April 15, 2011
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Comments
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Ken,
I just wish that for one day that my schedule was of my own doing rather than influenced and changed by others, this includes you.
Your newsletter of April 5th, "taxing monitoring charges" was of great interest to me since March 17th, 2011 when I received the AZ decision from one of my accounting firms, Goldstein, Karlewicz & Goldstein LLP.,
Advice for your readers, these articles are important, your professional business relationships with your attorney and accountant is vital to your long term success. That is why (here is the disclaimer, again) Ken Kirschenbaum is the Corporate Council to my company (USA) and is under contract with Security America Risk Retention Group - SARRG - of which I am a Director and Consultant for Claims Management. My thanks to GKG, my accountant firm, who sent me this decision.
Commentary -
I find this not only interesting, but it serves as a good place to continue my long standing argument/position that monitoring services can be deemed by a competent Court as either interstate or intrastate business activity. Further I contend that government entities can't have it both ways, meaning that if the State/City wants to treat the retail monitoring as a taxable event, that is fine. But then the State/City can't turn around and define the business activity as something else in an attempt to receive another tax. Taxation of the phone traffic (usage) is permissible because the tax is not sensitive to what content it carries, scalable to the amount of traffic (no tax for no traffic) and is only one component of a larger compilation of technologies designed to provide a comprehensive service that is taxable at the final point of sale.
My position has long been that a monitoring company located in New York State (or Texas, in this decision) and is in the business of monitoring accounts in any or all of the other 49 states is conducting "interstate" commerce and is not exposed to taxation or regulation by States where there is no physical presence, or other reasonable taxation nexus other than through the act of making a phone call.
I believe that the following points in this decision support my positions and that the overall decision provides a path to challenge the self created rights by the States to regulate interstate monitoring,
....The court of appeals held that the telecommunications involved are intrastate because they are part of a transmission loop that begins and ends in Arizona. We [State Supreme Court] reject this theory and conclude that separate interstate telecommunications cannot be aggregated and characterized as intrastate. .....
I agree and point to where the Court said that the two or potential three calls that refer to that happen upon an alarm activation each contain different information and purpose and as such can not be considered a loop where the beginning and the end are the same.
.....The Cities argue that even if the telecommunications involved in the home-security monitoring services are not "intrastate," the municipal taxes are still permissible because (1) A.R.S. § 42-6004(A)(2) does not apply to this kind of interstate telecommunication service, or (2) the taxes are imposed on "monitoring services" rather than telecommunications services. .....
This is correct, jurisdictions with taxing authority, have that authority only within the boundaries of that jurisdiction. There is no dispute, that I have ever seen, that the point of service delivery for monitoring services is the point where the control/communicator is installed and the agent of the same premises is tendering a payment for said service. Rarely have I ever acknowledged the authority of a foreign jurisdiction for licensure, unless the effort and expense to comply was akin to a pebble on a roadway.
I would like to see the Industry use this opinion about taxation on "interstate commerce" as the foundation on which to base a challenge to one, at first, of the States that have for far to long now regulated and taxed our companies.
Bart A. Didden
U.S.A. Central Station Alarm Corp.
with offices in NY, CT & MN
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Ken,
IÂ’m sure I must not be seeing this correctly. If a home owner or business already pay for the POTS line for their home or business use, arenÂ’t they already paying tax to the phone company that provides that POTS line for the transmission of data, sound etc. in and outside of the state? WouldnÂ’t that be double taxation? I could see this being an issue for VOIP but, even that should be covered under the tax paid to the I-Net provider. And GSM module transmissions should be covered because the company that handles the cell transmission has already paid tax on the air time.
Did the cities tax when the Internet was dial-up for data transmission?
Thanks
Keith from CO
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Ken,
You are right when you say “case isn’t over yet”. I have gotten plenty of calls from Arizona companies that wonder if they can switch to an out of state central station and avoid the tax. The case was sent back to the Court of Appeals and there is a lot of money at stake. The Cities will not give up easily. Meanwhile the Cities and Counties will continue to take the position that monitoring services are taxable. If you do business in Arizona you should continue to collect and pay the tax. But you are right when you advise alarm companies to get tax advice from someone who knows their industry.
Mitch Reitman
S.I.C. Consulting, Inc.
Fort Worth, TX 76107
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This government will kill America. While they're busy trying to EXTORT small change, there is China doing TAX FREE multi-billion dollars business on the internet, on line and just about anywhere they can. They ship from China directly to end user, bypassing any U.S. distributor who would pay tax. Chinese ship even material considered hazardous or illegal by most shipping companies - guess how. By the United States Postal Service. Give me a break!!!
Dusan