The Virginia Tax Commissioner concluded in two recent rulings that a reseller of mobile telephone services is not a “telephone company” for purposes of the Virginia Business, Professional and Occupational License (BPOL) tax and therefore is not subject to the higher BPOL tax rate levied against telephone companies. Va. Dept. of Taxation, Pub. Doc. Nos. 12-182 & 12-183 (Nov. 13, 2012). The taxpayer, a limited partnership, is not licensed by the FCC or the state regulatory agency, though its two partners are licensed by the FCC.

The Tax Commissioner determined that the taxpayer does not have any of the statutorily prescribed attributes of a telephone company. The second of the three attributes is met if the person is licensed by the FCC to provide “commercial mobile service.” In a 2007 ruling, the Tax Commissioner determined that a taxpayer providing mobile telephone services may meet the second attribute as a result of an FCC license granted to a related company. A 2008 ruling concluded that a taxpayer providing mobile telephone services was a telephone company because of an agreement with a related FCC-licensed entity to provide telephone services. Unlike the taxpayer in the 2007 and 2008 rulings, the Tax Commissioner found that the present taxpayer is not the entity that manages the operation of the wireless system—it primarily resells services provided by related entities. The rulings further noted the localities’ failure to establish that the taxpayer operates any mobile telephone communications sites, towers, switches, or other mobile telephone service-related equipment or facilities.

These rulings are important given the aggressive tactics pursued by Virginia localities in attempting to classify any company selling telecommunications services as a telephone company, irrespective of whether it meets the statutory definition of “telephone company.” The rulings are also important because they limit localities from using a “look through” approach to determine whether an entity bears any of the attributes of a telephone company. Thus, it is irrelevant whether an affiliated or related entity meets one or more of the requirements—the company selling the telecommunication services must meet the requirements.

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