Rev. Rul. 54-523

Advice is requested whether the tax imposed by section 3465(a)(2)(A) of the Internal Revenue Code of 1939 on leased wire, teletypewriter, or talking circuit special service applies to amounts paid by subscribers to a company for the lease and servicing of telescriber terminal equipment where the company from whom the equipment is leased does not maintain or lease wires or channels to the subscribers. The equipment is connected with lines or channels owned by the subscribers or leased by them from communications carriers and is used to transmit facsimile graphic characters, mostly in the form of handwriting, over the wires or channels with which it is connected.

Section 3465(a)(2)(A) of the Code imposes a tax on the amount paid for leased wire, teletypewriter, or talking circuit special service. Section 130.38(a) of the Regulations 42, provides that, in general, leased wire, teletypewriter, or talking curcuit special service relates to private line service where channels, equipment, and other facilities are furnished.

It is held that since the company furnishing the telescriber terminal equipment does not maintain or lease wires or channels to its subscribers, it does not provide a communications service of the kind contemplated by section 3465(a)(2)(A) of the Code, and amounts paid to the company by subscribers for the lease and servicing of the equipment are not subject to the tax.