By Evan Hamme and Charlie Kearns

A New York State Division of Tax Appeals Administrative Law Judge (ALJ) determined that two-way radio communications services, or walkie-talkie services, are not telephone services subject to New York State’s telecommunications excise tax imposed under Tax Law § 186-e (186-e Tax). The petitioner uses specialized equipment or “repeaters” to strengthen voice signals received from one walkie-talkie and transmit those signals to other walkie-talkies. On audit, the New York State Department of Taxation and Finance (Department) assessed the 186-e Tax on the “repeater category” less amounts from equipment sales. The Department sought to impose the 186-e Tax by arguing a “telecommunications service” includes any transmission of voice signals by radio waves, including walkie-talkie services that use repeaters to strengthen the transmission of the voice signal. However, the petitioner did not establish a connection with the Public Switch Telephone Network (PSTN) (i.e., no dial tone and no ability to call a telephone number), which the petitioner argued is necessary to provide a “telephone service” subject to tax. On administrative appeal, the ALJ agreed with the petitioner, concluding that the legislature intended the 186-e Tax to apply to telephone companies and common carriers, and that the Department’s definition would extend the tax beyond its intended scope. According to the ALJ, the mere “ability to communicate with the holder of the other walkie-talkie” (and no interconnection with the PSTN) did not cause the petitioner’s services to be deemed “telephony” subject to the 186-e Tax. ALJ determinations are non-precedential and may be appealed by the Department. Matter of N.Y. Commc’ns Co., DTA No. 825586 (NYS Div. Tax App. Aug. 13, 2015)