Certain Ancillary Telephone Charges Taxed 

Tax Alert

July 18, 2013

The en banc Commonwealth Court held that private telephone line charges and directory assistance services were subject to the Public Utility Gross Receipts Tax (GRT), but non-recurring service charges were exempt. Verizon Pennsylvania, Inc. v. Commonwealth, No. 266 F.R. 2008 (Pa. Commw. July 5, 2013). In its GRT return for the 2004 tax year, Verizon Pennsylvania excluded gross receipts associated with private line charges, directory assistance charges, and non-recurring service charges for telephone line installation, moves or changes to telephone lines and services, and repairs of telephone lines. Private line charges are incurred by customers when they lease private telephone lines between two end points for exclusive uninterrupted use for the transmission of messages. The customers are charged a fixed fee for the private lines rather than a fee based upon the amount of usage each month. Directory assistance charges are incurred by customers when they obtain directory assistance information and/or accessing a directory assistance operator. The customers are also charged a fixed fee if they are able to connect to the requested telephone number. Finally, the taxpayer charged customers for telephone line installations, moves, or changes to telephone lines and services, and repairs of telephone lines. These services were separately stated on each customer’s bill when such charges were incurred.

The court reviewed the history of the GRT as enacted in 1889 and its subsequent amendments, which limited GRT to those receipts “received … from telegraph or telephone messages transmitted wholly within the State,” which is identical to the current language of the statute. 72 P.S. § 8101(a)(2). The court also analyzed the three cases interpreting the GRT statute culminating with the 1943 Pennsylvania Supreme Court case of Commonwealth v. Bell Telephone Company of Pennsylvania, 34 A.2d 531 (Pa. 1943) (Bell III).

The court noted that, “when a court of last resort has construed the language of a statute, the General Assembly in subsequent statutes on the same subject matter intends the same construction to be placed upon such language” citing the Statutory Construction Act and Commonwealth v. Wilson Products, 194 A.2d 162, 165 (Pa. 1963). In applying Bell III, the court indicated that the sole purpose of the private line was to transmit messages between two points. The court further pointed out that there was no purpose for this leased private line other than to transmit a message and therefore based upon Bell III it was subject to GRT. Citing Bell III again, the court likewise concluded that the sole purpose of the directory assistance and directory assistance operator was to transmit messages and was therefore taxable. However, the court determined that the non-recurring charges associated the installations, moves and repairs, were analogous to the services noted in Commonwealth v. The Bell Telephone Company of Pennsylvania, 14 D &C 675 (1930) that were determined to be non-taxable. As a result, the court concluded that no telephone messages are transmitted when the taxpayer performed these non-recurring services and they were not subject to GRT.

This Alert was reprinted with permission from the PA Tax Recap, a publication of Pa Legislative Services.


Dan A. Schulder



(717) 703-5905

Joseph C. Bright



(215) 665-2053

Cheryl A. Upham



(215) 665-4193

Related Practices

To discuss any questions you may have regarding the opinion discussed in this Alert, or how it may apply to your particular circumstances, please contact: Joseph C. Bright at jbright@cozen.com or 215.665.2053, Cheryl A. Upham at cupham@cozen.com or 215.665.4193, or Dan A. Schulder at dschulder@cozen.com or 717.703.5905.