
           New Massachusetts Modem Tax Proposed (For Real)
           -----------------------------------------------

     Channel 1 BBS in Cambridge is having the unpleasant experience
     of being targeted for an "experiment" in revenue collection by the
     Massachusetts Department of Revenue.

     The DOR threatened Channel 1 with a bill for back taxes plus
     usurous interest and penalties on fees paid for information access
     and retrieval.  While telecommunications transmission services
     (such as telephone, satellite, etc) have been taxed by state
     statute since September 1990, information access and message
     services are explicitly excluded in the state tax code (see refs).

     This is the first time that the state has ever tried to collect a
     tax on online information access in Massachusetts (the
     "transmission" is taxed in your phone bill).

     After considerable negotiation and $20,000 worth of legal and
     accounting assistance, the DOR has put Channel 1's case on shelf
     until the end of the year.  However, it has become clear that the
     DOR is continuing to advance their justification for an information
     tax through several tactics, including "creative" interpretation
     and a legislative re-write of the telecommunications sections of the
     tax code.

     Under the revision to either the code or its interpretation, all
     charges for online access and data retrieval would be subject to 5%
     Massachusetts sales tax.  Consumers of online services, database
     access, email, legal and scientific or commerical research data,
     pay bbs's, and Internet access services would be among those affected.

     It is possible that feedback from those concerned might influence
     policy decisions apparently scheduled for completion by the end of
     1993.  The "proposed new regulations" are being revised now.  The
     public (and the legislature) will never be less-informed about the
     tax and its implications.  Unless consumers speak up now, new taxes
     will just get buried in new telecomm code revisions.

     -----------------------------------------------------------------
         A little effort now may save you alot of money later.
         Call, write or FAX these numbers, make your feelings
         and opinions known, and pass this information on.
                      NO TAX ON INFORMATION!
     -----------------------------------------------------------------


     Governor Weld
     Suite 360 The State House
     Boston, MA 02133        Telephone: 727-9133  Fax: 523-7984


     Mitchell Adams Commissioner of Revenue
     100 Cambridge Street Room 706 N
     Boston, MA 02204        Telephone: 727-4201  Fax: 727-0379
                                        ^^^^^^^^       ^^^^^^^^
                             (phone numbers corrected 8.5.93)

     Edward J Markey
     2133 Rayburn House Office Building
     Washington, DC 20515    Tel: 202 225-2836   Fax: 202 225-1716


     Boston Globe
     135 Morrissey Boulevard
     Boston MA 02125          Tel: 617-929-2000  Email: voxbox@globe.com


     For more information:
     Channel 1
     617-864-0100 info  617-354-5776 modem
     ^^^ ^^^ ^^^^
     J MASSMODEMTAX at the menu (free access conference).



                ------------------------------------
                Massachusetts General Law References
                ------------------------------------

Massachusetts Sales and Use Tax Regulation

Chapter 64H section 1 (Definitions)

"Telecommunications services," any TRANSMISSION of messages or
information by electronic or similar means, between or among points by
wire, cable, fiberoptics, laser, microwave, radio or similar facilites
but not including cable television."


Chapter 64H section 1.3 Computer Industry Services and Products (12)
Transmission of Programming or Reports.  Charges for transmitting
computer software or reports of anytype by telephone lines, microwaves,
or other electronic modes of transmission are not taxable, unless the
vendor transfers an otherwise taxable storage medium imprinted with the
programs or reports as part of the same transaction. (13) Access to
Database Services (a) Exemption for database services. Charges for
access by telephone or other means to databases stored in computer
equipment not on the premises of the customer are generally not taxable.

Related Letter Ruling 81-41 - Chapter 64 Section 1 (13)(c) provides that
"sales" subject to tax do not include professional or personal service
transactions which involve no sale or which involve sales as
inconsequential elements for which no separate charges are made. Based
on the foregoing .... charges to information providers for the right to
place information in the (Brand X) computer will not be subject to
Massachusetts sales or use taxes.

Related Letter Ruling 85-61 - "You request a ruling regarding the
application of the Massachusetts sales tax to monthly access charges for
the use of ______ ("System"). "Transaction whereby a person secures
access, by means of telephon or other lines, to equipment not on his
premises, is not subject to tax if the person or his employees do not
operate the equipment or direct or control it's operation while on the
premises where the equipment is located."

[Everything following is the 1990 revisions]

Chapter 64H.1.6: Telecommunications Services...applies to sales of
telecommunications services on or after September 1, 1990. Section (2) -
Telecommunications services, any TRANSMISSION of messages or information
by electronic or similar means, between or among points by wire, cable,
fiber-optics, laser, microwave, radio, sattellite, or similar facilities
but not including cable television. (ADDING the following) In general,
telecommunications include telephone and other transmissions between or
among specific parties or specific location, but do not include public
broadcasts.

Section (5) Residential Telephone Service Exemption and services not
            eligible for Residential exemption.

Section (6) Deals with Sales for Resale of Telecommunications Services

Section (7) Services Sold in Conjunction with Telecommunications
Services. (b) The tax on the sale or use of telecommunications services
under MGL c64H. 64I. is a tax on the "TRANSMISSION" of messages or
information by various electronic or similar means.  Generally, it is
not a tax on the sale or use of information itself. In some
transactions, such as telephone calls to "900 numbers" or to certain
database services that are not otherwise excluded from the definition of
a taxable sale under MGL c64H s.1(12)(f), a purchaser may purchase a
telecommunication service (i.e. the telephone call or other
transmission) and the information or data being transmitted
simultaneously. Under such circumstances, the entire sales price of the
transaction is taxable as the sale or use of telecommunications
services, unless the sales price of the taxable tranmission and the
sales price of information or data transmitted, are separately stated on
any evidence of the sale issued or used by the vendor...If the two
amounts are separately stated, the tax is assessed only on the sales
price of the taxable transmission service.

Message services excepting only beeper services which are to be taxed
under the telecommunications transmission tax - were officially
"re-exempted" under SIC 7389 (when the broader based sales tax was
rejected by the DOR in March 1991 - ed.) .

                       END of LEGALESE
                       ---------------


Footnote
--------
No BBS (defined here as online service that does NOT resell telephone
services) in Massachusetts collects the telecommunications tax from its
customers for obvious reasons.  ONE Massachusetts BBS was audited in
early 1991 (after the telecommunications tax went into effect) and was
NOT assessed or told to assess sales tax on its access fees.

Most (but not all) online services in Massachusetts that DO PROVIDE
telephone services do NOT collect or pay the sales tax -- Compuserve
(which has several offices in the state as well as many telephone
installations) and Prodigy  for example, also UUNET and PSI.  Though
there are some telephone services PROVIDERs (Mead Data, Westlaw) which
do collect the tax on the telephone portion of their services.


July 26 1993
Channel 1(R) BBS

