On August 7, 2025, the New York Division of Tax Appeals (DTA) concluded that fees charged by T-Mobile representing contributions to the Federal Universal Service Fund (FUSF) are subject to the state’s sales and use tax. The case is In the Matter of T-Mobile Northeast LLC, Decision DTA No. 850185 (August 7, 2025).
Background
Pursuant to federal law, providers of interstate public telecommunications services are required to contribute a portion of their revenues to the FUSF to ensure affordable telecommunications services are provided to rural and low-income areas. Such providers are allowed to recoup their contributions from their customers. T-Mobile included this fee as part of its bundled mobile telecommunications charges to its customers. During a New York sales tax audit of T-Mobile’s tax returns, the Division of Taxation issued an assessment, a portion of which represented taxes not charged and remitted on the FUSF fees charged to customers.
T-Mobile’s Position
On appeal, T-Mobile contended that the FUSF fee is not a receipt for a charge for mobile telecommunications services and, therefore, is not subject to the New York sales tax. T-Mobile argued that defined charges for mobile telecommunications services under state law [N.Y. Tax Law Sec. 1105(b)(2)] were derived from the Federal Mobile Telecommunications Sourcing Act and that under the Act, the FUSF is not included in the definition of charges for mobile telecommunications services. The DTA rejected this argument.
FUSF Deemed Taxable
The DTA explained that T-Mobile cited no authority for its claim that these charges are excluded from the definition of charges for mobile telecommunications services or that they are not a taxable receipt. The DTA found as controlling a 10-year old decision (Matter of Helio, LLC, Tax Appeals Tribunal, July 2, 2015), where the Tax Appeals Tribunal concluded that the receipts at issue, which included the FUSF fee, were taxable in their entirety where such charges were part of a bundle of services.
Time Warner Distinguishable
On May 20, 2025 (Matter of Time Warner Cable Information Services), the Tribunal concluded that the FUSF was a receipt of the nontaxable service at issue and was, therefore, not subject to sales tax. The underlying charges in Time Warner were voice over internet protocol (VoIP) charges that sold for a flat fee, combined with intrastate and interstate telephone services as part of a bundled plan [see N.Y. Tax Law Sec. 1105(b)(1)]. The DTA distinguished this case and the Helio decision from the May 2025 Tribunal decision. The charges in Time Warner and Helio can be unbundled into their taxable and nontaxable components, unlike the charges in T-Mobile. Thus in T-Mobile, the entire underlying charge was taxable, the DTA explained.
No Constitutional Violation
The DTA also dismissed T-Mobile’s claim that by subjecting the FUSF fees to sales tax in the context of its bundled plans, while providing for the fees’ exemption in the context of separately stated interstate and international wireless service receipts, amounted to a violation of the Equal Protection Clause. The DTA said “[t]here are inherent differences in how bundled mobile telecommunications services are taxed versus how separately billed intrastate, interstate and international mobile telecommunications services are taxed, as well as differences in how bundled landline or VoIP telecommunications services are taxed.”
Ryan’s Take and Action Steps
This decision should prompt companies that collect and remit the FUSF fee to carefully trace the underlying charges. This may prove challenging where, for convenience, charges are bundled. Companies should also remember that charges under N.Y. Tax Law Sec. 1105(b)(2) are different than those at issue under New York Tax Law Sec. 1105(b)(1). These differences, as brought out in the competing tax tribunal precedents, could be significant. This decision should also prompt purchasers to examine whether their purchases are being correctly taxed by New York.
Please contact our tax professionals for more information about how this decision may impact your business.
TECHNICAL INFORMATION CONTACTS:
Dustin Davis
Principal
Ryan
469.399.4286
dustin.davis@ryan.com
Adam Weinreb
Director
Ryan
917.472.9420
adam.weinreb@ryan.com
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