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ISP Phone Lines must pay Communications Excise Tax |
The U.S. Court of Appeals for the Federal Circuit ruled April 15 that an Internet service provider's incoming-only phone lines meet the definition of local telephone service in Section 4252(a) of the tax code and do not qualify for the section's private communication service exception. USA Choice Internet Services, LLC v. United States, [Fed Cir, 2008].
The decision reverses a November 2006 judgment of the U.S. Court of Federal Claims that granted USA Choice Internet Services, LLC a refund of communications excise taxes paid from January 1999 through April 2002 on various communications services purchased from local telephone companies.
The Federal Circuit agreed, finding that, while the lines were only used to receive incoming calls, two-way communication occurred once a customer logged on.
"While the 'access' prong of the statute is focused on connectivity, the 'communication with' prong refers to what happens after that connection is established," wrote Judge Richard Linn. "The issue therefore is whether two-way communication existed on USA Choice's incoming-only lines after a call was initiated.
"Here, even the authentication process demonstrates that two-way communication occurred during connections to USA Choice's network servers because a server communicated requests for user names and passwords, which were communicated back to the server by the subscribers who dialed the access number."
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