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Virginia: Wireless Service Fees Are Taxable


Are a wireless service provider's regulatory cost recovery and activation/reactiviation fees subject to sales and use tax in Virginia? According to Tax Commissioner Ruling No. 12-148, issued September 17, 2012, they are.

In November 2010, the wireless service provider filed a refund request with the Virginia Department of Revenue, stating that it "charged its customers [communications and sales and use tax] in error on data-only plans and usage." The DOR denied that refund request, and the service provider contested that denial.

This time around, each issue was addressed separately.

With respect to the sales and use taxes on the regulatory cost recovery fees, the Tax Commissioner Ruling points to the Guidelines and Rules for the Virginia Communications Taxes:

"Taxable communications services also include, but are not limited to charges for regulatory, administrative and other cost recovery charges." Since the charges at issue "are deemed cost recovery charges … the Taxpayer's request for a refund is denied."

With respect to the sales and use tax on the reactivation and activation fees, Tax Commissioner Ruling No. 12-124 refers to Virginia Code § 58.1-647, which defines communications services as, in part, "the connection, movement, change, or termination of communications services."

The Guidelines and Rules for the Virginia Communications Taxes are also cited: "Taxable communications services also include, but are not limited to charges for connection, reconnection, termination, movement, or change of communications services, including Internet services." [Emphasis added in the Ruling.]

As a result of these findings, the Virginia Tax Commissioner ruled that service fees for the connection and reconnection of internet services "are subject to the communications sales and use tax."

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.