Rev. Rul. 55-208

Advice has been requested concerning the application of the tax imposed by section 3465(a)(2)(A) of the Internal Revenue Code of 1939, on leased wire, teletypewriter and talking circuit special services to amounts paid for the lease of circuits and facilities for the following described transmissions.

A firm of brokers in securities and commodities with branch and field offices throughout the United States leases several types of wire facilities to meet its various needs. The leased facilities include teletype circuits connecting the branch and field offices with the main office, automatic tape transmitters located in the main office, and receiving-only page teletypewriters located in the branch or field offices. Throughout the business day orders for the purchase or sale of securities or commodities are placed in the branch or field offices. Each order is executed in the main office and a message is sent to the branch or field office where the order originated and that office notifies the customer of the completion of his order. Each day after the close of the security and commodity markets a punch card record is prepared in the main office for each transaction. These cards show the identification of the branch office, the date, account number, name of security, number of shares, whether purchase or sale, exchange symbol, price per share, commission, taxes, and dollar extent of the transaction. The cards are segregated according to branch or field office and the data shown on the cards for each particular office are converted into a continuous perforated teletypewriter tape. The perforated tape is then run through an automatic tape transmitter connected by teletype circuit with a receiving-only page teletypewriter, located in the branch or field office, which prints the confirmation notices on sprocket-fed multiple-copy form paper.

Section 3465(a)(2)(A) of the Code imposes a tax upon the amount paid for leased wire, teletypewriter, or talking circuit special service, except where such service is used exclusively in rendering wire and equipment service which is taxable at a lower rate under section 3465(a)(2)(B) of the Code.

Section 130.38 of Regulations 42 states that, in general, leased wire, teletypewriter, or talking circuit special service, taxable under section 3465(a)(2)(A) of the Code, relates to private line service where channels, equipment and other facilities are furnished to enable users to communicate between specified locations continuously or for specified periods. The communications may be telephonic, in Morse or similar code, or may be reproduced at the terminating end in the form of a typewritten page or tape, or picture or facsimile.

Accordingly, it must be concluded that the automatic tape transmitter and receiving-only page teletypewriter when connected by a teletype circuit provide a communication service of the kind contemplated by section 3465(a)(2)(A) of the Code. Therefore, amounts paid for the lease of the transmission facilities and for the circuits for such transmission are subject to the tax imposed by that section on leased wire, teletypewriter, and talking circuit special services