new tax bulleting covering Telecommunications and Internet Services, effective immediately upon its publication in January 2023. Though services are not generally considered taxable retail services in Indiana, intrastate communications services are taxable when the customer is primarily using these services in the state of Indiana. Internet Services, however, are untaxed, as required by federal law.
Indiana defines telecommunication service as “electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point or between or among points” and includes those conveyances by computer applications, VOIP (Voice Over Internet Protocol) services, or any services the FCC classifies as enhanced or value-added service. However, telecommunication services specifically do not include the following:
The provider of any of these services, taxable or not, does not have to be a public utility for the tax requirements to apply, but in order to claim tax exemption, the charges must be either separately stated or identifiable in the records of the service provider. Telecommunication services also does not include nonvoice data services, and services that fall under this umbrella are thus tax exempt, which means services such as caller ID or multiple call lines are untaxable.
Mobile telecommunications services are taxable based on the customer’s place of usage—usually a home address. This taxation is provided for under the Mobile Telecommunications Sourcing Act and applies regardless of where transmissions begin or end within a home service provider’s licensed service area.
The prohibition of taxing internet access is a federal law- the Internet Tax Freedom Act of 1998 and its extensions. Indiana law follows suit and further prohibits taxation on internet services by the state or any division thereof. “Internet access” includes the purchase, use, or sales of telecommunication services to the extent those services are used to access the internet and its contents. Home pages, email, and messaging services are not under this exemption if they are provided independent of the internet access. There are additional distinctions in when it comes to taxation of income, capital stock, or property value, all of which are not under the same prohibition on taxation.
This bulletin is primarily intended to aid the general public and is not binding on either the department or taxpayer. However, it is important that users and suppliers of telecommunications services understand the distinctions between taxable and exempt services, especially the distinction between taxable mobile carrier phone services and tax-exempt internet access fees and installations of related and required wiring and TPP for both phone and internet services.
(Indiana Sales Tax Information Bulletin #51T, released January 2023 and effective upon publication, signed by R.J. Grennes, Jr, Commissioner, Indiana Department of Revenue)