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D.C. Municipal Regulations (Last Updated: September 13, 2017) |
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Title 9. TAXATION AND ASSESSMENTS |
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Chapter 9-4. SALES AND USE TAXES |
Section 9-471. SALES TAX EXEMPTION, AND USE TAX ALLOCATION FOR TELECOMMUNICATION, UTILITY AND PUBLIC-SERVICE COMPANIES
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471.1The Deputy Chief Financial Officer shall, upon written application of a telecommunication, utility or public-service company, exempt that company from the sales tax under § 128(f) of the Act, as amended, and issue a certificate of exemption.
471.2Tangible personal property and select services subject to sales tax under the Act, purchased and paid for by telecommunication, utility and public-service companies which have obtained a certificate of exemption, are exempt from the District of Columbia sales tax if the property is for use and consumption in maintaining, operating, and conducting the activities of the company which are subject to the gross receipts tax under An Act Making appropriations to provide for the expenses of the government of the District of Columbia for the fiscal year ending June thirtieth, nineteen hundred and three, and for other purposes, approved July 1, 1902 (32 Stat. 619; D.C. Code § 47-2501), as amended, or which are subject to the telecommunication service tax under the Toll Telecommunication Service Tax Emergency Act of 1989, effective March 1, 1989 (D.C. Act 8-2; 36 DCR 1759; March 10, 1989).
471.3A telecommunication or utility company exempt from the sales tax under this section shall pay a use tax on all purchases subject to the sales tax under the act and subject to the compensating use tax under the District of Columbia Use Tax Act in an amount determined by applying the following three-step formula:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
Total District taxable purchases for month
×
Gross receipts and/or gross charges on which District gross receipts tax or telecommunication service tax paid in month of Column (1)
×
Purchases of tangible personal property everywhere in month of Column (1)
=
Amount of Column (1) purchases exempt for use tax
Gross receipts and/or gross charges every where for month of Column (1)
District purchases of tangible personal property in month of Column (1)
Step Two
Amount of Column (1) taxable at applicable rate, 6% e.g.
×
Amount of Column (1) less Column (4) exempted purchases, with the exempted purchases not to exceed Column (1) amount
×
Applicable sales tax rate. 6% e. g
=
Use tax payable to District at applicable rate
Total District purchases from Column (1)
Step Three
Add the results of all Step Two applicable sales and use tax rates. Remit to the District total Use tax payable to the District," as computed in Step Two for all applicable tax rates.
The following are examples of the application of § 471.3.
(1) The taxpayer has gross receipts charges from the sale of toll telecommunication service everywhere for the calendar month of one million dollars ($ 1,000,000), with one hundred thousand dollars ($ 100,000) of those gross charges and/or gross receipts in the District. Purchases of tangible personal property subject to use tax are five hundred thousand dollars ($ 500,000), with fifty thousand dollars ($ 50,000) in the District. For purposes of this example, a six percent (6%) District sales tax rate applies to forty thousand dollars ($ 40,000) of the fifty thousand ($ 50,000) in District purchases. The remaining ten thousand dollars ($ 10,000) in District purchases are subject to an eight percent (8%) rate. The use tax exemption, and use tax payable to the District, is computed as follows:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
$ 50,000
×
$ 100,000
×
$ 500,000
=
$ 50,000 exemption
$ 1,000,000
$ 50,000
Step Two and Step Three
These steps need not be completed because the exemption equals taxable purchases resulting in no District use tax payable. However, a tax return prescribed by the Mayor shall be filed in this instance, nonetheless.
(2) Same facts as (1) above except that gross receipts or gross charges subject to a District gross receipts tax or toll telecommunication service tax are fifty thousand dollars ($ 50,000). The exemption is computed as follows:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
$ 50,000
×
$ 50,000
×
$ 500,000
=
$ 25,000 exemption
$ 1,000,000
$ 50,000
Step Two
6% rate
$ 40,000
×
$ 25,000
=
$ 20,000
×
6%
=
$ 1,200
$ 50,000
8% rate
$ 10,000
×
$ 25,000
=
$ 5,000
×
8%
=
$ 400
$ 50,000
Step Three
$ 1,200(tax at 6% rate) + $ 400(tax at 8% rate) = $ 1,600(Total use tax payable to the District)
471.4A public-service company exempt from the sales tax under this section shall pay a use tax on all purchases subject to the sales tax under the act and subject to the compensating use tax under the District of Columbia Use Tax Act in an amount determined by applying the following three-step formula:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
Total District taxable purchases for month
×
Public-Service miles traveled within the District
×
Purchases of tangible personal property everywhere in month of Column (1)
=
Amount of Column (1) purchases exempt from use tax
Public-Service miles traveled everywhere
District purchases of tangible personal property in month of Column (1)
Step Two
Amount of Column (1) taxable at applicable rate, 6% e.g.
×
Amount of Column (1) less Column (4) exempted purchases, with the exempted purchases not to exceed Column (1) amount
×
Applicable sales tax rate. 6% e.g.
=
Use tax payable to District at applicable rate
Total District purchases from Column (1)
Step Three
Add the results of all Step Two applicable sales and use tax rates. Remit to the District total "Use tax payable to the District," as computed in Step Two for all applicable tax rates.
The following are examples of the application of § 471.4:
(1) The taxpayer has public-service miles traveled everywhere for the calendar month of one million miles (1,000,000), with one hundred thousand miles (100,000) traveled in the District. Purchases of tangible personal property subject to use tax are five hundred thousand dollars ($ 500,000), with fifty thousand dollars 50,000) in the District. For purposes of this example, a six percent (6%) District sales tax rate applies to forty thousand dollars ($ 40,000) of the fifty thousand dollars ($ 50,000) in District purchases. The remaining ten thousand dollars ($ 10,000) in. District purchases are subject to an eight percent (8%) rate. The use tax exemption, and use tax payable to the District, is computed as follows:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
$ 50,000
×
100,000 miles
×
$ 500,000
=
$ 50,000 exemption
1,000,000 miles
$ 50,000
Step Two and Step Three
These steps need not be completed because the exemption equals taxable purchases resulting in no District use tax payable. However, a tax return prescribed by the Mayor shall be filed in this instance, nonetheless.
(2) Same facts as (1) above except that fifty thousand miles (50,000) were traveled in the District. The exemption is computed as follows:
Step One
Column (1)
Column (2)
Column (3)
Column (4)
$ 50,000
×
50,000 miles
×
$ 500,000
=
$ 25,000 exemption
1,000,000 miles
$ 50,000
Step Two
6% rate
$ 40.000
×
$ 25,000
=
$ 20,000
×
6%
=
$ 1,200
$ 50,000
8% rate
$ 10.000
×
$ 25,000
=
$ 5,000
×
8%
=
$ 400
$ 50,000
Step Three
$ 1200(tax at 6% rate) + $ 400(tax at 8% rate) = $ 1,600 (Total use tax payable to the District)
471.5The use tax return required to be filed under this section shall be due and the tax paid by the twentieth (20th) day of the month following the calendar month for which the tax is due.
471.6Each telecommunication, utility and public-service company shall file a return as prescribed by the Mayor even if no use tax is payable therewith.
471.7The numerator and denominator of Column (3) purchases in §§ 471.3 and 471.4 shall include services subject to sales and use taxes without regard for any exemption from these taxes.
471.8The numerator and denominator of Column (3) purchases in §§ 471.3 and 471.4 shall include rental payments subject to sales and use taxes under the act and the District of Columbia Use Tax Act without regard for any exemption from these taxes.
471.9The exemption provided for under §§ 471.3 and 471.4 shall be limited to Column (1) total District taxable purchases for the same calendar month.
471.10No carryforward or carryback shall be allowed for any excess exemption derived from operation of the formulas in §§ 471.3 and 471.4.
471.11Column (1) total District taxable purchases, as required under the formula set forth in §§ 471.3 and 471.4, for a calendar month shall include all purchases of tangible personal property and services subject to sales or use taxes without regard for any exemption from these taxes.
471.12If the allocation provisions of this section do not fairly represent the extent of the sales tax exemption provision under the Act, as amended, the taxpayer may petition for, or the Mayor may require, the employment of any other method to effectuate an equitable allocation of the taxpayer's sales tax exemption.