Direct Pay Permit for Sales and Use Taxes on Telecommunications Service

A direct pay permit (DPP) for telecommunications service allows its holder to purchase telecommunications service and ancillary service without paying sales and use tax to a vendor and authorizes the vendor not to collect any tax on a sale to a permit holder. A business with a direct pay permit assumes responsibility for payment of all applicable sales and use taxes directly to the Department.

A direct pay permit can be issued to a call center for telecommunications service. A call center that purchases interstate telecommunications service that originates outside this State and terminates in this State may apply for a direct pay permit for telecommunications service and ancillary service. A call center is a business that is primarily engaged in providing support service to customers by telephone to support products or services of the business. A business is primarily engaged in providing support services by telephone if at least 60% of its calls are incoming. The gross sales tax on telecommunications service that originates outside this State, terminates in this State, and is provided to a call center that has a direct pay permit issued by the Department under G.S. 105-164.27A may not exceed fifty thousand dollars ($50,000) a calendar year. This cap applies separately to each legal entity.

A business may request permission from the Secretary of Revenue to discharge its sales and use tax liability on telecommunications service and ancillary service for its call centers directly to the Department by completing Form E-595B, Application for Direct Pay Permit for Sales and Use Taxes on Telecommunications Service. This authorization by the Secretary is conditioned upon full compliance with the provisions of the Sales and Use Tax Law and timely payment of all taxes due.

A taxpayer authorized to discharge their sales and use tax liability on telecommunications service and ancillary service in this manner are issued a numbered direct pay permit for telecommunications service.

A direct pay permit that is issued to a vendor providing interstate telecommunications service and other telecommunications services for the call center relieves the vendor from collecting and remitting utility sales and use tax on the sale of all telecommunications service to the call center. The vendor's liability is relieved when the vendor secures a copy of the direct pay permit or when the vendor secures the information as to a purchaser's name, address, type of business, reason for exemption, and exemption number.

A business, which has been issued a permit for telecommunications service must file utility and liquor sales and use tax returns, remit the utility and liquor sales and use taxes due, and maintain records that clearly reflect the tax liability.

The database at the following weblink contains the names and permit numbers of current Direct Pay Permit holders:

Firms Assigned Direct Pay Permits for Utility Sales and Use Taxes on Telecommunications Service