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Verizon Services Ruled Taxable in Pennsylvania


 Charges to install telephone lines ruled taxable in Pennsylvania.

Pennsylvania gross receipts tax applies to charges for a variety of communications services, according to a November 18, 2015, decision by the Supreme Court of Pennsylvania.

Verizon and Pennsylvania have been at odds over the applicability of gross receipts tax to certain services since 2004. Now, in Verizon Pennsylvania, Inc. v. the Commonwealth of Pennsylvania, the state’s highest court has ruled 3-2 that gross receipts tax applies to charges for the following:

  • Installation of private phone lines
  • Provision of directory assistance services
  • Certain non-recurring charges levied on customers
    • Installing telephone lines
    • Moving and changing telephone lines and services
    • Repairing telephone lines

In so doing, the Supreme Court affirmed the lower court’s position that installation and directory assistance services are taxable and reversed the position that revenue from the enumerated non-recurring charges are not.

The back story

After Verizon filed annual gross receipts tax in 2004, the Pennsylvania Department of Revenue presented a proposed tax settlement to Verizon which increased the company’s total gross receipts tax by more than $47.5 million. Verizon filed a petition for resettlement and the Pennsylvania Department of Revenue Board of Appeals reduced the company’s additional gross receipts tax to just under $10 million.

Verizon contested the resettlement, contending that gross receipts for the following services are not subject to gross receipts tax:

  • Installation of private phone lines
  • Provision of directory assistance services
  • Imposition of certain non-recurring charges on its customers for
    • Installation of telephone lines
    • Moves of- and changes to- telephone lines and services
    • Repairs of telephone lines

The Commonwealth Court determined that charges for directory assistance services and the installation of private phone lines are subject to gross receipts tax. However, it agreed with Verizon that charges for certain non-recurring services are not subject to gross receipts tax.

Verizon appealed the application of gross receipts tax to installation and directory assistance services. The Commonwealth then cross-appealed and the case ended up at the State Supreme Court. The recent High Court opinion explores the history of Pennsylvania’s gross receipts tax, its applicability to communications services, and several of the Supreme Court’s previous rulings. Read the opinion.

Moving forward

Verizon’s gross receipts tax liability will likely increase due to the November 18 decision. However, the justices did not specify the amount Verizon owes to the state. Neither Verizon nor the Pennsylvania Department of Revenue would comment on the case (Daily Journal).

The eyes of the industry are watching. The decision could lead the Department of Revenue to seek back taxes from other companies offering similar services. This could be a compliance nightmare for businesses that have not been collecting and remitting on those services.

Businesses that have been relying on Avalara AvaTax for Communications are in luck: Avalara AvaTax for Communications quickly determines and calculates taxes and fees for all communications, including the traditional telecommunication services under dispute in the Pennsylvania case. Learn more.


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.