Section 2.502. Apportionment of apportionable income of interstate telecommunications companies.

 

(1)   Scope. A telecommunications company that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the telecommunications company is in a combined group, its Wisconsin share of the combined group's apportionable income is computed as provided in s. 71.255 (5) , Stats., and further detailed in s. Tax 2.61 (7) . Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b) , Stats.

(2)   Definitions. In this section:

(a) "Cable television service" means cable service as defined in 47 USC 522 (6) when provided over a cable system as defined in 47 USC 522 (7).

(am) "Engaged in business in and outside this state" has the same meaning as in s. Tax 2.39 (2) (b) .

(b) "Payroll factor" means the payroll fraction computed under s. 71.04 (6) or 71.25 (8) , 2001 Stats., and s. Tax 2.39 .

(c) "Property factor" means the property fraction computed under s. 71.04 (5) or 71.25 (7) , 2001 Stats., and s. Tax 2.39 .

(d) "Telecommunications company" means any person that owns, operates, manages, or controls any plant or equipment used to furnish telecommunications services and cable television services within this state directly or indirectly to the public and derives at least 70% of its gross income for the current taxable year from the provision of telecommunications services and cable television services, excluding internet service and the resale of telecommunications by telecommunications resellers as defined in s. 196.01 (9) , Stats. For purposes of the 70% test, gross income does not include interest, dividends, rents, royalties, capital gains or ordinary gains from asset dispositions, other than in the normal course of business. "Telecommunications company" does not include internet service providers.

(e) The following terms have the same definitions as provided in ss. 77.51 and 77.522 (4) (a) , Stats.:

1. "Ancillary services" (s. 77.51 (1ba) , Stats.).

2. "Call-by-call basis" (s. 77.522 (4) (a) 2. , Stats.).

3. "Communications channel" (s. 77.522 (4) (a) 3. , Stats.).

4. "Customer" (s. 77.522 (4) (a) 4. , Stats.).

5. "Customer channel termination point" (s. 77.522 (4) (a) 5. , Stats.).

6. "Home service provider" (s. 77.522 (4) (a) 7. , Stats.).

7. "Interstate telecommunications services" (s. 77.51 (5n) , Stats.).

8. "Intrastate telecommunications services" (s. 77.51 (5r) , Stats.).

9. "Mobile telecommunications service" (s. 77.522 (4) (a) 8. , Stats.).

10. "Place of primary use" (s. 77.522 (4) (a) 9. , Stats.).

11. "Postpaid calling service" (s. 77.522 (4) (a) 10. , Stats.).

12. "Prepaid calling service" (s. 77.51 (10d) , Stats.).

13. "Prepaid wireless calling service" (s. 77.51 (10f) , Stats.).

14. "Private communication service" (s. 77.51 (10s) , Stats.).

15. "Service address" (s. 77.51 (17m) , Stats.).

16. "Telecommunications services" (s. 77.51 (21n) , Stats.).

(3)   Apportionment formula computation. For taxable years beginning after December 31, 2004, a telecommunications company that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The telecommunications company shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b) , Stats. The telecommunications company shall apportion its remaining net income to this state using an apportionment fraction obtained by taking the arithmetical average of the property factor, payroll factor, and sales factor. The sales factor is determined as prescribed in subs. (4) and (5) , as applicable.

(4)   Sales factor for taxable years beginning before January 1, 2009. For taxable years beginning before January 1, 2009, the sales factor is the sales factor as would be determined under s. 71.25 (9) , 2001 Stats.

(5)   Sales factor for taxable years beginning on or after January 1, 2009. For taxable years beginning on or after January 1, 2009, the sales factor is determined as provided in s. 71.25 (9) , Stats., as effective for the current taxable year. For purposes of computing the numerator of a telecommunications company's sales factor under this subsection, the following rules apply:

(a) General. Except as provided otherwise in par. (b) to (f) , gross receipts from the sale of a telecommunications service or mobile telecommunications service are in this state if the customer's place of primary use of the service is in this state.

(b) Telecommunications services on call-by-call basis. Gross receipts from the sale of telecommunications services sold on an individual call-by-call basis are in this state if either of the following applies:

1. The call both originates and terminates in this state.

2. The call either originates or terminates in this state and the service address is located in this state.

(c) Postpaid calling services, prepaid calling services, and prepaid wireless calling services. Gross receipts from the sale of postpaid calling services, prepaid calling services, and prepaid wireless calling services are in this state if the origination point of the telecommunication signal, as first identified by the service provider's telecommunication system or, if the system used to transport telecommunication signals is not the seller's, as identified by information received by the seller from its service provider, is located in this state.

(d) Private communication services. The following gross receipts from the sale of private communication services are in this state:

1. Any separate charge attributable to a customer channel termination point located within this state.

2. If all customer channel termination points are located entirely in this state, the gross receipts attributable to those customer channel termination points.

3. Fifty percent of the gross receipts attributable to segments of a channel between two customer channel termination points located in different states, if one of those customer channel termination points is located in this state.

4. If the segments are not charged separately, the gross receipts attributable to segments of a communications channel that is located in this state and in more than one other state or equivalent jurisdiction, computed based on a percentage determined by dividing the number of customer channel termination points in this state by the total number of customer channel termination points in all jurisdictions where segments of the communications channel are located.

(e) Ancillary services. Gross receipts from the sale of ancillary services are in this state if the customer's place of primary use is in this state.

(f) Carrier network access and sales for resale. The following gross receipts from carrier network access and from the sale of telecommunications services for resale are in this state:

1. Gross receipts from access fees attributable to intrastate telecommunications service that both originates and terminates in this state.

2. Where subd. 1. does not apply, 50 percent of the gross receipts from access fees attributable to interstate telecommunications service if the interstate call either originates or terminates in this state.

3. Gross receipts from interstate end user access line charges, including the surcharge approved by the federal communications commission and levied pursuant to 47 CFR 69 , if the customer's service address is in this state.

4. Gross receipts from sales of telecommunications services to other telecommunication service providers for resale if the reseller's sale to the customer would be sourced to this state under the rules of this subsection, provided the information is readily available to make that determination. If the information is not readily available, the taxpayer must use a reasonable and consistent method to determine the amount of gross receipts from sales for resale that are derived from Wisconsin, based on the information that is available.

(g) Other sales. Sales other than those described in pars. (a) to (f) are in this state if so determined under s. 71.25 (9) , Stats., and s. Tax 2.39 .

Emerg. cr., eff. 12-5-05; CR 05-117 : cr. Register June 2006 No. 606 , eff. 7-1-06; corrections in (1) and (3) (intro.) made under s. 13.92 (4) (b) 7. , Stats., Register April 2010 No. 652 ; EmR0943 : eff. 12-31-09 and CR 10-001 : am. (1) and (3), cr. (2) (am), (e), (4) and (5), r. (2) (d) and (f), renum. (2) (e) to be (2) (d) and am. Register June 2010 No. 654 , eff. 7-1-10; correction in (5) (f) 3. made under s. 13.92 (4) (b) 4. , Stats., Register June 2010 No. 654 .

Note

A telecommunications company that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting. Microsoft Windows NT 6.1.7601 Service Pack 1 Telecommunications companies that are in combined groups must adjust the numerator and denominator of each of their apportionment factors and then convert the arithmetical average of these factors to the modified sales factor. The modified sales factor then determines the company's Wisconsin share of the combined group's apportionable income. See s. 71.255 (5) , Stats., and s. Tax 2.61 (7) for details. Microsoft Windows NT 6.1.7601 Service Pack 1 The provisions of s. Tax 2.502 first apply for taxable years beginning on January 1, 2005. Microsoft Windows NT 6.1.7601 Service Pack 1 Section Tax 2.502 interprets ss. 71.04 (8) (b) and (c) and 71.25 (10) (b) and (c) , Stats. Microsoft Windows NT 6.1.7601 Service Pack 1