Rev. Rul. 55-646

The Internal Revenue Service has been requested to explain the application of section 4251 of the Internal Revenue Code of 1954 (section 3465(a)(3) of the Internal Revenue Code of 1939) to charges made by a radio corporation to its customers for a mobile radio telephone dispatch service.

The radio corporation is engaged in rendering a mobile communication service to the public on a common carrier basis, pursuant to its tariff on file with the Federal Communications Commission. The service rendered by the corporation is a two-way radio dispatch service. A subscriber may communicate only between his premises or one of his mobile units and the base station maintained by the radio corporations. The operator at this base station then relays the message as directed. All radio communications are over wave lengths and frequencies assigned to the radio corporation and the operations are conducted under Federal Communications Commission licenses granted to such corporation.

The subscriber's mobile units are equipped with transmitters and receivers for which the radio corporation makes a monthly rental and maintenance charge. There is also a monthly service charge covering a specified number of calls, with an additional charge for each one-minute call in excess of the number covered by the minimum monthly charge.

Section 4251 of the 1954 Code imposes a tax upon the amount paid for local telephone service. Section 4252(a) defines `local telephone service' as meaning any telephone service not taxable as long distance telephone service; leased wire, teletypewriter or talking circuit special service; or wire and equipment service. The latter section further provides that amounts paid for the installation of instruments, wires, poles, switchboards, apparatus, and equipment shall not be considered amounts paid for service.

The term `local telephone service' encompasses the facilities and equipment necessary to complete such service. Since transmission is oral, the communication service rendered by the radio corporation is telephonic in nature.

It is held that a radio telephone dispatch service as described herein falls within the category of `local telephone service' subject to the tax imposed by section 4251 of the 1954 Code. The tax applies to the total of the recurring charges for the services and for the facilities necessary to complete the service, including charges for rental and maintenance of the transmitting and receiving equipment