PART 495 TELECOMMUNICATIONS EXCISE TAX : Sections Listing

TITLE 86: REVENUE
CHAPTER I: DEPARTMENT OF REVENUE
PART 495 TELECOMMUNICATIONS EXCISE TAX

AUTHORITY: Implementing the Telecommunications Excise Tax Act [35 ILCS 630] and authorized by Section 17 of the Telecommunications Excise Tax Act [35 ILCS 630/17].

SOURCE: Adopted at 14 Ill. Reg. 11321, effective July 1, 1990; amended at 21 Ill. Reg. 13658, effective September 29, 1997; amended at 22 Ill. Reg. 11886, effective June 29, 1998; amended at 24 Ill. Reg. 12082, effective July 28, 2000; amended at 25 Ill. Reg. 197, effective December 26, 2000; amended at 25 Ill. Reg. 5034, effective March 19, 2001; amended at 27 Ill. Reg. 9614, effective June 13, 2003; amended at 42 Ill. Reg. 19044, effective October 3, 2018; amended at 45 Ill. Reg. 14494, effective November 2, 2021; amended at 47 Ill. Reg. 1467, effective January 17, 2023; amended at 47 Ill. Reg. 5816, effective April 4, 2023.

 

Section 495.100  Meaning of "Gross Charges"

 

a)         "Gross charge" means the amount paid for the act or privilege of originating or receiving telecommunications in this State and for all services and equipment provided in connection therewith by a retailer, valued in money, whether paid in money or otherwise, including cash, credits, services and property of every kind or nature, and shall be determined without any deduction on account of the cost of those telecommunications, the cost of materials used, labor or service cost or any other expense whatsoever.  (Section 2(a) of the Telecommunications Excise Tax Act (the Act) [35 ILCS 630/2(a)]  A retailer may provide services to customers that are not provided in connection with originating or receiving telecommunications.  If those services are not necessary for or directly related to the retailer's provision of telecommunications to customers and the charges for the services are disaggregated and separately identified from other charges, the charges need not be included in "Gross charges".  Without limitation, examples of services not included in "Gross charges" are directory advertising; specialized designing and/or engineering services; specialized security measures; and consulting services.

 

b)         "Gross charges"  shall not include charges for customer equipment, including equipment that is leased or rented by the customer from any source, wherein those charges are disaggregated and separately identified from other charges (Section 2(a)(4) of the Act).  Customer equipment includes, but is not limited to, all items generally classified as customer equipment or terminal equipment, such as telephone instruments and station sets, dialers, modems, private branch exchanges (PBXs), inside wiring, facsimile machines, pagers and non-electronic associated items such as documentation, manuals and furniture.  Items of customer equipment, including maintenance and miscellaneous services, may be leased, rented or sold to one customer or a group of customers without being included in the gross charges, but will be subject to retailer's occupation or use taxes. To be exempt, the charges for customer equipment must be disaggregated and separately identified from other charges in the books and records of the retailer.

 

c)         "Gross charges" does not include charges for the storage of data or information for subsequent retrieval or charges for the processing of data or information intended to change its form or content (Section 2(a)(3) of the Act).  Charges for answering services, for example, whether provided electronically or by live operators, represent charges for the storage of information or data for subsequent retrieval, and are not subject to tax, provided that these charges, if provided in connection with taxable telecommunications, are disaggregated and separately identified in the books and records of the retailer.  Charges for automated data storage, retrieval and processing services or for the use of computer time or other equipment are not included in gross charges.  Automated information retrieval or data processing charges are not included in gross charges.  For example, a customer who accesses an on-line computer data base would not be subject to tax on the charge for the data processing or inquiry, but would be subject to tax on the charge for the transmission of the data.  If a telecommunications retailer provides both transmission and data processing services, the charges for each must be disaggregated and separately identified in the books and records of the retailer.

 

d)         Value added services in which computer processing applications are used to act on the form, content, code and protocol of the information for purposes other than transmission are exempt (Section 2(c) of the Act).  For example, the charges for computer data, protocol conversions that permit computers to exchange data, no matter which languages or protocols a computer's out-put may be in, and packet-switching, which groups data into packets for efficiency of transmission, would be exempt.

 

e)         Advertising revenue either from online directory sales (e.g., yellow pages) or from message additions to telecommunications service are not included in gross charges.  For example, revenues from an advertising message preceding a time/weather call are not included in gross charges.

 

f)         Contributions to a telethon fund-raising campaign are not included in gross charges.

 

g)         Gross charges shall include, but are not limited to, charges for unlisted or unpublished numbers, operator assistance, directory information, call-waiting, call-forwarding, and burglar alarm services provided by telecommunications retailers.

 

h)         A caller located in Illinois who calls a 900 number and receives a billing for that call at his or her service address will have made a call subject to Telecommunications Excise Tax.  The invoice to the caller for a 900 number call need not separately state the line charge and tax specifically. However, the telecommunications retailer is responsible for remitting the tax due on the line charge.

 

i)          Gross charges shall include the transmission charges for premium services. Time/weather, gab line/party line and other public announcement services of information and entertainment, and charges for the message content or information of those services, are not included in gross charges.

 

EXAMPLE:  A call to a 900 code number is made to register an opinion in a poll.  The caller is billed $1.00.  $.80 is the transmission charge.  $.80 is included in gross charges.

 

j)          Charges for billing and collection received by telecommunications retailers from persons selling services or products to the telecommunications retailer's customers, which are billed and collected by the telecommunications retailer, are not included in gross charges.

 

EXAMPLE:    A call to a 900 code number to sell a product is billed by the telecommunications retailer as follows:

 

$25.00

service charge to caller for product or service

 

 

$    .30

call charge (15¢ call, 15¢ billing and collection)

 

 

$    .15

billing and collection charge is not included in gross charges

 

 

$25.00

is not included in gross charges

 

 

$    .15

is included in gross charge

 

k)         Billing and collections charges paid by persons selling services or products to telecommunications retailer's customers or billing and collections charges paid by telecommunications retailers to credit card companies whose holders have charged calls are not includable in gross charges.

 

l)          Taxes imposed on consumers for community 911 service, lifeline service or other services required by regulatory authorities or government are not includable in gross charges.

 

m)        Generally, persons that provide customers access to the Internet (Internet Service Providers or ISPs) and who do not, as part of that service, charge customers for the line or other transmission charges that are used to obtain access to the ISP's server or other point of access, are not considered to be telecommunications retailers from these activities.  This is the case so long as such ISPs do not, as part of their billing, charge customers for those line charges and instead pay their telecommunications suppliers all transmission costs that they incur in providing the Internet service.  In this situation, an ISP's customer pays his or her telecommunications supplier for all transmission costs incurred while using the service.  The single monthly fee charged by the ISP, which often represents a flat charge for a package of items including Internet access, e-mail, and electronic newsletters, would generally not be subject to tax.  If, however, the ISP charges customers for line or other transmission charges, it should provide its telecommunications suppliers with Certificates of Resale and should collect and remit the tax.  For example, if an ISP provides customers with Internet access, as described in this subsection, but also provides customers the use of a 1-800 service to access the ISP, and separately assesses customers per minute charges for the use of the 1-800 service, the ISP is considered a telecommunications retailer and incurs Telecommunications Excise Tax on the charges made for the 1-800 service.  If the charges are not disaggregated as provided in subsection (c), all charges are subject to the Telecommunications Excise Tax.

 

n)         "Gross charges" for private line service shall include: 

 

1)         charges imposed at each channel point within this State;

 

2)         charges for the channel mileage between each channel point within this State; and

 

3)         charges for that portion of the interstate inter-office channel provided within Illinois. Charges for that portion of the interstate inter-office channel provided in Illinois shall be determined by the retailer as follows:

 

A)        For interstate inter-office channels having 2 channel termination points, only one of which is in Illinois, tax may be imposed on 50% of the total charge imposed.  For example, tax would be imposed on 50% of the total charge for a private line with one termination point in Chicago and one termination point in San Francisco.

 

B)        For interstate inter-office channels having more than 2 channel termination points, one or more of which are in Illinois, tax may be imposed on an amount equal to the total charge multiplied by a fraction, the numerator of which is the number of channel termination points within Illinois and the denominator of which is the total number of channel termination points.  For example, Illinois would receive tax on 60% of the total charge for a private line that had 3 termination points in Illinois, 1 termination point in New York and 1 termination point in Los Angeles.  Using the same apportionment rule, New York and Los Angeles would each receive tax on 20% of the total charge.

 

C)        Tax may be imposed using any other method that reasonably apportions the total charges for interstate inter-office channels among the states in which channel termination points are located.  (Section 2(a) of the Act) For instance, the Illinois mileage of the channel could be calculated by determining a fraction, the numerator of which is the actual measured Illinois miles of that channel and the denominator of which is the actual measured route miles of the entire channel.  If it is impossible for a retailer to measure actual route miles, a method that accurately approximates the Illinois route miles of an interstate inter-office channel and accurately approximates the route miles of the entire channel can be used (e.g., the use of straight-line air miles).  Any method of approximation used by a telecommunications provider shall be subject to verification by the Department.

 

(Source:  Amended at 42 Ill. Reg. 19044, effective October 3, 2018)

 

Section 495.105  Exemptions

 

The exemption for State Governments and State universities created by statute extends only to telecommunications purchased by such entities for their own use.  Such entities are not exempt from the obligation to collect and remit tax on sales of telecommunications to others when they act as retailers of telecommunications.  For example, a university would be exempt from Telecommunications Excise Tax on purchases, by the university, of telecommunications services for use by its faculty and staff in the course of their duties.  However, the same university would have an obligation to collect and remit tax on sales of telecommunications services to students in university dormitories.

 

(Source:  Amended at 22 Ill. Reg. 11886, effective June 29, 1998)

 

Section 495.110  Retailers

 

Retailers of telecommunications are persons who engage in the business of making sales of telecommunications at retail. This includes retailers who operate or provide radio repeater services, paging services, facsimile transmission services and party line services. Hotels and other traffic aggregators who sell telecommunications to guests or other persons at retail are retailers of telecommunications.

 

Section 495.111  Registration of Retailers

 

a)         Every retailer shall apply to the Department for a certificate of registration. The application to register must be made on a form prescribed and furnished by the Department for that purpose. Applications to register may be found and submitted electronically on the Department's website at www.tax.illinois.gov.

 

b)         Each application shall be signed and verified and shall state: 

 

1)         the name and social security number of the applicant;

 

2)         the address of the retailer's principal place of business;

 

3)         the address of the place of business from which the retailer engages in the business of selling telecommunications in this State and the addresses of all other places of business, if any (enumerating such addresses, if any, in a separate list attached to and made a part of the application) from which the retailer engages in the business of selling telecommunications in this State;

 

4)         the name and address of the person or persons who will be responsible for filing returns and payment of taxes due under the Act;

 

5)         in the case of a publicly traded corporation, the name and title of the Chief Financial Officer, Chief Operating Officer, and any other officer or employee with responsibility for preparing tax returns under the Act; and, in the case of all other corporations, the name, title, and social security number of each corporate officer; and

 

6)         in the case of a limited liability company, the name, social security number, and FEIN of each manager and member.

 

c)         Upon completion of the form described in subsection (a), the Department shall issue to the applicant a certificate of registration that shall permit the person to whom it is issued to engage in business as a retailer of telecommunications in this State. If an applicant engages in the business of telecommunications at another location in this State, the Department shall furnish the applicant with a sub-certificate of registration for that place of business, and the applicant shall display the appropriate sub-certificate of registration at that place of business. The sub-certificate of registration shall bear the same registration number as that appearing upon the certificate of registration to which the sub-certificate relates.

 

d)         A certificate of registration will be valid for 1 year and will automatically be renewed, subject to revocation as provided by Section 495.112, in 1 year increments from the date of its expiration, unless otherwise notified by the Department as provided in this Section.

 

e)         The Department may refuse to issue, reissue, or renew a certificate of registration, permit, or license authorized to be issued by the Department if a person who is named as the owner, a partner, a corporate officer, or, in the case of a limited liability company, a manager or member, of the applicant on the application for the certificate of registration, permit, or license is or has been named as the owner, a partner, a corporate officer, or, in the case of a limited liability company, a manager or member, on the application for the certificate of registration of a person that is in default for moneys due under the tax or fee Act upon which the certificate of registration, permit, or license is required or any other tax or fee Act administered by the Department. For purposes of this Section only, in determining whether a person is in default for moneys due, the Department shall include only amounts established as a final liability within the 23 years prior to the date of the Department's notice of refusal to issue or reissue the certificate of registration, permit, or license. [20 ILCS 2505/2505-380(b)]

 

f)         When a taxpayer to whom a certificate of registration is issued under the Act is in default to the State of Illinois for delinquent returns or for moneys due under the Act or any other State tax or fee Act or municipal or county ordinance administered or enforced by the Department, the Department shall, not less than 60 days before the expiration of the certificate of registration, give notice to the taxpayer to whom the certificate was issued, of the following:

 

1)         the account period of the delinquent returns;

 

2)         the amount of tax, penalty and interest due and owing from the taxpayer; and

 

3)         that the certificate of registration shall not be automatically renewed upon its expiration date unless the taxpayer, on or before the date of expiration, has filed and paid the delinquent returns or paid the defaulted amount in full.

 

g)         The Department shall approve renewal by a taxpayer who is in default if, at the time of renewal, the taxpayer files all of the delinquent returns or pays to the Department the percentage of the defaulted amount as may be determined by the Department and agrees in writing to a payment plan for paying the balance of the defaulted amount.

 

h)         Any person aggrieved by any decision of the Department under this Section may, within 20 days after notice of the decision, protest and request a hearing pursuant to procedures outlined in 86 Ill. Adm. Code 200 et seq. After receipt of the request for a hearing, the Department shall give notice to the person of the time and place fixed for the hearing, shall hold a hearing, and shall issue its final administrative decision in the matter to the person. In the absence of a protest within 20 days, the Department's decision shall become final without any further determination being made or notice given.

 

(Source:  Amended at 47 Ill. Reg. 1467, effective January 17, 2023)

 

Section 495.112  Revocation of Certificate of Registration

 

a)         The Department has the power, after notice and an opportunity for a hearing, to revoke a certificate of registration, permit, or license issued by the Department if the holder of the certificate of registration, permit, or license fails to file a return, or to pay the tax, fee, penalty, or interest shown in a filed return, or to pay any final assessment of tax, fee, penalty, or interest, as required by the tax or fee Act under which the certificate of registration, permit, or license is required or any other tax or fee Act administered by the Department.  [20 ILCS 2505/2505-380(a)]

 

b)         The Department, after notice and hearing, shall revoke the certificate of registration (including all sub-certificates of registration, if any, issued under Section 495.111) of any retailer who violates any of the provisions of the Act or this Part.  Before revocation of a certificate of registration, the Department shall, within 90 days after non-compliance and at least 7 days prior to the date of the hearing, give the retailer notice in writing of the charge against the retailer, and on the date designated shall conduct a hearing upon this matter pursuant to procedures outlined in 86 Ill. Adm. Code 200 et seq.  The lapse of the 90-day period shall not preclude the Department from conducting revocation proceedings at a later date if necessary.

 

(Source:  Added at 45 Ill. Reg. 14494, effective November 2, 2021)

 

Section 495.115  Interstate

 

Interstate telecommunications means all telecommunications that either originate or terminate outside the State. This includes telecommunications that originate or terminate outside of the United States. Consumers paying foreign taxes on telecommunications may take credit for such taxes in the same manner as taxes paid to other states.

 

Section 495.120  Mobile Operations – Service Address

 

When the "service address" is not a defined location, as in the case of mobile phones, paging systems, or maritime systems, "service address" means the customer's place of primary use as defined in the Mobile Telecommunications Sourcing Conformity Act [35 ILCS 638]. (Section 2(n) of the Act)

 

(Source:  Amended at 42 Ill. Reg. 19044, effective October 3, 2018)

 

Section 495.125  Responsibility for Accounting and Payment of Tax

 

If a local exchange carrier acts as an agent of a long distance carrier, inter-exchange carrier, alternative operator service, or billing and collections contractor and bills local customers for long distance service and local service as well as the tax applicable for such services, and remits a part of the collections to its principal, the local exchange carrier or retailer is liable only for such amounts as it retains, but is required to maintain and provide billing data and accounting data to the other party and the Department of Revenue. Amounts remitted to principals are their responsibility. Long distance carriers, inter-exchange carriers and other retailers who retain local exchange carriers, or other agents in Illinois to bill and collect gross charges from customers in Illinois, are considered to be retailers maintaining a place of business in Illinois and must register with the Department and file returns.

 

Section 495.130  Credits

 

a)         Retailers who have paid Telecommunications Excise Tax to a local exchange carrier, or other retailers, on basic line charges or other services, and who have resold those services, may take a direct deduction of such taxes without filing a claim with the Department. Consumers who have paid tax to Illinois and another jurisdiction on a particular call may file a direct claim with the Department.

 

b)         As to any claim for credit or refund filed with the Department on or after each January 1 and July 1, no amounts erroneously paid more than 3 years prior to

such January 1 and July 1, respectively, shall be credited or refunded, except that if both the Department and the taxpayer have agreed to an extension of time to issue a notice of tax liability under this Act, the claim may be filed at any time prior to the expiration of the period agreed upon.

 

c)         Beginning June 25, 2021, for any period included in a claim for credit or refund for which the statute of limitations for issuing a notice of tax liability under this Act will expire less than 6 months after the date a taxpayer files the claim for credit or refund, the statute of limitations is automatically extended for 6 months from the date it would have otherwise expired.  [35 ILCS 630/10].

 

d)         The claim must be accompanied by documentation which would include the billing reflecting tax charged to the taxpayer and relating the tax charges to specific calls or transactions.

 

e)         For example, a corporation might have its service address in Illinois and its billing address in a state which imposes tax based upon its billing address. If the same call is subject to tax in Illinois because it originated in Illinois, and was charged to a service address in Illinois, and is subject to tax in another state because it terminated in the other state, and was billed to a billing address in that other state, a credit is available in Illinois to the extent of the tax imposed by the other state, but not exceeding the tax due on that call in Illinois.

 

(Source:  Amended at 47 Ill. Reg. 5816, effective April 4, 2023)

 

Section 495.135  Tax Returns – When Due – Contents

 

a)         Monthly Returns

            On or before the 15th day of each calendar month, each retailer maintaining a place of business in this State shall make a return to the Department for the preceding calendar month, stating the following:

 

1)         Retailer's name.

 

2)         The address of the principal place of business, and the address of the principal place of business (if that is a different address) from which the retailer engages in the business of transmitting telecommunications.

 

3)         Total amount of gross charges billed by the retailer during the preceding calendar month for providing telecommunications during such calendar month.

 

4)         Total amount received by the retailer during the preceding calendar month on credit extended.

 

5)         Deductions allowed by law.

 

6)         Gross charges billed by the retailer during the preceding calendar month and upon the basis of which the tax is imposed.

 

7)         Amount of tax (computed upon Item 6).

 

b)         Quarterly Returns

            If the retailer's average monthly tax billings due to the Department do not exceed $200, the Department may authorize the returns to be filed on a quarter annual basis, with the return for January, February, and March of a given year being due by April 15 of such year; with the return for April, May, and June of a given year being due by July 15 of such year; with the return for July, August, and September of a given year being due by October 15 of such year; and with the return for October, November, and December of a given year being due by January 15 of the following year.  Such quarterly returns, as to form and substance, shall be subject to the same requirements as monthly returns.

 

c)         Annual Returns

            If the retailer is otherwise required to file a monthly or quarterly return and if the retailer's average monthly tax billings due to the Department do not exceed $50, the Department may authorize the return to be filed on an annual basis, with the return for a given year being due by January 15 of the following year. Such annual returns, as to form and substance, shall be subject to the same requirements as monthly returns.

 

d)         Quarter Monthly Payments in Certain Instances

            Each retailer whose average monthly liability to the Department was $10,000 or more during the preceding calendar year, excluding the month of highest liability and the month of lowest liability in such calendar year, and who is not operated by a unit of local government, shall make estimated payments to the Department on or before the 7th, 15th, 22nd and last day of the month during which tax collection liability to the Department is incurred in an amount not less than the lower of either 22.5% of the retailer's actual tax collections for the month or 25% of the retailer's actual tax  collections for the same calendar month of the preceding year.  The amount of such quarter monthly payments shall be credited against the final liability of the retailer's return for that month.  Any outstanding credit, approved by the Department, arising from the retailer's overpayment of its final liability for any month may be applied to reduce the amount of any subsequent quarter monthly payment or credited against the final liability of the retailer's return for any subsequent month.  If any quarter monthly payment is not paid at the time or in the amount required by this Section, the retailer shall be liable for penalty and interest on the difference between the minimum amount due as a payment and the amount of such payment actually and timely paid, except insofar as the retailer has previously made payments for that month to the Department in excess of the minimum payments previously due.

 

e)         Direct Return by Taxpayer

            When a taxpayer does not pay the Telecommunications Excise Tax to a retailer, such taxpayer shall file a return with the Department and pay the tax upon that portion of gross charges so paid to the retailer during the preceding calendar month by the 15th day of the month following that month.  When a taxpayer pays the Telecommunications Excise Tax directly to the Department, the Department (upon request from the taxpayer) shall issue an appropriate receipt to the taxpayer showing that the taxpayer has paid the tax to the Department. The receipt shall be sufficient to relieve the taxpayer from further liability for the amount of tax to which the receipt may refer.

 

(Source:  Added at 24 Ill. Reg. 12082, effective July 28, 2000)

 

Section 495.140  Imposition of Telecommunications Excise Tax

 

a)         The Telecommunications Excise Tax is imposed upon the act or privilege of originating or receiving intrastate or interstate telecommunications in Illinois at the rate of 7% of the gross charge for such telecommunications purchased at retail from retailers.  On and after January 1, 2001, prepaid telephone calling arrangements shall not be considered telecommunications subject to the Telecommunications Excise Tax. (Sections 3 and 4 of the Act) "Prepaid telephone calling arrangements" means the right to exclusively purchase telephone or telecommunications services that must be paid for in advance and enable the origination of one or more intrastate, interstate, or international telephone calls or other telecommunications using an access number, an authorization code, or both, whether manually or electronically dialed, for which payment to a retailer must be made in advance, provided that, unless recharged, no further service is provided once that prepaid amount of service has been consumed.  Prepaid telephone calling arrangements include the recharge of a prepaid calling arrangement.  For purposes of this Section, "recharge" means the purchase of additional prepaid telephone or telecommunications services whether or not the purchaser acquires a different access number or authorization code.  For purposes of this Section, "telecommunications" means that term as defined in Section 2 of the Telecommunications Excise Tax Act [35 ILCS 630].  "Prepaid telephone calling arrangement" does not include an arrangement whereby a customer purchases a payment card and pursuant to which the service provider reflects the amount of the purchase as a credit on an account for a customer under an existing subscription plan. (Section 2 of the Act)

 

b)         The Telecommunications Excise Tax must be collected from a taxpayer by a "retailer maintaining a place of business in this State".

 

1)         "Retailer maintaining a place of business in this State" means and includes any retailer having or maintaining within this State, directly or by a subsidiary, an office, distribution facilities, transmission facilities, sales office, warehouse or other place of business, or any  agent or other representative operating within this State under the authority of the retailer or its subsidiary, irrespective of whether such place of business or agent or other representative is located here permanently or temporarily, or whether such retailer or subsidiary is licensed to do business in this State. (Section 2(m) of the Act)

 

2)         Retailers maintaining a place of business in this State shall collect the tax from the taxpayer by adding the tax to the gross charge for the act or privilege of originating or receiving telecommunications in this State, when sold for use.  Whenever possible, the tax shall be stated as a distinct item separate and apart from the gross charge for telecommunications.

 

(Source:  Amended at 25 Ill. Reg. 5034, effective March 19, 2001)